The first state budget from Gov. Maura Healey is a $55.5 billion package that her administration described as a “downpayment” on its goals of making Massachusetts a more affordable place to live, driving the state’s decarbonization push and addressing the impacts of climate change, and preparing students for careers in an evolving economy.
The governor said Wednesday that her budget (H 1) combines with the tax relief and reform plan she unveiled Monday and separate legislation to create a standalone housing secretariat to form “one package” to “build a strong economy, to create livable communities, and to put Massachusetts on the path towards a sustainable future.”
“We want to make the life of every Massachusetts resident better and more affordable,” Healey said.
The bottom line for fiscal year 2024 budget spending represents a 4.1 percent increase over the current year’s budget as originally adopted last summer, exactly the growth rate that the administration and lawmakers expect to see from state revenues in fiscal 2024 when accounting for $1 billion from the state’s new income surtax.
After watching state revenues surge nearly 40 percent over the last two fiscal years, accommodating a nearly 11 percent increase in spending in the current budget, the administration and Legislature are preparing for a “slowcession” over the next year and a half — not a downturn from the elevated revenue levels, but a definite handbrake on the eye-popping increases of recent years.
“Public revenue does little good when people can’t pay the rent, buy a house, heat their homes or hire child care,” Healey said. “Our budget will change that and more.”
The budget pumps new money into K-12 and higher education, early education and care, energy and environment initiatives, human service provider rates, housing programs and more. Offsetting some of the increases are reductions in one-time transfers (to the tune of $1.1 billion), curtailment of “extraordinary growth” in COVID-era programs and pilots, and a $254 million net decrease in funding for MassHealth, the largest program in the budget and one where spending increases can take vast amounts of money off the table for other programs.
“There really is something for everyone in this budget,” Lt. Gov. Kim Driscoll said.
Ahead of Wednesday’s official filing of the complete budget, Healey had already previewed many of the central elements of her first spending plan.
She told local officials she would propose $8.36 billion for local aid programs, which the administration said would be a $635 million or 8.2 percent increase over the budget Gov. Charlie Baker signed for fiscal 2023. Along with $1.26 billion for general government aid (a $24.6 million or 2 percent increase), cities and towns would share $6.585 billion in Chapter 70 school funding (a $586 million or 9.8 percent boost) under Healey’s plan.
The Healey administration said the Chapter 70 total it proposed represents full funding of the Student Opportunity Act school finance reform law passed in 2019 and, if enacted, would be the largest increase since at least 1999. The fiscal 2024 state budget will mark the third budget cycle for the Student Opportunity Act, which aims to address education equity gaps with $1.5 billion in new funds rolled out over a seven-year span.
She also telegraphed her plan to ask lawmakers to allocate $20 million to create MassReconnect, a program that will “offer students last-dollar financial support to cover the cost of tuition, fees, books and supplies as well as provide funding for career and wraparound support services to encourage retention and degree-completion.”
Tapping Into Surtax Revenues
The $1 billion from the new surtax on income in excess of $1 million will go under Healey’s plans towards education ($510 million) and transportation ($490 million) and Administration and Finance Secretary Matthew Gorzkowicz said that some of the investments the new governor’s first budget (H 1) proposes in those areas “would be very challenging” to have made without the new revenue stream.
On the education side, Healey is proposing to use the surtax money to pay for $100 million in child care grants to providers, $140 million in higher education capital funding, the $20 million free community college program the governor outlined earlier Wednesday, a $93 million expansion of a state scholarship program, a $59 million effort to stabilize tuition and fees at UMass and other public higher education institutions, and more.
For transportation, the surtax revenues would go towards $181 million in MBTA capital investments, launching a $100 million municipal partnership program, providing $100 million for highway bridge maintenance and preservation, and making $25 million available in regional transit funding and grants.
The administration is proposing to create a new Education and Transportation Fund to serve as the repository of all surtax revenues, and to restrict that fund to being spent only towards education and transportation as the Constitutional amendment that passed on the November ballot called for. The fund would receive all surtax revenues and its balance would not revert back to the General Fund at the end of a budget year. The proposal also includes an annual recurring spending cap and a required minimum fund balance.
Healey is also proposing to exclude surtax money from any future calculation of state revenue for the purposes of Chapter 62F, the 1980s voter law that puts a cap on state revenue growth and last year triggered nearly $3 billion in mandatory rebates, and to shield surtax receipts from the existing requirement that capital gains revenues above a certain level be stashed into state savings or put towards specific benefit accounts.
And while the Healey administration proposed close to a 50/50 split of surtax revenues between education and transportation in its first budget, Gorzkowicz said that is not a matter of administration policy.
“But it happened to be where we landed based on the various investment proposals and the priorities of the administration,” he said.
Higher Funding for Higher Education
Including the surtax investments, higher education would be in line for an increase of $371 million or 23 percent in the Healey budget. That includes a 3 percent increase to the base funding for each higher education segment, the University of Massachusetts system, state universities, and community colleges.
“Governor Healey and Lt. Governor Driscoll have made a bold statement about the importance of the University of Massachusetts to the socio-economic future of the Commonwealth,” UMass President Marty Meehan said. “These transformational investments would expand access to our world-class education and enhance the impact of our statewide research enterprise. On behalf of the UMass community of 74,000 students, 17,000 faculty and staff, and 500,000 alumni, we thank the Healey-Driscoll administration for their commitment to UMass.”
