The Senate Ways and Means Committee on Thursday unanimously approved a $41.42 billion fiscal year 2019 budget proposal, touting the spending plan's "robust and critical investments" in education, an "innovative approach to drug pricing" and a focus on children.
The fiscal 2019 budget plan (S 4) represents a 3 percent increase in state spending over the current year's budget and is based on the consensus revenue agreement that state tax revenue will grow by 3.5 percent in fiscal 2019, significantly less than tax revenue growth so far this fiscal year.
Senate Ways and Means Chairwoman Karen Spilka, who is expected to ascend to the Senate presidency in July, said the budget plan recognizes "that when all people in the Commonwealth are given the opportunities to participate in Massachusetts' economy -- as well as the tools to succeed -- we all benefit."
"Massachusetts has long been a leader in so many areas, from education and health care, to economic innovation and protecting the vulnerable. Our budget continues in this long tradition and invests in our strengths, while confronting obstacles to continued success," Spilka said. "We boost funding for school districts and empower regions across the state to provide local services. We provide tools to support full engagement in the economy, recognizing that access to opportunities and support services benefit our people and our Commonwealth as a whole."
The release of the Senate budget, which will be debated beginning May 22, comes at a point when it appears the state is more flush with cash than in the past two fiscal years. Since the passage of federal tax reform in November, tax collections have spiked, leaving the state with $809 million more this fiscal year than it had anticipated. The size of a potential state budget surplus, and of supplemental spending needs, remains unclear.
Spilka said the budget represents "a cautiously optimistic approach" to spending given the state's fiscal picture.
The Senate's budget includes about $61 million more in spending than Gov. Charlie Baker's budget plan (H 2) and $97 million less in spending than the budget (H 4401) amended and adopted by the House. The Senate's budget plan calls for $1.1 billion in unrestricted local aid, matching proposals from the governor and the House.
"I think at the basic values level it's very similar to the House budget, there's a focus on expanding opportunity, particularly for kids. There are trade-offs; the Senate put some more money into K-12 public schools, the House put more money into early education," Noah Berger, president of the Massachusetts Budget and Policy Center, said. "They're both working very much within the same tight revenue box, so if you do a little bit more on one thing it means doing a little less in the other."
Senate President Harriette Chandler called the Ways and Means Committee's plan "an effective, robust budget" that represents "a clear declaration of support for children and families, statewide transportation, healthcare, education, and our most vulnerable populations."
Senate Minority Leader Bruce Tarr called the Ways and Means Committee budget proposal "a reasonable starting point for the work the Senate must do to chart a proper course for the coming year." But he also cautioned that maintaining fiscal health and discipline will require government reforms, of which there seldom few in the House or Senate budgets.
"Eluding new taxes and budget shortfalls in the future, however, will require not only fiscal discipline, but also intensive efforts today to undertake reforms and capture effectiveness that will produce consistently balanced budgets in the years ahead," Tarr said.
Education was a central theme of the press conference the Ways and Means Committee held to unveil its budget. Spilka said the budget tries to fund education for people of all ages and backgrounds because education is "the fundamental building block of individual and shared success."
The Senate proposes funding Chapter 70 aid to local school systems at $4.91 billion -- "its highest level ever, even after accounting for inflation" -- to allow for a minimum aid increase of at least $30 per pupil, Spilka said. In sum, the committee's proposed budget would fund education to the tune of $5.5 billion.
The Ways and Means Committee budget also recommends $270.1 million for income-eligible childcare, and $5 million for the Commonwealth Preschool Partnership Initiative to expand access for 3- and 4-year-olds. There is $318.9 million in the budget plan for the Special Education Circuit Breaker, which reimburses districts at the statutorily required 75 percent rate and $62.5 million for regional school transportation reimbursements.
Sen. Sonia Chang-Diaz, the committee's assistant vice chair, said the Senate is "stopping and reversing a dangerous trend" of underfunding a commitment to local school systems in its budget by providing $100 million to fund its charter school reimbursement program for traditional public school districts.
While the budget includes no new broad-based tax increases, the Senate joined the governor and House in proposing to increase the state earned income tax credit from 23 percent to 30 percent of the federal credit, which will help many low-to-middle income families. The governor's budget office has pegged the cost of the expansion at $65 million annually beginning in fiscal 2020.
