As the mid-terms draw nearer, Americans have increasingly zeroed in on the four largest problems they see today, and perhaps unsurprisingly, they’re all about economics: Health care affordability, inflation, the federal deficit, and unemployment.
On a global scale, the U.S. is more or less in the same inflation neighborhood as other Global North countries, such as Australia, Canada, and much of Europe. Poorer countries such as Argentina, Haiti, Nigeria, Myanmar, and Venezuela are dealing with double-digit inflation rates, while the U.S. sits at about 2.4 percent.
But there is notable deviation throughout the United States itself. According to an October 2025 Moody’s Analytics report, 22 states are effectively in a recession, 16 are growing, and 13 are treading water. The three states that propel the country to overall profitability are California, New York, and Texas.
In this economic context, a seemingly unrelated health product has exacerbated the finances of many states.
Today, about 12 percent of Americans—or over 33 million people—are taking a GLP-1 drug. Half are using them to treat a chronic illness, such as diabetes. The rest are using the drugs primarily for weight loss. Between 2019 and 2023, the amount of people taking GLP-1s without a diabetes diagnosis jumped 700 percent.
That has big implications for state and local governments who insure public employees. For example, North Carolina’s state health plan, which covers public employees such as teachers, covered GLP-1s for weight loss from 2015 to 2024. In 2021, premiums to cover the drugs cost the state $3 million per month. By 2023, those premiums more than quadrupled to $14 million.
Projections, at that rate, were that by 2025, every person on a health plan would have to pay about $50 more per month to offset the growing costs of those taking GLP-1s. In turn, North Carolina nixed GLP-1 coverage for weight loss in 2024, but for some municipalities who didn’t pull the plug, covering the medication for public employees drove their insurance reserves close to insolvency.
Adam Chapdelaine, the Executive Director of the Massachusetts Municipal Association, puts the state question of how to balance GLP-1s coverage and infrastructure needs into national context.
Many people may not know what municipal associations are. How would you describe them?
I’d describe them as trade organizations for cities and towns. We advocate in the state government for policy and funding resources that benefit them, and operate from a mix of revenues from member dues, third-party agreements with universities, and an electricity supplier for bulk purchase agreements.
We also offer health, property, liability, workers’ compensation, and unemployment insurance to between 140 to 150 different cities and towns out of the 351 in Massachusetts.
When you think about all of these municipalities across the state, how many would you say have plenty of money, how many are treading water, and how many are underwater?
There’s a limited few, if any, that would describe themselves as having plenty of money. The majority are doing their best to tread water, and a few would describe themselves as feeling like they’re underwater.
Part of the challenge is the basis for funding municipalities, which is property taxes. Under Proposition 2.5, which went into place in 1981, municipalities can only increase property taxes year-over-year by 2.5 percent.
So the tax base is stable, but it can’t really grow much, especially when faced with an inflationary environment in utilities and health care. So cities and towns have had a lot of trouble balancing their budgets without reducing services.
I can see the argument for putting a cap on the amount that property taxes can increase year-over-year. Is this type of cap common?
Forty-five states, plus Washington D.C., have a property tax growth restriction. This started in the late 1970s in California with Proposition 13, and Massachusetts was an early adopter.
But the reality is that when you’re looking at polling, people hate property taxes, no matter what, because it’s not tied to the homeowner’s ability to pay them.
We’ve been advocating for a more serious look at the mechanics of Proposition 2.5, and how to match it to meet needs in an inflationary environment. We think controlling the property tax cap makes sense, but within that, we need to allow for more flexibility to meet up with 21st century economic conditions.
In Massachusetts, where does municipal tax funding tend to come from, and what are the proportions?
There are two snapshots, and a spectrum in between.
Property taxes and state funding are the biggest sources of revenue for cities and towns in Massachusetts. In a suburban, somewhat affluent community, the reliance on property taxes is between 70 to 80 percent, and state aid will step in to provide another 10 and 15 percent of funding.
If you look at what we call urban gateway cities, which tend to be lower-income, they are likely to have about 50 percent of their budget be constituted by property taxes, and the state pays a much larger share of their budget, sometimes 30 percent or more.
I think the amount that the state pays into municipalities depending on their economic status is fairly typical, but in Massachusetts, part of this matrix is due to the fact that when the state adopted the property tax restriction, it agreed to support local government by making up for lost revenue. The measure essentially hindered local governments from raising their own money via property taxes, so the state agreed to help make up the difference.