The budget also proposes a “tuition or fee lock” for in-state undergrads at UMass and state universities.
“Essentially what it means is that if you have a child that’s attending one of our four-year institutions, when they come in as a freshman, they will lock in that rate for their entire four years of college,” Gorzkowicz said. “Tuition will be allowed to go up each year by a modest amount, two and a half percent or so, which is, I think, very modest given our current inflationary environment. But what it’s designed to do is be able to recognize that institutions have inflationary pressures and fixed costs that are growing [and] allows them to increase tuition in a modest way, while also providing stability and predictability for families.”
The administration said the policy could be used as a recruitment tool by schools. Meehan said that locking in a four-year tuition rate for new in-state undergraduates “will help our students and their families plan for the cost of a UMass education while encouraging more students to finish their degree in four years, both of which will result in a more affordable degree.”
Higher education in Healey’s budget gets the lion’s share of surtax revenues proposed for education — $360 million versus $140 million for early education and $10 million for K-12 education. Gorzkowicz said Wednesday that the administration thought their higher education and early education investments were better fits for the surtax revenues because they were expansions whereas K-12 education is on a funding schedule through the Student Opportunity Act.
“There’s been a pattern of funding those increases through general fund dollars, and I think one could see that trying to shift that over and fund those increases with Fair Share could be potentially seen as supplanting,” he said.
One Percent for EEA
The budget plan also ratchets up funding for the Executive Office of Energy and Environmental Affairs, which sits at the center of the state’s efforts to reduce carbon emissions to a net-zero level by 2050 and to electrify buildings, vehicles and more.
EEA would get $543.6 million under Healey’s budget — an increase of $105.2 million or 24 percent that would allow the secretariat to hire 240 new staff members (an 8 percent increase in staffing), including 14 environmental justice liaisons in a new Office of Environmental Justice. The budget also includes$35 million in operating funding for the Mass. Clean Energy Center and puts $40 million towards goals outlined in the state Clean Energy and Climate Plan.
The administration said it would be the first time that an annual state budget dedicates at least 1 percent of its total to EEA, though that calculation excludes the $1 billion provided from the income surtax.
“What’s most important in this part of our proposal, is that it shows a whole of government approach to addressing the climate crisis,” Healey said. “This is absolutely essential. Actions involving education, workforce, economic development, housing, health, public safety, transportation — all of this is going to be necessary for our clean energy transition.”
Sen. Michael Barrett, who co-chairs the Joint Committee on Telecommunications, Utilities and Energy, said Healey’s fiscal 2024 budget proposal is “the best executive branch budget I’ve ever seen” and is “a leap over anything a governor has proposed before.”
“Making inroads against global warming is a massive job, and here’s a budget that takes up the nitty-gritty, the nuts and bolts,” the Lexington Democrat said. “It calls for training more people because we’re short on everybody from HVAC techs to solar installers to electricians to electrical engineers. It puts the Mass Clean Energy Center on a stable financial footing for the first time ever. It commits to protecting water supplies because PFAS are a major threat. It bumps up funding for DCR and the state parks, which are starved for attention. All of which takes money, so, yes, this budget asks for money.”
The largest single part of the state budget, MassHealth, would be funded in Healey’s budget at $19.8 billion, which would have a net cost to the state of $7.9 billion. That’s a decrease of $1.9 billion on a gross basis or $254 million after reimbursements compared to fiscal year 2023 spending projections.
The decrease is driven, the administration said, by “caseload decline and intentional distribution of funds across fiscal years to mitigate a revenue cliff due to the end of the federal COVID Public Health Emergency.”
MassHealth, which combines Medicaid and the Children’s Health Insurance Program under one umbrella, provides coverage to more than 2.3 million people, up from 1.8 million as of February 2020.
But federal Medicaid continuous coverage requirements that have been in effect since March 2020 expire in April and MassHealth will in May start the process of redetermining whether members are still eligible and “disenrolling” anyone who is not eligible — essentially trimming the MassHealth rolls for the first time since the pandemic began. The administration is projecting that enrollment will settle at around 1.9 million members during fiscal 2024.
To prepare people who could be kicked off MassHealth for the transition to employer-sponsored insurance or insurance purchased through the Mass. Health Connector, Healey’s budget includes $5.1 million for “proactive communication” with MassHealth members.
“We know what we’re facing right now this spring with redetermination, we know the work that we need to do,” Healey said. She added, “I think those numbers reflect our best educated estimate of what is necessary and appropriate to meet this moment and the needs of folks who have been accessing MassHealth.”
Now that it has been filed, the governor plans to take her budget (and tax package) on the road. On Thursday, she will speak to the Greater Boston Chamber of Commerce and has a session planned with the Springfield Regional Chamber on March 10.
“Already this week, the lieutenant governor and I have had the privilege of meeting some people who will be helped by this budget,” Healey said. “In the coming days and weeks, we’ll be out across the state connecting with many, many more, listening to their stories, hearing their stories, understanding what this relief could mean to them.”
Healey’s budget will go first to the House Ways and Means Committee to be rewritten. The House generally puts out, debates and passes its own budget proposal in April, followed by the Senate in May. Those two budgets then typically spend much of June in a conference committee before lawmakers agree to a compromise version. Expect news on a schedule of annual budget hearings soon.
Fiscal year 2024 begins July 1, but Massachusetts lawmakers seldom have the budget done in time for it to be in place for the start of the fiscal year.
(Copyright (c) 2022 State House News Service.