April 12, 2017

$40.3B House spending plan brings fiscal 2018 budget battles into focus

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Sam Doran / State House News Service

Outgoing House Ways and Means Chairman Brian Dempsey.

BOSTON — Democratic leaders of the Massachusetts House put forward a $40.3 billion spending plan for fiscal 2018 that Ways and Means Chairman Brian Dempsey said focused “first and foremost on the fundamentals” – health care, pensions and local aid.

Increases of $322 million in MassHealth, $198 million for pensions and $164 million for local aid consumed $684 million of just more than $1 billion in projected revenue growth, leaving just one-third of new revenue to spread around to other programs and services.

The House also signed off on Gov. Charlie Baker’s controversial employer assessment plan to generate new revenue to cover a shift of workers off employer-sponsored health coverage to MassHealth, but left the details for the administration to work out.

Watch: House leaders talk spending priorities

As with all budgets, some interests were pleased with how they fared in the Ways and Means budget, while others were left wanting. The plan landed amid another period of budget uncertainty with state tax collections trailing estimates this fiscal year by $220 million despite a relatively healthy economy.

Here are some highlights, lowlights and takeways from those who wrote the budget bill and could be impacted by it:

THE GOVERNOR’S REACTION: Via Press Secretary Billy Pitman, “The Baker-Polito Administration proposed a balanced budget that protects taxpayers and increases public education investments to historic levels, and while the administration is concerned the House chose to drop a bipartisan proposal to reform welfare, the governor looks forward to working with the Legislature to produce a final balanced budget.” Pitman was referring to Baker’s proposal that would have included supplemental security income (SSI) in the calculation of transitional assistance benefits. SSI is a federal program that provides stipends to low-income people who are either aged 65 or older, blind or disabled. Baker hoped to save $12.6 million in transitional assistance by making the change.

WILL IT STAY BALANCED? For the past two years, Gov. Charlie Baker has had to resort to midyear budget cuts to keep spending in balance with revenues. Revenue projections are trailing estimates by $220 million, making it a possibility that the governor could resort to another round of cuts.

Antonio Caban / State House News Service

Gov. Charlie Baker

And yet with revenues growing by just 1.7 percent over the first nine months of fiscal 2017, House leaders are proposing to increase spending by 3.8 percent. “It’s not an exact science,” Dempsey noted, indicating that the Legislature and administration picked a revenue projection somewhere in the middle of the range presented by economic expects in December. “When we make these projections we’ve been correct more than we haven’t and we took the mid-point range hoping again that in the current fiscal year we will begin hopefully to see some progress in April and May.” Massachusetts Budget and Policy Center President Noah Berger said the House budget is not overly optimistic, but he did not rule out mid-year problems under the plan as proposed. “I think the budget itself and 3.8 percent growth has a reasonably good chance of being sustainable, but the fact that there are some underfunded accounts within that is a little bit troubling,” Berger said. Dempsey acknowledged that the House put less funding than Baker into some accounts, such as sheriffs and indigent counsel services, that historically require passage of midyear spending bills to meet demand.

“PROGRESS” ON LOCAL AID: City and town leaders were less than enthusiastic about the levels of local aid proposed in Baker’s January budget bill, but Massachusetts Municipal Association Executive Director Geoff Beckwith said he was pleased with what he saw in the House Ways and Means redraft. The budget advanced Monday matched Baker’s $40 million increase in unrestricted local aid, and put an additional $15 million into Chapter 70 for local schools, totaling a $106 million increase in fiscal 2018. Beckwith said the Chapter 70 funding, along with investments in special education and regional school transportation, bring the House education increase to $20 million above Baker’s budget. “We know that if this was a budget year with a growing pie that there would be a more accelerated effort to fund education. The fundamental education funding debate has not been resolved, clearly, but the intent of the House is to do as best as they can,” Beckwith said. “Today it’s important to recognize that progress was made.”

AIRBNB TAX NOT READY: The governor proposed a tax on short-term room rentals through websites like Airbnb as part of his budget, but the topic was not touched by House leaders in their proposal. Baker counted on $12 million for fiscal 2018 from the expanded room taxes, but Dempsey said his committee preferred to let bills dealing with the issue wind their way through the process. “I think we wanted to stay away from any potential revenue there,” Dempsey said, adding, “First and foremost, it’s important for us to get the policy right.” Rep. Aaron Michlewitz, who chairs the Financial Services Committee, has filed legislation that would not only implement a tax structure for short-term room rentals, but address insurance requirements and safety precautions.

MARIJUANA IMPLEMENTATION: The House Ways and Means budget set aside $4 million for the implementation of the new medical marijuana law, large parts of which have been delayed by six months so that lawmakers can consider ways to change or strengthen the law. Treasurer Deborah Goldberg, whose authority to regulate the new industry may be stripped away and given to another entity, requested $10 million in startup costs. “We usually give everybody about 40 percent of what they ask for,” Dempsey joked, before calling the proposed House appropriation a “good starting point” until officials get a better sense of staffing and other needs.

Sam Doran / State House News Service

House Speaker Robert DeLeo

MONEY, MONEY, MONEY BILL: While Speaker Robert DeLeo eschewed broad-based tax increases with his budget proposal, there are provisions in the bill that make it a “money bill,” opening the door for the Senate to consider taxes next month when it takes a turn producing a budget. The House bill includes a $2,000 tax credit for businesses that hire veterans, as well as reforms to how sales taxes are collected and remitted to the state. “I think we’ll see what they do,” Dempsey said about the possibility of the Senate adding tax increases to the budget to generate new revenue. Senate President Stanley Rosenberg last week raised the idea of a sales tax on services, which was briefly contemplated and abandoned in the early 1990s. “Any new expansion to something that is currently not taxed is always a challenge,” Dempsey said. “Personally, I would have some concerns.”

GOOD AND BAD FOR ENVIRONMENT: Not unlike Gov. Baker’s budget proposal, the House spending plan made no progress toward pushing environmental spending closer to the 1 percent of overall spending long sought by activists. Environmental League of Massachusetts Vice President Erica Mattison said the “one bright spot” in the budget was for a “very small program that does very important work” known as the Division of Ecological Restoration. That division within the Department of Fish and Game works on wetland protection and dam removal. “On the other hand, it’s disappointing to see the lack of investment continuing with major line items, like the overarching line item for the Department of Environmental Protection and the Department of Conservation and Recreation,” Mattison said. Overall, Mattison said the Ways and Means budget would allocate $215 million for environmental programs and agencies, down from $219 million in the fiscal 2017 budget.

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