Senate budget includes increase in sales tax along with local revenue increases

As was the case in the House, the Senate budget debate began with votes to increase revenues.  Like the House, the Senate voted to raise the sales tax to 6.25 percent from 5 percent. But unlike the House plan, the Senate budget does not include a statewide meals tax.

The Senate ultimately went further than the House by increasing the alcohol tax and increasing local revenue sources. The Senate would allow cities and towns to increase meal and hotel room taxes, close the telecommunications loophole and allow communities to collect property taxes on telephone wires and poles.

However, even with these increases, the final Senate-passed budget includes significant cuts in order to deal with an expected deficit of over $5 billion. Along with local revenue options, the Senate included in its final budget a proposal, similar to the governor's Municipal Relief legislation, to require local savings in health insurance coverage for local public employees (see the Employee Benefits section below).

PreK-12 Education

The Senate budget cut Chapter 70 for all school districts by 2 percent from their FY09 levels, a total cut of $79 million. Like the House plan, the Senate budget uses federal ARRA monies to ensure that districts are funded at their foundation levels. But the Senate uses a lower inflation factor for calculating foundation budgets than is required under current law, which also means less funding for some school districts.

Other non-Chapter 70 local aid (now combined and called "General Government Aid") was drastically cut, down $487 million from FY09, a reduction of over 36 percent. This cut is $264 million below the final House budget. Because in some communities over half of local aid goes to help fund schools, this proposed cut in local aid will affect our schools, as well as other local services. However, the increase in local option taxes, along with the repeal of the property tax exemption for telecommunications equipment and the potential savings in health insurance costs, would provide savings for most cities and towns.

The Senate budget includes serious cutbacks to many important programs, including regional school transportation (down $20 million from the House), kindergarten development grants (down $1 million from the House) and the Special Education Circuit Breaker (down $33 million from the House). But the Senate-passed increase in the sales tax provided some significant restorations to important programs.

  • The Special Education Circuit Breaker was funded at $141 million, down from $184 million in the House and $230 million in FY09.
  • The education funding reserve account "pothole account") was funded at $3.5 million, down from $6 million in the House.
  • Expanded Learning Time was funded at $15.6 million, but this account is still down almost $2 million from the House appropriation of $17.4 million ($17.5 million in FY09).
    Higher Education

The Senate Ways and Means proposal had included a provision to reduce funding of state employees' health insurance premiums from the current 85/15 or 80/20 split (which depends on the hire date of employees) to a 70/30 split for everyone, but with the increase in the sales tax, the Senate added $33 million to the GIC account, increasing the split to 75/25 for everyone. The House final language provided an 80/20 split for all current employees and 75/25 for new hires.

The Senate-passed budget level funds the University of Massachusetts and all state and community colleges at their FY09 levels, as the House essentially did:

  • $492 million for the University of Massachusetts (the House added $892,000).
  • $223 for the state colleges.
  • $245 for the community colleges.

Like the governor's recent proposal, the Senate and the House plans rely on funding from the American Recovery and Reinvestment Act to make up the difference between the state appropriation and level funding for FY10.

Compared to the House, the Senate budget would make additional cuts to other higher education line items. The governor had level funded the scholarship reserve and McNair program at $96 and $1.9 million, respectively, while the House funded the reserve at $92.8 million and level funded the McNair program. The Senate combined the scholarship reserve and McNair into a new line item and cut this by $6 million, although some relief may be available, as ARRA funding includes increases to Pell Grants and to Work-Study programs.

Employee Benefits

  • Municipal Health Insurance. An amendment essentially mirroring the recommendations of the Special Commission on Municipal Relief was passed on a voice vote. The main elements include:
    • Uses the cost of covering employees through the GIC as the benchmark to measure the acceptable cost of municipal health insurance.
    • If a community’s cost of health insurance is above the benchmark, then through coalition bargaining the municipality must reach the GIC standard.
    • Failure to reach agreement triggers arbitration.
    • Ability to bargain Health Reimbursement Accounts (HRAs) for new municipalities joining the GIC for employee out-of-pocket costs exceeding $1,000 annually.
    • If the community is below the benchmark, then there are no changes to bargaining over health insurance.
    • The Special Commission had recommended that all Medicare-eligible retirees be required to go into Medicare. This was not included in the amendment.

    NOTE: The House version of the budget contains no provisions relating to local health insurance, so this matter will be subject to deliberations by the Joint Senate-House Budget Conference Committee.

    • State Employee Hiring and Salary Freeze. An amendment to freeze all state employee salaries and hiring for FY10 was defeated on a 28-to-9 roll call vote.
    • Pension Benefits and Salary Freezes. An amendment preventing any diminishment  in pension calculations due to salary freezes was rejected on a voice vote.
    • Retiree COLA. An amendment clarifying and guaranteeing a retiree COLA of 3  percent on the first $12,000 of pension income was adopted on a voice vote.
    • Contracting Out. An amendment repealing the "Pacheco Law" prohibiting the  contracting out to the private sector of most services currently provided by state  employees was rejected. However, the cap to "contract out" certain services was  increased to $2 million.