House budget increases aid to education

The FY08 $26.7 billion House Ways and Means budget proposal, which was released on April 11, increases funding for both Chapter 70 and higher education over the governor's budget (House 1).

However, it does not include any additional revenue and only balances the budget by relying on reserves and cuts in programs.  In House 1, Gov. Deval Patrick closes a number of corporate tax loopholes to increase FY08 revenues by $295 million and add $500 million in FY09.

The House plan (H 4000) estimates that the budget deficit for the upcoming fiscal year is $800 million. To make up for this deficit, H 4000 takes approximately $300 million out of reserves, makes another $300 million in programmatic cuts and does not make the required payment into the rainy day fund. Relying on the rainy day fund and not increasing revenues will make it even more difficult to balance the budget in future years. This risks not having adequate reserves for times of recession -- potentially resulting in even more painful programmatic cuts.

Prior to the release of the House Ways and Mean budget proposal, the House and Senate adopted a local aid resolution. Those funding levels were included in the House plan and, with the exception of Chapter 70, match the levels proposed by Patrick. Chapter 70 increases $220 million (6.3 percent) in H 4000 -- up $20 million over House 1. However, some of the increases in grant programs – for full-day kindergarten and extended learning time -- are not as large in the House Ways and Means version as in House 1.  When adjusted for enrollment changes and projected inflation, Chapter 70 funding in H 4000 is still $356 million (9 percent) below FY02.

The total budget for public higher education proposed by House Ways and Means is 2.1 percent over the level proposed by the governor in House 1. This amounts to an increase of $18 million over FY07. When projected inflation is taken into account, public higher education is approximately $313 million below FY01 funding levels. The scholarship reserve is increased by $5 million over FY07 in H 4000.

Below are some highlights of the proposed House budget.

PreK-12

Chapter 70 -- State Aid to Local School Districts
The $220 million increase in Chapter 70 over FY07 continues the reforms contained in the FY07 budget and ensures school districts of at least $50 per pupil over FY07. The FY08 proposal also includes small increases in the foundation budget for low-income and limited-English-proficient students.

Local Aid -- Lottery, PILOT and Additional Assistance
Small increases in other local aid include:  $15 million increase in the Lottery funds (2 percent).  PILOT (Payment in Lieu of Taxes) is up $3 million (12 percent).  Additional Assistance is level-funded.

Education Grant Programs
Several grant programs see increases over FY07, including kindergarten expansion grants (though not as much as in House 1) and the special education circuit-breaker. However, most other programs have been level-funded, and a number of programs that were eliminated in previous years still have not been restored:

  • Full-Day Kindergarten -- increase of $4 million to $31.1 million. Governor proposes $39.5 million.
  • Extended Learning Time -- increases pilot grant program by $3 million to $9.5 million. Governor proposes $13 million.
  • Special Education "Circuit-Breaker" -- increases from $207 to $218 million, up $8 million from the governor's proposal.
  • MCAS Remediation -- very small increase, from $10.3 million to $10.8 million.
  • Targeted Intervention in Underperforming Schools – increases funding to expand program to assist more schools $4.9 million to $9.1 million.
  • METCO -- funded at FY07 level ($19.6 million).
    Alternative Education Grant Program – funded at $1.195 million; slightly below FY07 level of $1.25 million.
  • Regional School Transportation -- level-funded at $55.5 million.
  • Education Reform Reserve -- "pot-hole fund," for unanticipated costs for school districts, not funded.
  • Charter School Reimbursements -- level-funded at $73.7 million.
  • Class Size Reduction for Low Income Districts -- not funded.
  • Comprehensive Health Education Programs -- not funded.
  • Transportation of Pupils -- not funded, except for regional school districts' reimbursements, which were level funded.

Office of Educational Quality and Accountability
The governor proposes eliminating this office. House 1 includes $2.9 million for EQA.

Early Education and Care – Community Partnerships for Children
Total funding for early education increases by about $21 million over FY07. However, the increases do not go to public school early education programs or to community partnerships for children.  Funding for community partnership for children programs (program coordination money) is cut by nearly $1 million.

School Building Authority
Funding increased $307 million (6.7 percent) over FY07.

Higher Education Budget

The House increases funding for public higher education budget by $18 million over FY07. The scholarship reserve is up $5 million (5.3 percent) over both FY07.

  • University of Massachusetts − $13 million (2.6 percent) over FY07, and $7 million over House 1. 
  • State colleges − $9 million increase (2.5 percent) over FY07. $4 million over House 1.
  • Community colleges − $14 million (3.6 percent) over FY07. $4 million over House 1.

Employee Issues

For the first time in many years, there are no provisions in the proposed FY08 House Ways and Means budget that repeal, reduce or diminish public employee benefits. Budget sections that relate to employee benefits include:

State Employee Health Insurance
State employee health insurance premium shares remain the same at 85-15 for those hired before 7/1/03 and 80-20 for those hired after 6/30/03.  For state retirees who retired before 7/1/94, the premium split remains at 90-10, while for those who retired on or after 7/1/94, the premium shares remain at 85-15.

Retiree COLA
Provides for a 3 percent COLA on the first $12,000 of retirement income for retired state employees and teachers. Municipal employees other than teachers are entitled to the same increase, which is subject to a vote of the Legislature, governor and local legislative body. The state is prohibited from mandating such costs on municipalities.

State Retiree Benefits Trust Fund
Establishes a State Retiree Benefits Trust Fund administered by the Pension Reserves Investment Management Board (PRIM).  This trust would receive, invest and disburse amounts set aside from a variety of sources (e.g., budget appropriations, investment returns, etc.) to meet the liabilities of the state employee retirement system for health care and other non-pension benefits for retired members of the system.

State Retiree Benefits Trust Fund Appropriation
After deductions are made from the State Retiree Benefits Trust Fund for payment of the state's share of FY08 retiree health insurance coverage, the remainder of the $345 million appropriation to the trust fund, or approximately $200 million, will remain in the trust to help offset the state's retiree health insurance liability obligations. 

State Retiree Health Insurance Study Commission
Establishes  a special commission to investigate, study and recommend ways to pay for/amortize the state's unfunded liability for retiree health insurance and other non-pension- related benefits, as required by the federal Government Accounting Standards Board (GASB). The commission would be chaired by the co-chairs of the Legislature's Public Service Committee.  Other members would include representatives from House and Senate Ways and Means, the State Treasurer's Office, the State Comptroller, the Group Insurance Commission and the Pension Reserves Investment Management Board.  The commission is required to report its findings and recommendations no later than December 31, 2007.

Labor Relations Commission/Board of Conciliation and Arbitration
Appropriates $1,734,579 for the operation of the state's Labor Relations Commission and the Board of Conciliation and Arbitration.  This represents "level funding" from FY 2007.  In the budget, the functions of both agencies have been combined into the Division of Labor Relations.