Cities hamstrung by salaries, outgoing budget chief says

Eric A. Kriss, the Romney administration budget chief known for making provocative statements during his three years on the job, is issuing a dire warning as he prepares to depart: Cities and towns are in their worst financial shape ever, he says, and it is a crisis largely of their own making.

Kriss, whose last day at the State House is tomorrow, says that overly generous contracts with public employees, together with a failure to control employee healthcare costs and an aversion to development that could spur new tax revenue, have doomed cities and towns to a dark financial future.

''This is a quiet crisis, a crisis of attrition," he said in an interview with the Globe. ''It's not a Katrina, but if we extrapolate over the next couple of years, it will get worse and worse and worse."

Kriss says the financial squeeze is manifesting itself in the poor condition of public infrastructure such as parks, roads, and bridges.

''We have infrastructure problems that, given the wealth of our Commonwealth, we should not have today," Kriss said. ''It's our future. It really is our future."

The financial plight of cities and towns has been a hot topic over the past several months. In July, the Massachusetts Taxpayers Foundation released a survey of three dozen communities showing that their healthcare costs have grown by 63 percent since 2001. Earlier this month, a task force convened by Boston-area mayors documented ''a serious strain on municipal budgets" that has closed firehouses, taken police officers off the streets, and shortened library hours.

''Massachusetts has begun to see a decline in municipal services across the Commonwealth," the report states.

Those studies largely point to two culprits: Stagnant state aid for government functions other than schools, and fast-growing healthcare costs that are mostly beyond communities' control.

Kriss says local officials who blame the state are ''completely missing the picture." Beacon Hill cut aid to cities and towns during its fiscal crisis, but now the dollars are starting to flow again. Many cities and towns have given raises to their employees that exceed their own growth in tax revenue, according to Kriss. And while it's true that state law makes it difficult for local leaders to share healthcare costs with employees, some communities have been far more successful than others.

Kriss says local officials should follow the state's lead. Last April, the administration broke with tradition by granting modest salary hikes to 32,000 state workers that will not exceed the expected growth in state revenue.

''I'm not saying that communities weren't harmed by what has happened in local aid, but that's not the core of the problem," Kriss said.

To help cities and towns manage their expenses more prudently, the state recently unveiled an Internet-based guide that tabulates the financial liabilities and expected revenue of each community to produce a ''municipal stability factor," or the salary hike that local officials can afford.

Kriss cites Cambridge as an example of a city that is living within its means. The city has a relatively robust stability factor of 4.6 percent, largely because it has been able to keep its healthcare costs under control.

Michael Gardner, Cambridge's director of personnel and labor relations, said his city was one of the first to shift to managed healthcare for nearly all its employees and has asked workers to pay larger copayments for drugs and doctor's visits.

In Brookline, according to the state's calculation, fast-rising healthcare costs and slow growth have produced a stability factor of minus-2.4 percent. But Town Administrator Richard Kelliher said he recently told the state it used an incorrect figure for the town's healthcare expenses, producing an erroneous final number. In any case, Kelliher said, the state's calculation is ''an attempt to take the eye off of one of the key issues here, and that has been the cutbacks in local aid."

''Predictable growth in local aid is a key ingredient for cities and towns to continue to provide the service base people expect us to provide," Kelliher said.

Lisa Signori, Boston Mayor Thomas M. Menino's chief budget aide, said the city is hamstrung by a state law that forces it to negotiate with all of its unions when it wants to alter the health plan of any one of them. Signori said Boston has done what it can to cut costs, saving about $8 million by consolidating all of its HMOs into one. Both Romney and Senate President Robert E. Travaglini have proposed healthcare plans that would give cities and towns more flexibility.

Kriss says he is hopeful that Romney and the Legislature will give cities and towns more flexibility to control healthcare costs. But as he leaves the State House after a tumultuous three years, he isn't bullish on the future.

''It's like a chronic disease," Kriss said. ''It just keeps getting worse and worse. There is no day, no week, no moment where somebody says, 'Look what happened to us. It's a calamity!'

''In fact, it's insidious because it's so gradual," he said of the situation facing cities and towns. ''Only when you look back over a generation do you recognize what's been lost."