Measuring Non-School Fiscal Disparities among Municipalities

Abstract

This paper develops new measures of non-school revenue capacity and environmental costs for Massachusetts cities and towns as the basis for a new municipal aid formula. On the capacity side, we account for the constraints of a tax limitation by estimating them as a function of residents' incomes, and also take account of non-property-tax revenue sources and non-municipal budget obligations. On the cost side, we quantify the effects on local non-school spending of characteristics related to environmental costs, controlling for preferences, efficiency, and non-school local revenue capacity. Our approach is potentially applicable to other states.