Dukakis Proposes Loans for 11 Cities

After more than two weeks of State House debate. Gov. Michael S. Dukakis yesterday proposed a plan that would resolve a sticky local aid issue by offering state loans to the 11 cities--including Cambridge--hit hardest by the third year of Proposition 2 1/2.

The short-term loan plan, announced at a State House press conference, would allow those large cities to borrow local aid from fiscal year 1985 to cover up to one-half of the revenue losses caused by required property-tax cuts in the third year of the property tax-cutting measure, which was passed by referendum in 1980.

Dukakis also said that he has withdrawn a $36 million budget request for 2,450 new state jobs to free funds for the loans. The specific funding would still require legislative approval, probably as a budget item, added Frank Keefe, secretary of administration and finance. Keefe could not be reached for further comment last night because he was meeting with legislative leaders.

Latest Development

Dukakis's proposal is the latest in a series of developments that has left both the administration and the legislature sensitive about easing the effects of Prop 2 1/2. Dukakis emphasized that the loans would only be available after special request by the cities.

As part of his fiscal year 1984 local aid package, Dukakis had originally proposed a modification of Prop 2 1/2 that would have allowed the 11 large cities to delay one half of the required property tax cuts for one year with a city council vote. Currently, any postponement of Prop 2 1/2 requires a city-wide referendum.

The entire package won immediate approval in the State Senate. But in the House, a Republican attack on the Prop 2 1/2 override led to a successful vote to eliminate the provision.

The following day, stunned House leaders and Dukakis staffers lobbied furiously and overturned the vote. The House returned the proposal, slightly amended to require a two-thirds city council vote, to the Senate, where it fell prey to the publicity created by the shuffle.

Many State House observers have quietly said that the Dukakis administration badly miscalculated the intensity of public opposition to any change in Prop 2 1/2, which passed by a two-thirds margin the 1980 vote. As one explained last week, the package's planners failed to see the symbolic nature of the change, instead only considering it as a solution to a cash-flow problem.

Opinion Stirred

Citizens for Limited Taxation and the Massachusetts High Technology Council, the two groups who lobbied for the 1980 referendum, were largely responsible for stirring public opinion in the recent debate as well with a spontaneous media and telephone campaign.

The two groups "were very successful in creating the feeling that a very great deal was at stake here," Daniel Soyer, communications director for the Massachusetts Municipal Association, said last week.