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Overview of Governor Baker's Education Budget for FY17

Governor Charlie Baker released House 2, his annual budget bill, on Jan. 27. The budget proposes $39.5 billion in spending for the 2017 fiscal year, which begins July 1.

The budget represents virtually no increase in overall state expenditures over the current fiscal year. The governor’s plan includes a number of items of concern to the MTA, including: A reduction in the amount available to local communities via charter school tuition reimbursement; an increase in employee contributions to their health insurance costs, and a change in the dual enrollment program that would allow high school students to take programs for credit at private nonprofit technical institutions and other entities in addition to state colleges and universities.

As with past budgets, the governor’s proposal for FY2017 continues a long narrative of budget cuts and fiscal deficits. In large part, this ongoing budget hole stems from tax cuts between 1998 and 2002 that now cost the Commonwealth over $3 billion annually.

Before the start of budget deliberations each year, the governor’s Administration and Finance staff works with legislative budget leaders on House and Senate Ways and Means committees to determine the amount of tax revenue likely for the coming fiscal year. This is called the “consensus revenue” number. The FY 2017 consensus revenue figure was set at $26.86 billion, a $1.11 billion increase over the $25.75 billion that was projected for FY 2016.  

Related Resources

  • Budget Spreadsheets - We've created spreadsheets of specific line items for specific sectors of the governor's proposed FY17 budget, including Early Education and Care, DESE (K-12), Higher Education, Chapter 70 and Non-Educational Local Aid.
  • An overall analysis of H2 is available from the Mass Budget and Policy Center.

The Baker administration is not proposing any new sources of revenue in H2. However, it is diverting $150 million in capital gains revenue from the Stabilization Fund to the budget. It is also proposing scaling back the Film Tax Credit and using the savings to fund two initiatives: a corporate tax break called the Single Sales Factor and expansion of the Low-Income Housing Tax Credit. Single Sales is estimated to cost approximately $67 million once fully implemented. While this credit has been offered since the 1990s to struggling manufacturing companies and mutual fund companies, there’s no indication that expanding it to all corporations would strengthen the Commonwealth’s economy. Increasing the Low-Income Housing Tax Credit would cost $25 million over five years and would support an additional 1,500 affordable rental units.

House 2 increases Chapter 70 funding for municipalities and regional school districts by 1.6 percent, keeping all districts at foundation budget levels and providing only a minimal aid increase to almost 80 percent of operating districts. The governor did increase unrestricted local aid by 4.3 percent.

More concerning are the governor’s cuts of about $14 million to nearly all local education grants from programs such as substance abuse prevention and program evaluation.

Among Baker’s specific budget proposals for early education is a new Quality Improvement Initiative that would draw on funds transferred from existing line items, including universal prekindergarten, childhood mental health and community preschool partnerships, thus limiting funds for critical services for families in need.

Below is a summary of the key elements of the budget that affect public education.

PreK-12 Education

Chapter 70 State Aid to Municipalities and Regional School Districts

The governor proposes to increase Chapter 70 funding by $72.1 million over FY16, an increase of only 1.6 percent. This increase does fully fund the current foundation budget requirement for each school district, which accounts for most of the increase and provides a minimum increase of $20 per pupil for every district. However, in order to keep Chapter 70 aid on pace with projected FY16-17 inflation and enrollment changes, the increase should have been at least $102 million over FY16.

As part of his proposal, the governor also makes two important changes to the low-income component of the foundation budget.  First, as suggested by the Foundation Budget Review Commission, the low- income foundation per-pupil rate for a district with a high share of low-income students is greater than the corresponding rate for a district with a low share.  Second, due to data limitations, the count of low-income students is now based on the number of “economically disadvantaged” students, rather than on the number of students eligible for free or reduced-price meals (the measure that has been used historically).

Most districts have fewer economically disadvantaged students than they had students eligible for free or reduced-price meals.  The governor’s proposed foundation budget attempts to adjust for this difference by raising the per-pupil rate. Nonetheless, the Chapter 70 aid of about 50 of the state’s 322 operating districts is lower because of the shift to the “economically disadvantaged” approach.  (Some 14 of these districts have above-average shares of economically disadvantaged students.)

PreK-12 Education Grant Programs

Overall, H2 proposes to spend substantially less state money on preK-12 education grant programs than it did in FY16. In addition to eliminating more than $14 million in funding, the governor also proposes consolidating several programs.

