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Fed Reserve recommends new formula for state aid

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mass graphic Fed Reserve recommends new formula for state aid

A new report from the Federal Reserve Bank of Boston says the state’s formula for distributing funds to cities and towns is antiquated.  The report says the current formula is based on property taxes and a better formula would use a so-called “municipality gap”.  That would be the local services required by a community combined with their ability to raise revenue.

The report also says funds should not be redistributed as communities would suffer unexpected cuts.  Instead the report recommends putting in the new formula over a 5 year period and keep current funding levels for communities that would face cuts.

WBZ’s Mark Katic spoke with the Federal Reserve of Boston Vice President Yolanda Kodrzycki and Bo Zhao, Senior Economist at the Federal Reserve and author of the report.

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