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Massachusetts House Budget Chops Baker's Taxes, Boosts Local Aid

Massachusetts House Ways and Means Chairman Aaron Michlewitz briefed reporters Wednesday on his committee's proposed fiscal 2020 budget.
Sam Doran
State House News Service
Massachusetts House Ways and Means Chairman Aaron Michlewitz briefed reporters Wednesday on his committee's proposed fiscal 2020 budget.

Massachusetts House leadership is rolling out a $42.7 billion budget for fiscal year 2020 on Wednesday. The spending plan largely mirrors Governor Charlie Baker's proposal, but it eschews his revenue-raising ideas, like new tax on vaping and opioid manufacturers.

The proposal, which the House is expected to debate in formal sessions the week of April 22, would boost total state spending by 3 percent over the current year's budget and came in with a bottom line almost identical -- but slightly below -- what Baker proposed. The budget includes no increases to broad-based taxes.

"As is the House's history in the past, I think you will find this budget to be fiscally responsible," House Speaker Robert DeLeo told reporters Wednesday morning. "You will see various targeted investments in terms of growing our economy as well as making sure we increase support for the most vulnerable residents of the commonwealth."

The budget, which was approved by the House Ways and Means Committee during a meeting that was closed to the media, counts on $133 million in new revenue from marijuana sales, $294 million from gaming taxes including assumed revenue from Encore Boston Harbor, $42 million from online sales tax from retailers and $28 million in revenue from a newly-implemented tax on short-term rentals through services like Airbnb.

House leaders opted against other revenue sources, some of which were proposed by Baker. Notably, the Ways and Means budget does not include revenue from sports betting ($35 million), does not expand tobacco excise taxes to e-cigarettes and vapor products ($6 million), and does not include Baker's proposed tax on opioid manufacturers ($14 million).

The House, as DeLeo indicated earlier this week, is not pursuing its own tax proposals in the budget, even though House leaders are proposing to ramp up spending on K-12 education as part of a multi-year investment.

"There's still much work to be done and I still think there is going to be some further discussion relative to revenue," DeLeo said. "Although this is the budget which we will be debating by the end of April, I think there is still further discussion that's going to be had relative to other revenues as well."

Ways and Means Chairman Aaron Michlewitz, who was appointed to head up the budget-writing committee in February, said he wanted to base the fiscal 2020 budget on existing state tax revenues for fiscal 2020, which total $24.22 billion. Those tax revenues are supplemented by federal funds and fees.

"On all revenue pieces, we're taking a look at all of them but we didn't want to include them in this year's budget proposal because we were trying to build our budget based off the revenues we currently have in front of us," he said.

DeLeo and Michlewitz said the House simply is not yet ready to consider a number of issues, including taxing e-cigs and sports betting. Sports betting, DeLeo said, "I don't think is as easy as some people may suspect it may be."

The House also proposes to make an initial investment towards an eventual overhaul to public education funding. The budget would provide $5.1 billion for Chapter 70 local school aid, including a $218 million increase in direct Chapter 70 aid, a new $16.5 million reserve account specifically for low-income student supports and $2 million for a social and behavioral health services grant program.

"Relative to the education foundation budget, I think it's going to require a lot more discussion and debate to go ahead there," DeLeo said. "I think there is also the realization that one of the issues that we're probably going to address is the issue relative to particularly low-income students."

The bill would also make significant changes to the charter school reimbursement process and increases charter reimbursement funding by $23 million "hoping to head back to a fully-funded system in the next two years," Michlewitz said.

The single largest increase in the budget belongs to MassHealth, the state's behemoth Medicaid program, which would see its state funding grow by $343 million under the committee's proposed budget. At $16.57 billion, MassHealth accounts for just under 39 percent of all proposed spending in the committee's budget.

The bill proposes to empower MassHealth to directly negotiate with prescription drug manufacturers for a supplemental rebate in an attempt to help drive down costs. Drug spending in the program that serves more than 1.8 million people has doubled in five years to $2 billion, according to the administration.

The House's proposal is substantially similar to the governor's proposal for MassHealth drug price negotiations. Under both plans, MassHealth would be authorized to directly negotiate drug prices with manufacturers in a public rate-setting process. If negotiations do not lead to reasonable prices, officials could refer the company to the Health Policy Commission and the drugmaker would need to justify its prices under a process now in place for others in the health care sector.

The two proposals diverge after that. The governor's idea allows the HPC to refer the issue to the attorney general for resolution, but the House removed the attorney general from the process, Michlewitz said.

Michlewitz said the House is assuming $28 million in savings from its MassHealth drug pricing initiative.

Though the House used the same number as the governor -- $1.128 billion -- for unrestricted local government aid, the House Ways and Means Committee budget would funnel $54.18 million more than the governor's budget to local governments in total local aid, which is spread across multiple accounts.

This report was originally published by State House News Service.

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