This is the fourth article in the Current’s series, Overriding Considerations, exploring Marblehead’s budget crisis. To read other stories, visit MarbleheadCurrent.org.
Marblehead is receiving more state aid than it did a decade ago, but local officials say the increases have done little to ease pressure on the town’s budget or meaningfully change its financial outlook.
The town’s largest flexible aid source, unrestricted general government aid, or UGGA, has increased steadily over the past decade, rising from about $1.09 million in fiscal year 2017 to roughly $1.42 million in fiscal year 2026.
Annual percentage gains have generally fallen in the low single digits, typically around 2% to 4%, with the most recent increase just 1.1%, or roughly $15,000 — an amount local officials say has little impact on a budget facing millions in rising costs.
“A minimal $15,000 increase in UGGA is helpful, but it doesn’t come close to addressing the scale of our budget pressures,” Finance Director Aleesha Benjamin wrote in an email to the Current. “If the community’s state aid funding were adjusted for inflation year over year, we would be in a better financial position today.”
Two main streams, two very different roles
State aid to municipalities comes through several channels, with two of the most significant being UGGA and Chapter 70 education funding.
While both have grown over time, they serve different purposes and offer varying levels of flexibility.
UGGA is the primary source of general-purpose state funding, used to support services such as public safety, public works and town operations.
“That’s really the biggest aid program to fund … all the essential services that communities deliver,” said John Ouellette, senior executive at the Massachusetts Municipal Association.
That flexibility makes UGGA especially important for municipal budgets, where costs extend far beyond education.
But it is also the smaller of the two major aid streams.
In Marblehead, UGGA accounts for about $1.4 million in fiscal 2026, compared with more than $7 million in Chapter 70 funding.
UGGA: a shrinking share of municipal funding
Annual increases have averaged roughly $37,000 over the past decade, with the most recent increase — about $15,400 — representing one of the smallest gains in that period.
Over that time, UGGA has consistently accounted for just over 1% of the town’s total operating revenue — roughly 1.26% in fiscal 2026 — while property taxes make up more than three-quarters of the budget.
Even in years when aid increases, those gains have not consistently kept pace with inflation. In 2021, UGGA saw no increase while inflation rose by 4.7%, and in 2022, aid increased by 3.5% while inflation rose by 8%.
That imbalance means even steady increases in UGGA translate into relatively small changes in the town’s overall financial position.
Statewide, the trend is similar.
Unrestricted general government aid has declined as a share of local funding, falling from about 11.5% of total local taxes in 2007 to roughly 5.4% in 2024, according to a recent Massachusetts Municipal Association report.
“What we’ve seen is a retraction of state support for those municipal services,” said Ouellette, adding that the program has never fully recovered from cuts during the Great Recession.
As a result, communities have become increasingly reliant on local revenue.
“Property taxes now are accounting for about 75% to 80% of municipal budgets,” Ouellette said.
Calls for reform, but no formula in place
Unlike Chapter 70, UGGA is not driven by a detailed formula based on enrollment or local need.
“It’s 16 years after UGGA was created,” said state Sen. Brendan Crighton, who represents Marblehead. “I think it is time for us to take a serious look at how to improve the current system.”
Local officials say that structure does not reflect current realities.
“I definitely do not feel the state’s funding formula reflects the realities of what cities and towns are going through now,” said Benjamin. “There needs to be a closer look at how the state is prioritizing distributing funds to the municipalities, and how the needs of cities and towns are weighed out as far as importance. Without regular review and adjustment, the financial challenges we face will continue.”
The structure of unrestricted local aid traces back to a decision made about 15 years ago, when the state merged two funding streams — Lottery Aid and Additional Assistance — without creating a new formula to guide UGGA, the combined program.
Lottery aid had been allocated based on municipal property wealth whereas Additional Assistance originally relied on a needs-based system, which was later abandoned in fiscal 1992, with funding largely level-funded or cut in the years that followed.
When the two programs were consolidated, those patterns were effectively carried forward. Since then, UGGA is set each year based on the growth in state budget revenues.
A significant portion of unrestricted aid remains tied to lottery revenue. But newer forms of gambling, such as casinos and sports betting, return a smaller share to the state than the lottery, which was historically fully directed to local aid, according to Phineas Baxandall of the Massachusetts Budget and Policy Center.
“As the lottery has to share with these other kinds of gambling, so is local aid having to share out its part,” he said.
In 2019, Massachusetts overhauled its education funding formula after a commission found it no longer matched districts’ needs. A comparable review, lawmakers say, is overdue for unrestricted aid.
State Rep. Jenny Armini, who also represents Marblehead, wrote in an email to the Current:
“I don’t blame cities and towns for turning to the state for relief from the incredible fiscal strain they are under. UGGA was created 17 years ago. It has no formula. It’s a baseline amount that has been increased moderately over time,” she wrote. “It is certainly reasonable to look at UGGA with an eye toward reform, including funding amounts and how they are distributed.”
Chapter 70: larger, but restricted
Chapter 70 funding represents a much larger share of state aid for most communities.
