House budget reflects fiscal concerns

Summary
On April 16, the House Ways and Means Committee released a $28 billion budget for the new fiscal year that begins July 1, 2008. Budget writers, concerned that the state will bring in fewer revenues as a result of the recession, made cuts in some programs, funded others at the same level as last year and provided modest increases in some.

Prior to release of the House Ways and Means budget (H4700), the House, Senate and Governor Deval Patrick supported a local aid resolution that set next year's levels for Chapter 70 -- state aid to local school districts -- and other local aid accounts that fund essential services in cities and towns including schools and public safety. In one of the few substantial increases, H4700 proposes increasing Chapter 70 by $223 million or six percent.

The state is facing a $1.3 billion deficit. This means that the state has to take in $1.3 billion more than it is projected to collect just to keep programs funded at their current level. To make up this deficit, the House plan raises the tax on cigarettes and closes certain tax loopholes. While the legislation that the House passed to close corporate loopholes will raise $218 million next year, had the governor's original loophole proposal been adopted, it would have increased revenues by $500 million. In addition, tucked in to this legislation are new tax cuts for corporations and financial institutions and new loopholes and tax avoidance opportunities for corporations. To help close the deficit, the House also dips into the "rainy day" fund, cuts $109 million from programs that were funded last year and proposes several tax enforcement and efficiencies that were included in the Patrick's FY09 budget plan.

Had the House passed the governor’s original corporate loophole closing bill and passed the casino bill, the House likely would not have had to use the"rainy day" fund or forgo payment into that fund which their proposal does.

PreK-12

As mentioned above, the House budget follows the local aid resolution and increases Chapter 70 funding.  This is in keeping with an agreement made three years ago to embark on a five year phase-in of changes in how Chapter 70 funding is distributed. One of the changes will guarantee that every district will receive 17.5 percent of its funding from the state. Generally, these changes result in substantially increasing funding to suburban and high-growth areas while providing smaller increases in urban and low-income communities.  MTA has called on the Legislature to fund a study of the adequacy of Chapter 70 funding (S 291) to ensure that there are sufficient resources for all students to achieve the standards set by the state.

Chapter 70, when inflation is taken into account, is still $421 million below FY02 funding levels.

A few of the grant programs saw modest increases in their funding though these increases were below those proposed by Patrick. These include extended learning time, early childhood education, and the special education circuit breaker.

Higher Education


H 4700 provides $521 million for University of Massachusetts operations (including tuition retention). This is an increase of $24 million over last year and $3.5 million more than in the governor's budget (H 2).

Funding for state colleges (including tuition retention) rose by $5.5 million in the House Ways and Means proposal, bringing the total to $225 million.  This is $1.3 million more than in the governor's plan.

Community colleges are slotted to receive $250 million, which increases their budgets by almost $9 million. Patrick had proposed a total of $245 million for community colleges.

When inflation is taken into account, funding for higher education is $349 million below FY01 funding levels.

Student aid ($94 million) increased negligibly, and is funded at the same level as in the governor’s proposal.  It is almost $20 million below the FY01 level.

Employee Benefits

Both the governor and House Ways and Means are proposing substantial increases in  the amount that state employees pay for health insurance. Employees earning more than $50,000 would pay 25 percent, those earning $35,000 to $50,000 would pay 20 percent and those earning less than $35,000 would pay 15 percent. Increasing one's premium from 15 to 20 percent is a 33.3 percent increase while an increase from 15 to 25 percent constitutes a 66.7 percent jump.
 
H4700, like the governor's plan, increases the COLA for state and local retirees by 3 percent calculated on a base of $12,000 or $360.  Local retirement systems would be permitted to approve similar COLAs for municipal retirees.