8. The squeeze

An earmark is a one-year appropriation. A town’s fixed costs recur in every later budget. Over the nine budgets from FY2017 to FY2025, in nominal dollars, the piles compare as follows.

Sources: DLS Municipal Databank (levy limit and new growth; Schedule A fixed costs; health insurance, Schedule A Parts 2 and 6), towns reporting in both FY2016 and FY2025 (dls-gw.dor.state.ma.us); earmarks from the General Appropriations Acts FY2017–FY2025 (malegislature.gov). Parcenomics analysis. Nominal dollars.

Health insurance rose 54.0% in those towns, from $2.65 billion in FY2016 to $4.09 billion in FY2025, against 24.9% for nine years at 2.5%. All fixed costs rose 53.0%, from $4.13 billion to $6.32 billion. New growth is the added levy on new construction and improvements.

Over the same nine budgets, earmarks equal 28.2% of the health-insurance increase counting earmarks that name the town, 42.3% counting earmarks placed in the town and 45.2% counting everything placed (towns that reported health insurance in both years). The typical town shows the same order of size. The median town received $408,750 in earmarks naming it over the nine budgets, and the median increase in a town’s health insurance was $785,703; the two medians are taken separately. Forty of the 351 towns received no earmark naming them in those budgets.

State aid as a share of town spending

Gross cherry-sheet aid covered 25.9% of town general-fund spending in FY2006, 22.7% in FY2016 and 22.0% in FY2025: $4.55 billion of $17.58 billion, and $7.55 billion of $34.37 billion. The median town’s share was lower and fell further, from 14.1% to 12.2% to 11.5%. The statewide figure is weighted toward the largest places, where aid is a larger part of the budget: in FY2025, 26.5% in the largest fifth of towns and 9.6% in the smallest.

Part of the earlier decline is a receipt that phased out: about $313 million in FY2010 that the itemized cherry sheet does not show, consistent with school-building reimbursements and gone by FY2024. On itemized receipts alone, the statewide share was 21.9% in FY2016 and 22.0% in FY2025, flat over the decade, while the median town’s share fell. Net of the charges the state assesses on the same cherry sheet (charter and school-choice tuition, transit, county and other assessments), aid covered 22.1% of spending in FY2010, the first year the charges are itemized, and 17.9% in FY2025. The charges grew from $611 million to $1.41 billion.

Against inflation and the 2½% limit

Proposition 2½ lets a town’s levy limit grow 2.5% a year, plus new growth. From FY2006 to FY2025 that path compounds to 59.9%. Over the same years Boston-area consumer prices rose 55.1%, U.S. consumer prices 59.7% and the federal price index for state and local government purchases 74.5%. From FY2016 to FY2025 all three ran above the path: Boston-area prices rose 32.2%, against 24.9%.

Statewide gross aid to all 351 municipalities rose from $4.55 billion in FY2006 to $7.69 billion in FY2025. That kept pace with consumer prices, 8.9% more in real terms on the Boston index, but not with the government price index, 3.2% less. Town by town the result is less even: 199 of 351 towns received less in FY2025 than their FY2006 aid grown by Boston-area prices, and 240 less than it grown by the government price index. The median town’s change was −5.7% in real terms on the Boston index and −16.2% on the government index. The FY2006 base includes about $313 million of receipts the cherry sheet does not itemize; on itemized receipts from FY2010, aid grew from $4.52 billion to $7.69 billion, 18.0% in real terms on the Boston index.

Across kinds of towns

The squeeze reaches nearly every kind of town. Fixed costs grew faster than the town’s allowed levy growth in 60.5% of town-years among the fifth of towns with the least new growth relative to their levy limit, and in 54.1% among the fifth with the most. Grouping by state-owned land or by population barely separates towns: 58.8% against 55.3% from the least to the most state land, and 54.1% against 54.9% from the smallest fifth to the largest.

What these figures do not show

Spending figures stop at FY2025: on October 19, 2026, 55 of 351 towns had filed FY2026 spending with the Division of Local Services. Pensions are not a separate public series; the state’s municipal spending reports combine retirement with health insurance, other benefits and insurance as fixed costs. Cherry-sheet detail before FY2010 could not be retrieved, so net figures begin in FY2010. Town series break when costs move between budget lines or into the state’s Group Insurance Commission, so statewide sums are steadier than any one town’s. Outside the inflation passage the figures are nominal dollars. They are associations and do not measure cause.

A caveat on the years ahead. The comparison above ends in FY2025, and the signals since have turned. Consumer prices rose 3.7% in the 12 months to September 2026, or 2.6% excluding food and energy. On September 16 the Federal Reserve raised its target range for the first time since 2023, to 3.75%–4%, saying inflation “remains elevated.” The ten-year Treasury yield closed at 5.09% on October 16, after reaching 5.31% earlier in the month. Should inflation hold above 2.5%, the gap between what the levy may raise and what fixed costs require would widen each year, and the pressure on municipalities described in this section would mount. Higher yields would also tend to raise what towns pay to borrow for capital projects.

Sources: U.S. Bureau of Labor Statistics, Consumer Price Index, September 2026 (released October 14, 2026); Board of Governors of the Federal Reserve System, FOMC statement, September 16, 2026; U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates, October 2026.