In 1980, a tax revolt that reshaped how every city and town in Massachusetts raises revenue was driven in part by Barbara Anderson, a Marblehead resident and one of the leading figures behind the campaign.
More than four decades later, in the town closely associated with Proposition 2 1/2, local officials say the law is increasingly at odds with the financial reality facing the town today.
The law limits how much a community can raise in property taxes each year, generally capping annual increases at 2.5% plus new growth.
But the cost of running a town no longer follows that same trajectory — and hasn’t for years.
A constraint that compounds over time
In Marblehead, where new development has remained limited, that formula has produced a steady but constrained increase in revenue.
For much of the period from 2008 through 2017, the town’s levy limit — the maximum amount it can raise in property taxes — and overall spending remained closely aligned, with revenue growth modestly outpacing spending in the earlier years before the two converged by the mid-2010s.
Indexed to a common baseline with 2008 set at 100, the data allows changes in costs and revenue growth to be compared on the same scale. By 2017, both rose to the mid-130s, or roughly 36% above their 2008 levels, reflecting a period when the constraints of Proposition 2 1/2 were more manageable within the town’s budget.
In recent years, however, that balance has begun to shift. While the levy limit has continued to grow steadily, the town’s operating budget, driven by rising costs, has increased at a faster pace, creating a gap that has widened over time.
That trend has persisted even as the municipal workforce has not increased in size. The number of full-time employees has hovered around 190 since 2023 and is down by nine full-time equivalent positions since 2018, according to data presented by Town Administrator Thatcher Kezer at a March 11 Select Board meeting.
For a brief stretch after 2017, the two tracked closely. But beginning around 2021 — particularly following the pandemic — that alignment began to break down, with spending growth outpacing the town’s ability to raise revenue under the law.
Since 2017, the town’s levy limit has risen from about $57.8 million to $75.7 million in fiscal 2026. Over the same period, the town’s operating budget has grown more quickly, climbing from about $82.2 million to $112.6 million.
Indexed data shows the divergence more clearly: by 2026, the levy limit reaches about 178 on a 2008 baseline, or roughly 78% above its starting point, while the town’s operating budget rises to roughly 186, or about 86% above 2008.
The same pattern is visible in school spending, which tends to grow faster than the overall budget and remains one of the town’s largest cost drivers.
Even as the number of full-time equivalent teaching positions has declined over the past decade, overall school spending has continued to rise, driven in part by salary obligations and other fixed costs.
State Department of Elementary and Secondary Education data shows that staffing levels dropped by the equivalent of 36.2 full-time positions between 2018 and 2026.
“We can’t stay within inflation”
Finance Director Aleesha Benjamin said the limits imposed by Proposition 2 1/2 have become increasingly difficult to manage in recent years, particularly as inflation and cost pressures have accelerated and new development remains limited.
“We can only raise taxes by 2.5% of the prior year levy, and that plus new growth — and our new growth is pretty stagnant,” she said in a November interview with the Current. “Marblehead’s property tax revenue is 80% of the [total] revenue, so that being restricted at 2.5% is a major problem when we have inflation at 3% or more.”
In recent years, new growth has hovered around $300,000 annually, signaling a relatively small addition to a budget of more than $100 million.
At the same time, costs are rising faster.
“We can’t stay within inflation with 2.5%,” Benjamin said. “It’s impossible, especially with our low and very limited new growth — absolutely not.”
In earlier years, she said, the system was manageable. But in recent years, particularly following the pandemic, expenses across nearly every category have accelerated.
Health insurance, pensions, contractual salary increases and service demands have all contributed to upward pressure on budgets.
“In those low-inflation environments, we were able to survive,” she said. “But now, there’s no way. COVID really changed the landscape.”
And for schools, the growth rate is often higher.
“Schools grow, on average, 4% to 5% by themselves,” Benjamin said.
A system relying on a single lever
As previously reported by the Current, the pressures facing Marblehead mirror a broader pattern across the state, where municipal leaders say it has become increasingly difficult to maintain services under the current system.