Programs proposed to be funded at current levels include:

  • Special Education Circuit Breaker –Level-funded at $271,631,998
  • Regional School Transportation – Level-funded at $59,021,000

Some of the programs receiving funding cuts include:

  • Extended Learning Time – Cut by approximately $50,000
  • Child Sex Abuse Prevention – Cut by $135,000
  • After-School Grants – Cut by $310,000
  • English Language Acquisition Grants – Cut by $900,000
  • Adult Basic Education – Cut by $974,000
  • School Breakfast Program – Cut by $250,000

Programs eliminated in the governor’s budget:

  • Program Evaluation – $300,000 in funding eliminated
  • Substance Abuse Counselors $500,000 in funding eliminated
  • English Language Acquisition Grants – Nearly $1 million in funding eliminated
  • College Readiness Program – $500,000 in funding eliminated
  • Foundation Reserve Assistance – $2,500,000 in funding eliminated
  • Public School Military Mitigation – $1.3 million in funding eliminated
  • Innovation Schools – $737,000 in funding eliminated
  • MCAS Low-Scoring-Student Support – $4.295 million in funding eliminated
  • Alternative Education Grants – $250,000 in funding eliminated
  • Teacher Content Training – $200,000 in funding eliminated
  • Creative Challenge Index – $200,000 in funding eliminated

Charter School Reimbursement Funding

Although total funding for reimbursements in FY17 was increased by approximately $20 million over FY16 to a total of $100,975,474, H2 substantially reduces total sending-district reimbursements for charter school tuition over time. Under current statute, communities receive tuition reimbursement for any increase in tuition paid to charter schools over the previous year. That reimbursement is 100 percent of the increase in the first year and then 25 percent of the increase for the next five years. It is important to note that these reimbursements are subject to appropriation. Occasionally, such as in FY16, districts do not receive the full reimbursements owed to them because of insufficient state funding.

The governor’s budget keeps the first year of reimbursements at 100 percent for all school districts. For school districts losing less than 9 percent of net school spending to charters schools (which is the majority of districts), all subsequent reimbursements would be eliminated. School districts losing more than 9 percent of net school spending to charter school tuition would be eligible for a 50 percent reimbursement and in second year and a 25 percent reimbursement in the third year. Reimbursements in subsequent years would be eliminated. Figure 1 illustrates the proposed changes in contrast to current law.

Figure 1 

 

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Current Statute

All districts

100%

25%

25%

25%

25%

25%

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Governor's Proposal

All districts

100%

0

0

0

0

0

>9% districts*

100%

50%

25%

0

0

0

For districts with charter school payments of less than 9 percent of net school spending (the majority), this represents a 56 percent reduction in total reimbursement. For districts in excess of 9 percent, it represents a 22 percent reduction in total reimbursement.

In addition to the financial hit, the governor’s budget also requires school districts qualifying for the 50 percent

reimbursement to submit a plan to the commission by October 1 detailing how the district plans to maintain and improve the quality of education it provides, “notwithstanding reductions in enrollment and increases in charter school tuition.” 

Dual Enrollment

Under current law, qualifying Massachusetts high school students may have dual enrollment in a public institution of higher education for credit on either a full-time or per-class basis. This policy was originally enacted to allow highly talented students access to college-level courses. H2 expands dual enrollment institutions to include a “nonprofit, independent, degree-granting career technical institution.” It is unclear why public dollars would be redirected to private institutions or why the governor proposed this new measure in light of his stated support for public vocational schools.

Early Education

The governor’s proposed budget for early education seeks to remove dedicated funding for many established programs, thus limiting transparency and removing guarantees of minimum spending levels.

The proposal includes a massive consolidation of program funds to create a new Quality Improvement Initiatives fund, to which the governor appropriates $33.4 million. Individual line items for Universal PreK, the Commonwealth Preschool Partnership Initiative and Mental Health Consultation are eliminated. In addition, more the 50 percent of the department’s administrative funds and $7 million from Child Care Access funds are transferred to the new Quality Improvement Initiative. The budget does not make clear how much the administration would spend on any of these program components.

Higher Education

Taking assumed tuition retention into account, the governor's budget includes a 1.1 percent average increase for higher education institutions (including expenditures over and above the operating budget) over FY16, including a .9 percent increase to UMass, 1.8 percent to state universities and .6 percent to community colleges. (In FY17, UMass is allowed to retain in-state tuition of $31 million. Its state appropriation is adjusted correspondingly.)  The main scholarship program was increased only slightly, from $95.6 million to $96 million, a .4 percent increase, while the High Demand Scholarship Program line item ($1 million in FY16) is proposed to be eliminated.

Employee Health Insurance

The governor’s budget seeks to shift additional costs to many current active state employees and all future state retirees by increasing the percentage they pay for health insurance. Under H2, all active state employees would pay 25 percent of the cost of their health insurance premium beginning July 1, 2016. Currently, active state employees hired on or before June 30, 2003, and their dependents pay 20 percent. In addition, all state employees who retire after June 30, 2016, would pay 25 percent. The state currently pays 80 percent of the premium cost for a newly retired state employee. Based on current premium rates, the cost of these proposed changes to active state employees would be $300 to $480 more per year for individuals and $720 to $1,200 more per year for those enrolled in family plans.

Pensions

Funding for teacher and state employee pension systems was increased in H2. Annual funding now totals $2.198 billion in state appropriations.

Cost-of-Living Adjustment (COLA)

The governor’s budget provides a 3 percent COLA on the first $13,000 in pension benefits for retired members of the state and teacher’s retirement systems.