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MTA's analysis of the governor's proposed budget and cuts

On Jan. 28, Gov. Deval Patrick released his proposed budget, House 1, for the upcoming fiscal year, which begins on July 1.

In order to balance the budget in the face of seriously declining revenues, he called for significant cuts in public higher education, local aid, preK-12 education and many other programs. Patrick also filed a bill entitled Municipal Relief Act II, which includes revenues for municipalities and changes the way that communities can join the Group  Insurance Commission (GIC), a change that MTA does not support.

In the third piece of legislation filed on Jan. 28, Patrick made a second round of cuts (known as 9C cuts) to the current FY09 budget. This was necessary in order to have a balanced budget at the end of this fiscal year.

The governor estimates that the deficit for FY10 will be $3.5 billion. Rep. Robert DeLeo (D-Winthrop), former chair of House Ways and Means and newly-elected Speaker of the House, says the deficit could go as high as $4 billion. The deficit reflects how much additional revenue must be raised in order to keep services at the same level as in the FY09 budget prior to the 9C cuts. Since revenue projections for FY10 are well below last year, in order to balance the budget, Patrick is proposing the following:

  • $1.63 billion in cuts and savings (including $60 million by raising the cost of premium shares for state employees health insurance).
  • Close to $600 million in new revenues (These are included in his budget and in the Municipal Relief Act).
  • Roughly $590 million taken from the rainy day fund (for both FY09 and FY10).
  • $711 million from the yet-to-be-passed American Recovery and Reinvestment Act of 2009 (the federal economic stimulus bill),  to be used both for the current fiscal year and FY10.

The House 1 budget totals $28.0 billion, which is almost $200 million below the FY09 budget. This is the first time since the early 1990s that a budget is below a previous year's budget.

Below is a summary of the major highlights of the governor's proposed budget, the 9C cuts that take place immediately, and the proposed Municipal Partnership Act II. 

PreK-12 Education

9C Cuts (including both October and January rounds)

  • Total 9C cuts of $37.4 million
  • Chapter 70 education funds not reduced
  • Regional school transportation cut by $2.9 million
  • Special Education Circuit Breaker cut by $14.6 million
  • Kindergarten expansion grants cut by $3.0 million
  • METCO cut by $2.3 million

House 1

The total Department of Elementary and Secondary Education budget is reduced from $4.565  billion to $4.493 billion ($71.6 million, or 1.6 percent). 

  • Chapter 70 -- State Aid to Local School Districts
    Chapter 70 is funded at the same amount as in FY09, $3.948 billion, and each district is provided with its FY09 level of aid. With respect to required contributions from local revenues, the fourth year of a five-year phase-in of changes to the Chapter 70 formula is implemented with some modification.

Required spending levels for almost one-half of the state's operating districts are below these districts' foundation budgets. The state may rely on funding from the federal economic stimulus bill currently being debated to close spending gaps.

  • PreK-12 Education Grant Programs
    The governor proposes to combine a number of education program line items into larger "consolidated" line items. Since, as a general rule, these line items do not include earmarks allocating funds to particular programmatic areas, it is difficult to determine cuts to specific programs. Nonetheless, at this point, it appears that the following cuts (among others) have been made from the original (pre-9C cut) FY09 budget:
  • Special Education Circuit Breaker -- reduces funding from $230.0 million to $215.9 million ($14.1 million).
  • Regional District Transportation -- reduces funding from $61.3 million to $53.3 million ($8.0 million).
  • Full Day Kindergarten -- reduces funding from $33.8 million to $28.8 million ($5.0 million).
  • Expanded Learning Time -- reduces funding for this pilot program very slightly from $17.5 million to $17.4 million (less than $100,000).
  • MCAS Remediation -- reduces funding from $13.4 million to $10.1 million ($3.3 million).
  • Targeted Intervention in Underperforming Schools -- reduces funding from $9.2 million to $7.6 million ($1.6 million).
  • METCO -- reduces funding from $21.6 million to $18.5 million ($3.1 million).
  • Alternative Education Grant Program -- reduces funding from $1.2 million to $1.0 million (less than $200,000).
  • Education Reform Reserve -- the so-called "pot-hole fund" is eliminated.  In FY09, this was funded at $5.5 million.

Charter Schools

The governor proposes increasing the cap for the 50 lowest-performing districts to 12 percent of district spending from the current  9 percent to allow for the establishment of new charter schools.

At least 80 percent of the new schools' enrollment must include students who are English Language Learners, SPED, potential dropouts or low-income, "or other students . . . who should be targeted in order to eliminate the achievement gap."  The schools' operators must have a proven track record of working with these categories of students.

In addition, the governor proposes changing the charter school tuition formula so that all facilities and new student costs associated with charter schools are paid directly to the charter school from the state and must be shown in a separate line item in the state budget. This is a reform MTA has long lobbied for. Although the changes should help sending districts better plan for the financial impact of charter schools, they will not affect the resources available to sending districts.