The Ways and Means Committee budget also seeks to do away with a restriction that prohibits families from receiving an extra $100 per-month cash assistance for a baby conceived while the family was receiving public assistance, as the House did with an amendment to its budget last month. The current cap denies benefits to 9,400 children in Massachusetts, according to the Massachusetts Law Reform Institute.
The Senate's proposal takes a different tack than the House, though. The House made the change effective July 1, 2019, pushing the need for funding into fiscal year 2020. The Senate proposes to lift the cap effective Jan. 1, 2019 and includes $5.5 million to fund the expansion of benefits for the second half of the fiscal year. The annualized cost of the expansion is expected to be roughly $13 million.
Sen. Sal DiDomenico, who has been the leading Senate advocate for lifting the so-called Cap on Kids, said the Senate's proposal would be "a gamechanger for families across our state" and said that the Senate's inclusion of funding "puts our money where our mouth is."
MassHealth, the state's behemoth Medicaid program, is funded to the tune of $16.12 billion in the Ways and Means Committee budget -- accounting for nearly 40 percent of the spending plan.
Senate leaders scrapped the governor's proposal to shift 140,000 non-disabled adults between 100 percent and 138 percent of the federal poverty line to comparable plans at the Massachusetts Health Connector. The House also discarded the governor's suggestion, despite what the administration described as efforts taken to tweak the proposal so that people who are transferred could receive zero-copay, zero-premium coverage.
"We do not adopt that," Spilka said. "We did not change eligibility or take anyone off MassHealth."
Businesses in Massachusetts are making new payments to help the state afford its MassHealth program, and have supported efforts to reform the program.
To tackle the rising costs of pharmaceutical drugs, the Senate budget plan includes an annual prescription drug spending target and authorizes the secretary of health and human services to seek rebates from drug companies, changes that Spilka said are expected to deliver $40 million in savings. Ways and Means Committee aides said the hope is that the changes will lead to a 6 percent cut in MassHealth pharmacy spending.
The Senate budget anticipates an $88.5 million deposit into the state's "rainy day" fund. Fiscal watchdogs have cautioned Beacon Hill that officials have not set aside enough reserves during the state's prolonged recovery and that its inadequate reserves could easily be drained in a recession.
Spilka suggested that the $88.5 million deposit is a starting point and that the Senate would look to further bolster the rainy day fund with surplus money at the end of this fiscal year and/or next fiscal year.
"If we can put more in at the end of the year, just like I'm hoping that for fiscal year 2018 -- when I mentioned earlier that we're a little more than $800 million above benchmark, there may be about $500 million of that that's capital gains, so I'm hoping that we can put some of that towards the rainy day fund," she said. "It's not a matter of if there is going to be a recession, it's a matter of when."
The budget also includes an outside policy section that calls for the secretary of administration and finance, treasurer, comptroller and executive director of the Pension Reserves Investment Management Board to study the fiscal management of the stabilization fund, including investing the money in the fund differently and "the feasibility and advisability of using the fund as a source of short-term borrowing funds for the commonwealth."
Following up on the passage of a sweeping criminal justice reform bill that legislative Democrats are already pointing to as a key accomplishment of this session, the Senate budget includes between $5 million and $8 million in funding related to that new law.
The Senate's budget plan, like the governor and House, assumes the state will pull in $63 million in revenue from legal marijuana sales, which are expected to begin July 1 with an effective state tax rate of 17 percent. The Senate is also counting on $20 million in revenue next fiscal year from taxing short-term rentals, although compromise legislation to regulate and tax that growing industry remains a work in progress.
While Senate leaders touted areas of investment on Thursday, the Massachusetts Taxpayers Foundation recently cautioned that a growing portion of state revenues are being consumed by a few priorities, leaving a lot less money for lawmakers to invest in programs important to their constituents.
Fixed obligations to non-discretionary spending in areas like MassHealth, debt service and pensions accounted for 55 percent of tax revenues in fiscal 2007, but accounted for 73 percent in fiscal 2017, the foundation said.
This report was originally published by State House News Service.
