A Defense of Proposition 2 1/2

         For nearly 45 years, Proposition 2 1/2 has shaped the financial landscape of Massachusetts municipalities. Enacted in 1980, this landmark law restricts how much cities and towns can raise property taxes each year. Critics have often debated its merits, but the simple truth is this: Proposition 2 1/2 has proven highly effective. It has given residents predictable property tax bills, maintained local control, and promoted responsible budgeting. The enduring presence of this law, with no significant changes, reflects its success and the balanced approach it provides to municipal finance.

Boston Mayor Wu disagrees.  She recently suggested that it be repealed.  This law has often been seen as a political third rail, and few notable politicians have suggested tinkering with it.  Wu, however, has nothing to worry about, as she runs unopposed, and her suggestion aligns with her high-tax philosophy.  I doubt her position will gain much traction, and frankly, it should not.  But it is still worth talking about.

At the beginning, let’s recognize the obvious: the 2.5 percent cap is arbitrary. There’s nothing special about the number itself; economists or actuaries didn’t set it. But sometimes, policies succeed not because they are perfectly crafted, but because they strike a practical balance. Whether by luck or foresight, the 2.5 percent cap has kept property tax growth in check, ensuring communities can fund essential services without overburdening homeowners. The cap has introduced at least some discipline into municipal budgeting.

A common critique is that the cap doesn’t keep up with inflation. While this point deserves consideration, it overlooks several essential realities. Property taxes are not the only source of municipal revenue in Massachusetts. Cities and towns benefit from state aid, local fees, and other income streams, which help cushion the impact of rising costs. Moreover, the 2.5 percent limit applies only to the prior year’s levy. Revenue from new growth, such as new homes, businesses, and improvements, is not capped. This means communities almost always expand their tax base by well more than 2.5% annually, often by 4 to 5% in reality.

Wu and sometimes others suggest raising, eliminating, or tying the cap to inflation. While these ideas may seem reasonable at first glance, they come with serious risks. It is almost certain that any adjustment would be upward rather than downward. Sudden increases in property taxes would disproportionately affect those who can least afford it, namely seniors, working families, and residents on fixed incomes. We know this because real estate taxes are inherently regressive; they do not consider a taxpayer’s ability to pay. Removing or weakening the cap could cause unpredictable spikes in tax bills, jeopardizing the financial stability of households across the Commonwealth.

It’s easy to forget that not everyone can absorb higher taxes. For many, their home is not just a place to live, it is also their most significant financial asset. Proposition 2 1/2 protects vulnerable residents from being priced out of their communities by runaway property tax increases. By keeping growth predictable, the law helps ensure a wide variety of residents can continue to make Massachusetts home.

It is important to remember, Proposition 2 1/2 is not a straitjacket. The law allows for voter-approved overrides, giving communities the power to increase taxes when necessary and justified. This safeguard ensures that local priorities are respected and that residents have a direct say in major fiscal decisions. Overrides are not granted lightly, nor should they be.  They require clear public support and open debate, providing both flexibility and accountability in municipal finance.

After nearly 45 years, Proposition 2 1/2 remains in effect because it works. The 2.5 percent cap may be arbitrary, but its effectiveness is undeniable. It promotes prudent budgeting, safeguards vulnerable residents, and honors the voters' choice. While no policy is flawless, the alternatives carry much greater risks. Proposition 2 1/2 has, in many ways, established a stable basis for real estate taxation. It remains a practical law that should not be altered to satisfy the political desires of Mayor Wu and others. Any modifications should be carefully evaluated before they are enacted.

 

Myths of a Would Be Mayor

I agree with Geoff Epstein, the keyboard warrior and fledgling mayoral candidate, on a single point: financial support for public education is critical to a community's health. However, a budget is only as impactful as the precision with which it is deployed.  Epstein disagrees; he believes we should throw all our money and then some at the problem without considering the results. He has advocated raising taxes as high as possible and suggests people who cannot afford it should take out home equity loans.

His rambling blog posts constantly try to argue that the Framingham mayor and city council have not been fiscally supportive of the schools. He discounts all seven budgets we have adopted as a city provide the school department with the amount requested.

Epstein loves twisting facts like pretzels to make his points.  One of his favorites is to talk about what he calls the “local contribution.”   To get to that number, he takes the state aid to education revenue we receive and subtracts that from the total school budget and gets to his number.   He never acknowledged that the education aid figure is part of the local contribution.  So, if state aid goes up, making a larger portion of the budget, he says the local contribution goes down, indicating a lack of support in his mind.  He ignores the schools are funded by their own budget, plus over $40M from other aspects of the city budget.