In Marblehead, the funding has increased more significantly than UGGA over the past decade, particularly following the state’s 2019 Student Opportunity Act.
Armini said recent increases have also been driven in part by the Fair Share Amendment, which directs revenue from the state’s surtax on high earners toward education and transportation.
Per-pupil Chapter 70 funding has increased significantly, rising from $30 in fiscal 2022 to $150 in fiscal 2026, contributing to higher overall aid levels for communities like Marblehead, she said.
While Chapter 70 aid has grown by an average of about 2.5% annually over the last decade, increases did not keep pace with inflation in several recent years, including a four-year stretch from 2021 through 2024.
Although funding has rebounded more recently — with increases outpacing inflation in fiscal 2025 — local officials say those gains have not eased broader budget pressures.
Ouellette noted that while education funding is separate from unrestricted aid, the two are closely linked in practice.
“Many communities are using some of that state aid under unrestricted general government aid to also help pay for education services,” he said.
That dynamic plays out locally as well.
“While the Student Opportunity Act has improved allocations, the underlying formula [for Chapter 70] still creates inequities,” said Benjamin. “Smaller towns like Marblehead are disproportionately affected, which means a growing share of essential costs continues to fall directly on the town.”
For municipal officials trying to balance a budget that includes police, fire, public works, facilities and other services, that dynamic has broader consequences.
“The state should be fully supporting public education, but … communities like Marblehead are being forced into difficult trade‑offs,” Benjamin said. “We shouldn’t be choosing between teachers, students and the town services residents depend on every day, yet limited resources and rising expenses leave us with exactly those choices.”
Crighton said lawmakers are hearing similar concerns.
“We’ve heard from certain districts that need more resources as well,” he said. “We do believe Chapter 70 should be closely examined as well as UGGA.”
Other aid categories provide targeted support, but limited flexibility
The town also receives funding through a patchwork of other accounts, including charter school tuition reimbursements, veterans’ benefits, reimbursements for elderly tax exemptions and public library aid.
Together, these categories add hundreds of thousands of dollars in state funding each year, but do little to ease pressure on municipal budgets because they are largely restricted and designed to offset specific expenses.
Several additional state aid categories listed on the town’s Cherry Sheet — including regional transportation, smart growth and payments for state-owned land — show no funding for Marblehead because the town does not meet the criteria for those programs.
Limited relief amid rising costs
On paper, state aid to Marblehead has increased over time, with total receipts rising from about $7.1 million in fiscal 2017 to more than $9.2 million in fiscal 2026.
But after required assessments — including charter school tuition and other state-mandated charges — the town’s net state aid is significantly lower, reflecting the amount actually available to support the budget.
At the same time, municipalities are facing rising costs across nearly every category of spending with limited ability to control them.
“I certainly recognize that municipalities across the Commonwealth are dealing with higher costs due to healthcare, inflation … and just the cost of doing business,” Crighton said.
Ouellette said municipalities are particularly vulnerable to rising health insurance and energy costs because of their reliance on large workforces and extensive infrastructure.
“The pain they feel from [cost increases] is really pronounced,” he said, adding that the financial strain is magnified compared to what residents face in their own household budgets. “When health insurance is going up 10, 12, 15, in some cases 20% in a single year … where are you going to turn?”
With few options to raise revenue, even steady increases in aid have not been enough to close the gap. As a result, communities are relying more heavily on property taxes — which already account for the majority of municipal revenue — to fund core services.
“We see more and more often communities having to go back to the taxpayer through a Proposition 2 1/2 override, as well as debt exclusions,” Crighton said.
Uncertain outlook for change
Local officials say the current trajectory of state aid is unlikely to shift in a way that meaningfully alters Marblehead’s budget outlook.
“Strong local governments strengthen the entire state. But without meaningful investment in municipalities, the state will continue to see communities struggle to meet growing demands,” Benjamin said. “Unfortunately, that level of support simply isn’t reflected in current funding practices.”
Lawmakers say they recognize the strain but point to broader fiscal constraints that limit room for major increases in aid.
“I think it’s going to be a very challenging budget year,” Crighton said.
That challenge is driven in part by federal policy changes, including potential cuts to Medicaid funding.
“For Massachusetts, the biggest hole is the roughly $3.5 billion that will be taken out of our health care system every year,” Armini said. “That’s simply too big to fill.”
Crighton said those pressures could limit increases in local aid.
“I think we’ll be able to maintain levels of funding, but… we’re dealing with a great deal of uncertainty as a country,” he said.
Both lawmakers also pointed to a November ballot measure to reduce the state income tax from 5% to 4%, which could further reduce available revenue.
“That’s $5 billion annually that we will not have, and you’ll be looking at some serious cuts and serious impacts to local aid,” Crighton said.
Armini echoed that concern, writing that the consequences would be “problematic in this climate.”
Despite those challenges, legislators say reforms to programs like UGGA remain under discussion.
“We are committed to working closely with municipalities to make some of these reforms and to try to bring more resources for them,” Crighton said.
