The trade association that represents the 351 cities and towns in Massachusetts unveiled an ambitious and costly wish list for Beacon Hill Thursday, featuring a sizeable and symbolic request to increase unrestricted local aid by $351 million.

The Massachusetts Municipal Association also wants to overhaul the parameters of Proposition 2 ½, enable greater shifts in commercial and residential property tax rates, and access a menu of local-option taxes included in Gov. Maura Healey’s Municipal Empowerment Act legislation.

“Reinvesting in flexible state aid is no longer prudent policy — it’s an urgent necessity,” a new MMA report says.

The recommendations follow the MMA’s October “Perfect Storm” report that examined pressures that inflation, spending demands and sluggish state aid are having on municipalities, which are limited in how much property tax revenue they can generate to fund local services. That report found inflation-adjusted spending on operations in cities and towns grew by just 0.6% annually between 2010 and 2022, and suggested the constraints of Prop 2 ½, which supporters see as a key check on property tax bills, “may be too restrictive.”

Under the 1980 voter law, municipalities cannot increase their levy by more than 2.5% of the maximum allowable limit from the prior year. Three out of four municipalities are at or between 95% and 99% of their levy limit, or the amount of revenue they can generate before resorting to override campaigns, the October report found. Override votes are the mechanism currently in place to facilitate larger property tax increases.

State budget writers plan to dive into fiscal 2027 revenue talks next week, and the MMA recommendations will color budget debate, including the request for a $351 million boost for Unrestricted General Government Aid (UGGA). That translates into a 26.5% increase above fiscal 2026 levels, according to the new report.

Budget cuts inflicted during the Great Recession created a “long-term structural hole in the municipal revenue base,” the MMA says.

In fiscal 2007, the share of UGGA ($1.3 billion) relative to total local taxes ($11.32 billion) was 11.5%, according to the report. In fiscal 2024, the ratio of UGGA ($1.27 billion) to taxes ($23.59 billion) was 5.4%. Over that time span, the ratio has averaged 6.78%, and MMA wants the state to restore funding to that target.

While reaching that benchmark would require a funding infusion of roughly $356 million, MMA settled on the more symbolic amount of $351 million. The funding increase would “restore a measure of balance to a state-local fiscal partnership that has drifted out of alignment for more than a decade,” the report says.

“Working together, we can reverse the trends that have put municipalities in an untenable position and ensure the high-quality, essential local government services that make our communities great places to live and work,” said Gardner Mayor Michael Nicholson, who’s president of the Massachusetts Mayors’ Association.

MMA also offered recommendations to modify Prop 2 ½, including enabling voters to approve overrides that would be phased in over multiple years in order to mitigate “abrupt tax shocks while giving local governments breathing room.” Through voter referendum, MMA says municipalities should also be allowed to increase their 2.5% levy limit to a “specific economic indicator,” such as the Consumer Price Index, or to a local metric.

“Cities, suburbs, and rural communities face very different challenges for balancing budgets and living within Proposition 2½,” Northfield Town Administrator Andrea Llamas said. “Overrides are a non-starter for most communities, and state law prohibits communities from using many local revenue-generation strategies. The MMA plan offers a needed degree of flexibility.”

During a radio interview in October, Boston Mayor Michelle Wu said Prop 2 ½ should be repealed, contending that “cities already have a very, very tight belt cinched around.” Healey does not support repealing the voter law, according to spokesperson Karissa Hand.

Wu’s latest fight on Beacon Hill revolves around the impasse on her home rule petition to temporarily shift more of the city’s property tax burden onto commercial property owners. Without legislative intervention, which appears unlikely, the average single-family homeowner will see a 13% property tax increase in January.

The MMA report broadly wades into the property classification debate with a trio of recommendations.

It suggests giving municipalities greater flexibility for reclassifying property based on use and the revenue generated. Cities and towns should similarly have more flexibility over rate shifts, authorizing them to “provide larger shifts between Commercial‐Industrial‐Personal (CIP) rates and residential rates in a given year,” the MMA says. Expanding local-option exemptions for “targeted populations” could also offer relief for vulnerable residents, such as seniors and veterans, according to the report.

The Senate on Thursday could revive legislation that would establish a “tax shock prevention credit” for when residential property taxes skyrocket by more than 10% in the third quarter. Municipalities would decide which eligible groups, including adults ages 65 and older, can receive the aid.

— Alison Kuznitz / State House News Service

Alison Kuznitz is a reporter for State House News Service and State Affairs Pro Massachusetts. Reach her at akuznitz@stateaffairs.com.

Mayor Michelle Wu