He should examine “net school spending” to see how well Framingham supports the school department. This state-generated figure shows the total municipal spending on education, including the items not directly in the school budget, such as health insurance and retirement. The state requires every municipality to spend a minimum amount in net school spending. In FY 2024, Framingham was REQUIRED to spend $159M.  We spent $201M. Yet Epstein says we do not adequately support education.

I looked at other municipalities and their net school spending to test his theories.  I looked at annual increases in some area towns, the communities along Route 9 between Worcester and Boston, and some similar cities to Framingham.   I tried to get a good mixed bag.  The results do not show what Epstein espouses at all.  It poses the question why do we spend so much and get so little?

The average annual increase in Net School Spending in the selected communities over the last five years:

Community	5 yr Avg Increase
Natick	6.14%
Framingham	5.76%
Quincy	5.43%
Shrewsbury	5.14%
Westborough	5.11%
Holliston	4.44%
Brookline	4.29%
Newton	4.25%
Wayland	4.21%
Braintree	4.21%
Weymouth	3.97%
Wellesley	3.83%
Sudbury	3.66%
Marlborough	2.92%

Despite Epstein’s criticisms, we are second among 14 diverse communities in spending increases over the last five years.

Epstein does not want to face the problems; he wants to throw money at them. The data shows that we spend the money—plenty of money—we need to get results. Compared to other communities and the state as a whole, our achievement results have dropped substantially over the last decade.  

Public sector resources are not unlimited. We must use our resources well to provide the excellent services our children and residents deserve while remaining affordable and accessible. To do this, we must operate efficiently and intelligently.

He delineates all the problems in our education system, and his solution is predictable: more money and higher taxes. He does not question why the Superintendent received a six-year contract extension after overseeing this downturn. Instead, he wants to offer more money despite already providing more than most of our neighbors, which does not seem to work.

If he emerges from behind the keyboard and runs for mayor, as he threatens, hold on to your wallets and let him know that his solutions are too expensive and lack substance.  Untwist the facts, and the picture is much different than he wants us to believe.

Good News from the City

The City Council just finished consideration of the FY 2024 budget and the news is good.  We unanimously adopted a budget that maintains all city services and gives the Framingham School Department the largest increase in many years.  We were also able to limit the property tax increase to about 1%.

 

This year presented an opportunity to continue to minimize the property tax increase, because  many of the other revenues were strong, allowing total revenue to rise almost 5%.  In a year where other revenues are strong it is important to limit the tax levy so we can rely on it when we need to.

 

The average Framingham tax bill is over $7,100, which is fairly significant putting us  in the top 35% of municipalities.   Had we not taken similar steps in recent years to try to limit the tax levy increase as we did this year, the bill would be over $8,500.  That would put us in the top 20% of municipalities, a big chance as to affordability.  I am confident that by being mindful and efficient we are able assure Framingham remains an economically diverse community keeping the increase in tax bills predictable and manageable, while providing support for services.

 

The financial situation as it stands, after a lot of hard work by both the Council and the Mayor, is very positive.  The Mayor announced last week Moodys, which is the third party rating service we use to review our financial standing when issuing debt, gave us the highest possible rating. This is excellent news that Moodys sees Framingham’s financial position as strong and well managed.

 

I am not sure the opinions of Moodys are as important as some think.  But this opinion offered by  Moodys is going to disappoint critics, who were almost guaranteeing Moodys to downgrade Framingham’s bond rating.  Instead, the opposite happened, assuring all that we are heading in the right direction.

 

The Moodys review confirms what I have seen first-hand.  The Mayor and his team have worked hard to rebuild Framingham’s finances, and it looks like they have met with good success.  Their biggest challenge and most impressive accomplishment is the rebuilding of the water and sewer fund.  This fund was devastated by mismanagement and ran a deficit in excess of $20 million from 2018 to 2021.  That deficit shook the foundation of the City’s finances overall as tax money was required to bail out the failing fund.

 

We have to continually stay on top on our finances.  We need to assure that the City provides all the services it needs to, while doing so effectively and efficiently.  This year I think we accomplished that to the benefit of all.

 

This news is particularly encouraging given all the other accomplishments we have achieved over the last 18 months.  We have acquired the right of way for the Bruce Freidman Rail Trail,  signed an agreement with the state that will pave the way for a new justice center at the old Danforth building, acquired the office building next to town hall for a very reasonable price and obtained seed money for a new downtown parking garage.  These are all things that will improve our community.

 

The news is good as we enter the summer.  During the warm days to come, we can enjoy our newly revitalized farmers market, every week on Thursday, staring two weeks from now.  On June 30 this year, Framingham will have a fireworks display for the first time in 23 years.  The summer concert series starts two weekends from now every Friday night on the Center Common.

 

Things are looking up in the City, make sure you are a part of it!