In addition, charter schools must, at the end of the year, identify the sources (both public and private) and probable uses of unexpended funds.

Early Education and Care

The governor proposes to consolidate a number of program line items and proposes reducing the total budget from $585.1 million to $556.2 million ($29.0 million). Of that reduction, funding for child care access is reduced from $213.6 million to $190.9 million ($22.7 million).

Local Aid  -- Lottery Aid and Additional Assistance

In addition to Chapter 70 funds, cities and towns receive state funds through categories known as lottery and additional assistance, as well as through a number of smaller aid categories.  In some communities, as much as 50 percent of local aid helps pay for public schools. The governor proposes combining lottery aid and additional assistance into one new local aid source called Unrestricted General Government Aid.

9C Cuts

The governor cuts lottery aid and additional assistance from $1.314 billion to $1.186 billion, or $128 million – almost 10 percent of the original FY09 budget amount.

House 1

Unrestricted General Government Aid is cut from $1.314 billion to $1.094 billion, or $219.5 million (almost 17 percent).  The 1.094 billion FY10 level assumes that $149 million will be generated through a statewide meal and hotel tax increase that the governor proposes. If the tax increases are not enacted, aid will fall by a total of $369 million from FY09.

Higher Education

9C Cuts

Total 9C cuts for FY09 were $59.3 million, almost all of which were from UMass ($27.7 million), state colleges ($12.4 million) and community colleges ($13.6 million). Individual campuses were cut from 5  to 5.6 percent of their FY09 funding prior to the 9C cuts.

House 1

  • Cuts higher education (including non-campus "central" accounts) from $1.091 billion to $922.8 million (almost $168 million, or 15.4 percent) from the original FY09 budget, of which $159 million is cut from UMass, the state colleges and community colleges. Each of these segments is cut by over 16 percent.  Individual campus allocations for both state and community colleges are consolidated into single state college and community college line items, respectively. The specific allocations to each campus will therefore be determined by the respective boards.
  • Increases the health insurance premium shares for 58,000 state employees, thereby reducing the employer’s costs by $60 million and increasing the affected employees' costs by a similar amount. Those whose salary ranges from $35,000 to $50,000 would pay 20 percent of the premium while those earning $50,000 or more would pay 25 percent. The 6,000 state employees earning less than $35,000 (including those currently paying 20 percent) would pay 15 percent.

Other Employee Benefits

House 1

  • Authorizes a cost-of-living adjustment (COLA) for retiree pensions of  3 percent on the first $12,000 of retirement income.
  • The Retired Municipal Teachers’ (RMT) Health Insurance premium share paid by the local employer remains at 90 percent. Retired municipal teachers from 73 school districts receive health insurance through this state-run program. The 90-10 premium split is set by the GIC with all eligible teacher retirees assigned to a risk pool composed solely of retirees from the participating school districts.

Municipal Partnership Act II (Key Provisions)

  • Requires that municipalities either insure their employees through the GIC or achieve GIC-equivalent or better health insurance rates (and savings).  If this standard is not met, unrestricted local aid (not Chapter 70) will be reduced by the difference between the local and GIC rates.
  • The GIC threshold for employee approval to enter the GIC is reduced from 70 to 50 percent.
  • All eligible retired local employees would be required to enroll in Medicare as their primary source of health insurance coverage.
  • Authorizes municipalities to pro-rate employer contributions for part-time employee health insurance based on the number of hours per week worked by the employee when compared with a full-time employee who works at least 37.5 hours per week.
  • Permits municipalities to amortize their FY2009 revenue deficit over a three year period but not to exceed the amount of 9C local aid reductions.
  • Provides that local (non-teacher) retirement systems that voluntarily transfer their assets to PRIT before receiving notice from PERAC of underperformance would be exempt from the requirement that the transfer be in perpetuity. 

Miscellaneous

Division of Labor Relations

The budgets and functions of the Board of Conciliation and Arbitration (BCA), Labor Relations Commission (LRC) and Joint Labor-Management Committee (JLMC) have been consolidated under the recently established Division of Labor Relations (DLR). The proposed blended budget for DLR is $2,097,000 or $307,415 less than the combined FY09 allocations for BCA, LRC and JLMC. This represents a decrease from FY09 of 12.8 percent.

New Revenues

House 1

  • Raises $150 million by eliminating tax exemption on sales of alcohol, soda and candy.
  • Raises $20 million on expanding 5 cent bottle deposit charge to water, etc.
  • Raises $75 million by increasing fees residents pay to Registry of Motor Vehicles.
  • Raises approximately $150 million by raising the statewide meals tax and hotel tax by 1 percent. Funds would go to municipalities.

Municipal Partnership Act II

  • Raises about $50 million by eliminating the property tax exemption for telephone poles and telecom switching stations
  • Allows cities and towns, at local option, to levy an additional 1 percent excise on meals and hotel stays.

These spreadsheets provide more detailed information about House 1 and the 9C cuts.