NEWTON, Mass. -- Facing almost certain cuts in aid programs for the coming fiscal year, cities and towns will probably sue Gov. William F. Weld and his administration, according to attorneys for the City of Brookline.

"We are presently considering the commencement of a major lawsuit against the commonwealth," said William B. Golden, a partner with the Boston law firm of Burns & Levinson, which is counsel to Brookline.

A number of Massachusetts's other 350 municipalities could join the suit, Mr. Golden said. He spoke at a conference here yesterday on municipal bankruptcy and how to avoid it. Burns & Levinson sponsored the conference, which about 70 local officials attended.

For the new Republican administration, the suit adds a cloud to a fiscal storm front that had just shown signs of lifting. The Weld administration prides itself on having brought an $850 million budget gap under control in the last half of the fiscal year that ends this week.

An administration official remarked recently that Massachusetts alone will have the distinction of a fiscal 1992 budget smaller than this year's.

Some of those savings are bound to come from local aid coffers, which have ballooned since the enactment by voters in 1980 of the state's Proposition 2 1/2 property tax limit.

The state will probably cut some $370 million from its $4 billion in local aid plans in the coming fiscal year, Mr. Golden said.

Local governments will charge that such cuts violate another voter referendum. On Nov. 6 last year, voters endorsed the measure, known as Question 5, by a larger margin than they elected Mr. Weld governor. Question 5 called for 40% of the state's so-called growth revenues -- including taxes on income and business profits -- to fund local government spending.

But although the measure passed, lawmakers and other state officials have construed it to be largely no-binding, having the form of a resolution more than an order.

Mr. Golden said the joint filing would follow the resolution of the coming fiscal year's budget. "We're going to wait to see what comes out of the conference committee," he said, referring to fiscal negotiations underway this week.

David Turner, town counsel for Brookline, Mass., said the municipalities will have to file suit quickly, before the state enters too far into the next fiscal year. That means sometime this month, according to Mr. Golden.

The suit could also charge that the governor's local aid cuts violated the state constitution as well as Question 5, Mr. Golden said. He further said that the voters' passage of the referendum in November reflects "broad-based political support" for maintaining local aid programs.

In 1990 former Gov. Michael S. Dukakis lost a similar suit that Mr. Turner had brought in 1989.

As much as anything else, the inchoate litigation shows how fiscal stress, stemmed at the state level, is trickling with increasing virulence to the local.

Joseph D. Malone, the state's treasurer, opened yesterday's conference by exhorting the local officials to privatize services and find other ways to cut their budgets. He also warned against filing for Chapter 9. "Think less about bankruptcy and more about getting our state and the cities and towns moving again," he said.

But the June 6 bankruptcy petition of Bridgeport, Conn., cast its pall over the conference. Most of the municipal officials said the stigma attached to bankruptcy would prevent them from filing, no matter how bad their town's fiscal straits became. "I personally think it shouldn't be an option," said John F. Frause, comptroller of Needham, Mass. "It's too drastic."

His town, whose average house costs twice the statewide mean, seems an unlikely candidate. Some other cities and towns here have begun considering such drastic actions as filing for protection under Chapter 9, or function under the orders of a court appointed receiver.

Barbara Anderson, head of the lobbying group Citizens for Limited Taxation, called the bankruptcy code "one way to get out of your union contracts." And, she added, for the city of Chelsea, for example, Chapter 9 may offer the only solution. "Unions have been running that city for years," she charged.

The city is struggling to keep up with burdensome collective bargaining agreements that include such provisions as manning requirements preventing Chelsea from paring the number of fire-fighters it employs.

Filing for bankruptcy affords certain protections, but it also entails risk, Burns & Levinson attorney Jeffrey D. Sternklar pointed out to the local officials gathered here.

"As Bridgeport, Conn., will soon discover," Mr. Sternlar said, "the bond markets may never forgive them, even though the bondholders are protected."

According to the city's petition, debts to bondholders and vendors will not be on the table if Judge Alan H.W. Shift decides to accept the city's petition. "The instability of filing may make it impossible for Bridgeport to get any financing anytime soon."

For cities and towns in Massachusetts, he added, "one of the big questions" is whether subdivisions of the state have the permission required by the code to seek a bankruptcy court's protection. The code, according to 1977 amendments, requires that local bodies be "generally authorized" the state.

If the state's municipal powers law -- which allows cities and towns to sue and be sued -- allows for bankruptcy is unclear. The federal court here has never been called upon to accept a Chapter 9 petition, according to Mr. Sternklar.

If Chelsea did enter bankruptcy, Mr. Sternklar pointed out, it would enjoy a certain freedom that has been denied to a number of similarly strapped cities that the state has placed under financial review boards since the Great Depression.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.