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Governor releases budget for 2013

On January 25, Governor Deval Patrick released his proposed budget (House 2) of $32.3 billion for the upcoming fiscal year which begins July 1. Despite the continuing effects of the economic crisis and the long-term structural budget deficit, this represents an increase of about 3 percent from current state spending, and 5.5 percent higher than last year’s budget. This proposed budget increase is made possible by a growing, albeit slowly, state economy, modest revenue increases, level-funding of most accounts, as well as some program cuts.

While revenues are expected to increase by just under $1 billion, fixed costs for services like Chapter 70, health care, pensions and debt services are expected to outpace the growth in revenue by over $1 billion. This will leave a budget deficit of over $1 billion.  To balance the budget, the Governor proposed cuts in some programs, use of the funds from the “rainy day fund” and a small increase in taxes worth $260 million. Budget Spreadsheets   

The budget proposal includes $4.1 billion in state aid for K-12 education, which represents a $145 million increase in state funding to municipalities and regional school districts over the current fiscal year, FY12. In addition, there may be as much as $17 million of unspent funds from the federal education jobs bill from two years ago that districts can use into FY13. 

House 2 includes $10 million to help close the achievement gaps for students in our “Gateway Cities.”  Our two dozen Gateway Cities (including Brockton, Fall River, Lawrence, Holyoke, Fitchburg and Pittsfield) are home to much of our immigrant population, most of our low-income students, and English Language Learners.  As the Governor stated in his address at the Summit on Closing the Achievement Gap in November, 2011, “The problem is poverty.  It’s not unions…we are leading the nation in student achievement in one of the most highly-unionized environments in American education.” The Gateway Cities project will include funding for Programs for English Language Learners, Student Support Counselors, Career Academies, Early Literacy Programs and school innovation.

For public higher education, the Governor is recommending a $68 million increase over last year’s budget in public higher education funding, up 6.8 percent. This includes an additional $10 million for Community Colleges for a proposal unveiled by the Governor earlier in the week in an outside section of the budget. The Governor proposes $175 million to fund collective bargaining agreements for state employees, which includes about $44 million in reserve accounts to fund those who work as faculty, librarians and staff on our public higher education campuses.

Below is a summary of the key elements of the budget that affect public education. For more specific information, click on the charts.
 
PreK-12 Education

• Chapter 70 – State Aid to Local School Districts

House 2 increases state funds to Chapter 70 by $145 million to $4.1 billion and keeps districts’ funding levels at foundation. Municipalities and regional school districts will receive no less in chapter 70 moneys than they received for FY12, and about one-third of districts will receive more.

• Unrestricted General Government Aid – Other Local Aid

In addition to Chapter 70 funds, cities and towns receive state funds through local aid, called Unrestricted General Government Aid. In some communities, as much as 50 percent of this other local aid helps pay for public schools.

House 2 funds local aid to cities and towns at $834 million, the same amount that was appropriated for the current year, FY12. Also, if state revenues increase, cities and towns will receive an additional $65 million during FY13, as was the case during FY12.

• PreK-12 Grant Programs

Most programs were level-funded, including:

  • Special Education Circuit Breaker – level-funded at $213 million
  • Regional School Transportation – level-funded at $43.5 million
  • METCO – level-funded at $17.6 million
  • There were some modest increases, to account for projected need:
  • Kindergarten Expansion Grants – increased $3 million, from $22.9 to $25.9 million
  • Targeted Intervention in Underperforming Schools – increased $2.5 million, from $6.7 to $9.3 million
  • Extended Learning Time Grants – increased $1 million, from $13.9 to $14.9 million

In addition, there is some proposed increased funding to support new initiatives, including several programs in the Governor’s proposed Gateway Cities project, including:

Programs for English Language Learners - $3.75 million

Student Support Counselors - $3.64 million

Career Academies - $1 million
Early Literacy Programs - $575,000

Innovation Fund - $1 million

Higher Education

Campus Line Items

• The University of Massachusetts line item is level-funded at $417.9 million, and the state university line items are all level-funded at their FY12 level. Unlike FY12, no cut is proposed for FY13. 

In addition, the University of Massachusetts account is funded at $25.6 million to fund FY13 salary costs upon ratification of the collective bargaining agreements.

• House 2 proposes level funding State Universities at $191.6 million and Community Colleges at $218.6 million increase of $10.6 million.

In addition, there is an increase of $17.9 million in the Board of Higher Education account to fund FY13 salary costs upon ratification of the collective bargaining agreements at the State Universities and Community Colleges.

• All of the community college line items are proposed to be consolidated into one line item.  An additional $10.6 million is proposed for community colleges over FY12 funding.  An outside section of the budget sets out the Governor’s proposal for “Community College Reform”. The Governor’s summary of this section states: “In order to ensure that the community colleges are aligned to execute a coherent mission that best serves students and responds to the needs of the workforce and regional employers, this section authorizes the Board of Higher Education to allocate funds among the community colleges and to appoint and remove their presidents.  It also provides that the Governor will appoint the chair of each community college board of trustees.  This section also establishes a study commission on higher education financing, chaired by the Secretary of Education.”

MTA understands that there are a number of concerns related to the governor’s Community College proposal.  MTA, along with HELC, will be examining this proposal in greater detail. 

Scholarship Program

The State Scholarship Program is proposed to be funded at $87.5 million, essentially level-funded from FY12.

Early Education and Care

The Governor’s budget proposes to essentially level-fund most Early Education and Care programs from the FY12 level:

Universal Pre-Kindergarten – level-funded at $7.5 million.

Early childhood mental health consultation services – level-funded at $750,000.

Access Management – level-funded at $5.9 million.

The budget also proposes to consolidate three child care line items (income eligible, supportive child care and TANF) into a single child care access line item of $434.7 million, down from $442.8 in combined funding in FY12.

Employee Benefits

• Cost of Living Adjustment (COLA) – Section 21 of the Governor’s budget provides for a 3 percent increase on the first $13,000 in pension benefits for retired state employees.

• GIC – There were no changes in the percentage of premium paid for active or retired member’s health insurance.

• Municipalities joining GIC - The Governor filed a supplemental appropriations bill at the same time as he filed House 2 which will move more quickly than the FY13 budget. The supplemental budget includes language allowing for an additional enrollment period for municipalities wishing to join the GIC. Under the proposal a community could join on either January 1 or July 1.

• OPEB Special Commission – The supplemental budget filed with the FY13 budget includes funds to cover the costs related to studying municipal retiree health care as well as language that would create a co-chair of the commission. 

Revenue

The Governor's FY13 budget proposal includes $260 million in new revenue initiatives. Of this amount, $214 million will provide ongoing revenue beyond FY13, while $46 million is a "one time" source of revenue limited to FY13.

The ongoing revenues include:

  • Permitting and licensing fee increases ($11 million)
  • Enhanced tax enforcement at the Department of Revenue ($22 million)
  • New application of the existing bottle-redemption fee to bottled waters and sports drinks ($22 million)
  • Elimination of the sales tax exemption for candy and soda ($61.5 million)
  • An increase in the cigarette tax ($62.5 million)
  • Updating of tobacco tax laws ($10.4 million)
  • Reforms in the rules governing taxation of various business entities ($24 million)

The $46 million in one-time tax-related revenues would come from postponing (for another year) a provision (known as FAS 109) in the Commonwealth's 2008 package of reforms to the corporate tax code.