However, one part of Proposition 2.5 is that it can go to the ballot box, so municipalities can vote to raise their property taxes, and some affluent communities have had success in going to their voters on a semi-regular basis to ask for revenue above Proposition 2.5’s limits, which has allowed them to keep up with revenue demand for services.
But comparatively, in urban centers or non-affluent suburbs, overrides at the ballot box are unsuccessful, or local government leaders don’t even try.
So more affluent communities who choose to raise their property taxes throughout the country may be in a better financial position at any point in time, but they’re perpetually in a politically precarious one. It’s politically challenging, no matter the community, to go back to voters and ask for more and more tax money.
I’ve been thinking about GLP-1s, and the reportage coming out that covering them for government employees is putting states in precarious financial situations. Tell me about what you’ve seen in Massachusetts.
We pay a lot of attention to health insurance because we insure so many cities and towns. We’ve seen double-digit health premium increases over the last few years. The costs from doctors, hospitals, and pharmaceuticals are increasing faster than the rate of inflation.
This predicament is significantly driven by the use of GLP-1s.
We spent an unbelievable amount of time, thought, and effort in the past 12 to 18 months to think about how to manage GLP-1 access. We analyzed the cost of GLP-1s going forward, their usage rates, and the financial pressure that put on health insurance plans, along with projections for the solvency of the health insurance funding pool.
As of July 1st, we discontinued coverage of GLP-1s for weight loss, but it remains covered for diabetes. A lot of other insurers at the municipal and state level in Massachusetts did the same. We know what an important medical intervention this has been for so many people, but until there’s movement in the market to decrease the cost of these drugs, we had to make the painful decision to discontinue coverage.
Zooming out, a June analysis found that the fund that delivers social security is projected to have to decrease payments by 2032, a year earlier than anticipated. Medicare is also projected to reach solvency issues by 2033 due to rising medical costs, and about one in five Americans are eligible for Medicare. When you think about these large-scale federal solvency problems combined with local ones, do you think these are predictors of a future financial crisis?
I do view it as an existential crisis. In Massachusetts in particular, much of our economy is based on the health care, life sciences, and pharmaceutical industries. We think we have it tough to cover these costs to government employees, and the private sector is experiencing the same problem.
But taking too-aggressive action to curb hospital or pharmaceutical costs puts the economic vitality of the state at risk. There’s a lot of internal work right now to strike this balance, [...] but if health insurance rates keep increasing year-over-year in double-digit percentages, there is no way in the current paradigm to keep up with that, or keep offering the services we provide now to people in the future.
When it comes to GLP-1 coverage in particular, if we were going to continue to bear those costs at the rate they were coming in, something had to give. It could have been roads, water, or sewer lines. It could have been construction of new schools. It’s most likely that the short-term outcome would have been employing fewer police officers, firefighters, and teachers. Cities, towns, and states seeing these mounting costs are going to have to make hard decisions on what they can afford to continue to prioritize.
I’m sure that plenty of counties in Massachusetts have been approached by data centers, and I imagine that in this fiscal context, the incentives are strong. What’s been the response by various municipalities?
We’re probably a microcosm of what’s happening across the nation. There’s public pushback, but local leaders are feeling pressure to access revenue. There’s probably more road ahead on the data center conversation, but much like I’m hearing everywhere else, it’s a difficult trade-off.
A recent project published with Vox talked about how federal tax rates for 80 percent of Americans are near historic lows. Namely, people earning low, middle, and upper-middle class incomes are paying much less in federal taxes than at any point in national history. What do you think are the local consequences of that?
I’m of two minds. Federal tax rates have come down tremendously over the last 100 years, but I’m not sure people can distinguish lack of pressure in that way. People across income brackets are seeing their finances get tighter and tighter between the costs of groceries, utilities, health insurance, and everything else.
We have a broader issue with everything costing more in this country, and people feeling that no matter how hard they work or improve their income, they can’t get ahead.
When it comes to solutions, I don’t think local government taxing wealth would be equitable, or practically possible. But in Massachusetts, the government has been the beneficiary of the Fair Share Amendment, which institutes an additional income tax on incomes over $1,000,000 a year, and money raised goes towards education and transportation, so a version of ‘taxing the rich’ has been beneficial in this state.
It feels to me that we need some type of broader look at tax burdens at all levels to be part of the solution.
This interview has been edited for length and clarity.
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Now it’s time to hear from you, dear reader. Would you pay a higher property tax rate to keep a data center out of your community? Do you think covering GLP-1s should take precedence over maintaining schools or roads?
Comment and tell me what you think.