Communities across Massachusetts rely heavily on property taxes to fund essential services, and Proposition 2 1/2 governs how quickly that revenue can grow.
That reliance has increased over time, particularly as other sources of funding have become more limited, leaving communities with few alternatives for raising revenue.
Overrides — the primary mechanism for exceeding the levy limit — were originally intended as exceptions to the rule. In recent years, however, data shows they have become a more routine budgeting tool in municipal finance.
Built during a different era
Proposition 2 1/2 was approved by voters in 1980 and emerged from a broader tax revolt that swept the country in the late 1970s, when homeowners pushed back against rapidly rising property taxes driven by inflation and increasing property values.
In Massachusetts, the movement was closely tied to Marblehead. Barbara Anderson, a longtime resident often referred to as the “mother of Proposition 2 1/2,” became one of its foremost advocates, helping lead the campaign that brought the measure to voters.
It was designed as a taxpayer protection measure, limiting how quickly tax bills could grow, and give voters direct control over any increases beyond that cap.
Over 45 years later, that framework remains unchanged, even as the economic conditions that shaped its creation have shifted.
“A lot of towns are finding the constraints of Proposition 2 1/2 really difficult these days,” said Phineas Baxandall of the Massachusetts Budget and Policy Center, adding that the override process “is onerous and creates uncertainty.”
Over time, he said, the law has become familiar and reassuring to many residents, but has not been meaningfully revisited in decades.
He also pointed to broader changes in municipal cost pressures since the law was adopted, including rising health care costs, expanding infrastructure, higher expectations for public services and increased demands on school systems.
“Most of these things are completely out of control of towns, but all of which create cost pressures,” he said.
The case for reform
Municipal leaders and advocacy groups are not calling for Proposition 2 1/2 to be repealed. But many say the framework needs to be updated to reflect current economic conditions.
Benjamin said one approach would be to raise the cap beyond 2.5% to better reflect rising costs.
At the state level, the Massachusetts Municipal Association has raised similar concerns, arguing that the fixed cap does not account for inflation or the rising cost of delivering services.
The group has pointed to potential changes such as tying the levy limit to inflation and expanding flexibility in property classification and exemptions.
“Proposition 2 1/2 has been around for two generations,” said John Ouellete, senior executive at the MMA. “That’s a long time for something that is a statewide restriction without revisiting it.”
He said the organization is not advocating for eliminating the law but for reconsidering how much flexibility communities should have under it.
“We’re concerned, ultimately, about how much pressure there is on the property tax to deliver these essential services,” he said.
The argument against change
Supporters, on the other hand, argue that the law has fulfilled its purpose.
Massachusetts continues to rank among the states with relatively high property tax collections, both per capita and as a share of income, according to the Tax Foundation, an international think tank. Advocates say the law has prevented those burdens from rising even faster.
Groups such as the Massachusetts Fiscal Alliance have described the law as “the single most important taxpayer protection ever adopted in Massachusetts,” arguing that weakening it would shift more costs onto residents rather than addressing underlying spending pressures.
In a recent statement, the group said the solution is not to raise the cap but to control costs, pointing to rising state revenues and arguing that Beacon Hill has underfunded local aid while prioritizing other spending.
Legislative outlook
Despite growing debate over potential reforms, any changes to Proposition 2 1/2 are uncertain at the State House.
State Sen. Brendan Crighton said municipalities across the Commonwealth are facing similar challenges, driven by rising costs and limited revenue options.
“We’re seeing more and more debt exclusions and more and more overrides,” he said, while acknowledging the limits set by Proposition 2 1/2 in municipal budgets. “It’s a pretty rigid system, so it doesn’t take into account many of the outside factors that we’re dealing with now.”
However, he said, changes to the law remain unlikely.
“We want to make sure that our municipalities have the resources they need, but … with this being in place for as long as it has been, I don’t know that in the near future we will be making those reforms,” Crighton said.
