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Governor’s budget proposes major investments in education

On January 23, Governor Deval Patrick released his budget (House 1), which proposes spending $34.8 billion for the fiscal year that begins July 1. This is close to a 7 percent increase over current spending. The governor’s plan significantly increases funding for education, from early childhood through graduate school, and transportation. Almost every area of the budget sees additional spending over FY13, including local aid and human service programs, which were cut during the recession.

To pay for his visionary budget, the governor proposes a bold plan which, when fully implemented, would raise $1.9 billion in new revenues in a way that makes the tax code more fair. The governor’s budget increases the income tax rate from 5.25 percent to 6.25 percent, lowers the sales tax from 6.25 percent to 4.5 percent and doubles the personal exemption. (See below for details.)

House 1 increases Chapter 70 – state aid for preK-12 to municipalities and regional schools – to a new high of $4.4 billion, a $226 million increase over FY13. In addition, local aid would be increased by $31 million, education grants by $13 million and efforts to help close the achievement gaps in the state’s Gateway Cities by $11 million.
 
For public higher education, the governor is recommending a $193 million increase in campus line items and scholarship aid over last year’s budget, up more than 18 percent from FY13.

The governor’s budget establishes a commission on public higher education finance. This proposal is one of MTA’s legislative priorities. The commission would be charged with examining a number of higher education issues, including the appropriate use of adjunct faculty and the ratio of adjunct to full-time faculty.

House 1 increases funding for early education by $132 million for FY14, growing to a $350 million increase by FY17. This funding helps ensure that low-income families have access to high-quality early education to help prepare children for elementary school. The funding also provides more training for teachers and supports initiatives to raise the quality of early education.

When fully phased in, the governor’s education initiative would increase investment by close to $1 billion. Because most of the new increases in revenue would not take effect until January 2014 and the FY14 budget year begins July 1, all new revenues would not be available until the FY15 and FY16 budgets. The governor’s office estimates that the proposed tax increases would increase revenue by close to $1.2 billion in FY14, $1.6 billion in FY15 and more than $1.8 billion in FY16.

Below is a summary of the key elements of the budget that affect public education. For more specific information, see these budget spreadsheets.

MTA President Paul Toner's statement on the governor's budget.

 

PreK-12 Education

Chapter 70 – State aid to Local School Districts
The governor proposes to increase Chapter 70 funding by $226 million over FY13, an increase of more than 5 percent. This increase includes fully funding the current foundation budget, which accounts for most of the increase and is statutorily required to be funded under current law. The proposal also:

  • Provides $25 per pupil over FY13 aid.
  • Fully phases in the formula changes that began in the FY07 budget, which was stalled during the fiscal crisis (i.e., all districts to receive Chapter 70 funds to cover at least 17.5 percent of their foundation budget).
  • Includes all preK students now attending public schools in district foundation budgets.
  • Increases the cost of out-of-district placement for special education students in the foundation budget.

PreK-12 Education Grant Programs
House 1 proposes an increase of $13 million in preK-12 education grant programs over FY13.

Programs funded at current funding levels include:

Special Education Circuit Breaker – at $230 million.

Regional School Transportation – at $44.5 million.

Kindergarten Expansion Grants – at $23.9 million.

Programs receiving increases include:

Targeted Intervention in Underperforming Schools – funded at $9.7 million, a 28 percent increase over FY13.

Extended Learning Time Grants – funded at $19 million, a 34 percent increase. (In future years, this program will see an increase of $70 million.)

Charter School Reimbursements – funded at $80.2 million, a 13.9 percent increase.

Gateway Cities
Gateway Cities receive an additional $7 million. Our two dozen Gateway Cities (including Brockton, Fall River, Lawrence, Holyoke, Fitchburg and Pittsfield) are home to many ELL and low-income students. The proposals include:

Programs for English Language Learners – funded at $5 million, a 66 percent increase.

Student Support Counselors – a new program, funded at $3.64 million.

Career Academies – funded at $1 million, a more than100 percent increase.

Early Literacy Programs – a new program, funded at $575,000.

Innovation Fund – a new program, funded at $1 million for FY14.

Other Local Aid – Unrestricted General Government Aid (UGGA)
House 1 increases funding by more than $31 million. In some communities up to 50 percent of school funding comes from local aid.

Higher Education

The governor proposes increasing funding for higher education by $193 million over FY13. This represents an increase of 18.5 percent.

Campus Line Items – funded at an additional $77 million, an 8.4 percent increase. The amount and percentage vary by campus.

Scholarship Programs – an increase of $112 million, 127 percent more than FY13.
 
Commission on Higher Education Efficiencies and Finance – this outside section of the budget (Section 31) establishes a commission that includes an MTA representative. The goals of the commission include:

Defining a sustainable model of financing for public higher education and appropriate contributions from students and families, the Commonwealth and all other sources;

Examining the full range of issues affecting public higher education financing, including evaluating the appropriate adjunct faculty to full-time faculty ratio, with a review of:

(i) the use of adjunct or part-time faculty as well as the pay, benefits, responsibilities of and support services provided to adjunct faculty under the current system;

(ii) the number and use of full-time and tenure-track faculty across the system;

(iii) the ability of the current system to attract and retain highly qualified faculty and staff; and … assessing the number of developmental students being served under the current system and at which institutions, and the adequacy of academic and related support systems in place for both the number and types of students served.

(The italicized language is nearly identical to the language contained in a bill filed for the MTA, An Act Establishing a Commission on the Funding Needs for Quality Public Higher Education.)

Early Education and Care

The governor’s budget increases funding for early education and care by $132 million over FY13, an increase of more than 26 percent. Early Education and Care will see a total increase of $350 million when funding is fully phased by FY17.

Funding is increased for some current programs, and several new initiatives are funded, including:

  • Provider Quality Investments – $30.6 million.
  • Pre-school Initiative – $25.1 million.
  • Infant and Toddler Initiative – $31.6 million.
  • Quality Improvement Initiatives – $30 million.
  • Kindergarten Readiness Assessment System – $3.2 million.

The new programs are designed to increase provider quality by supporting more training for teachers and will move the state toward ensuring that all income-eligible infants, toddlers and preschool children have access to early education and care subsidies. These programs provide care for children of low-income parents who are working, disabled or in an education or job-training program. Funding cuts in recent years meant that many of these children were not able to receive a subsidy. The waiting list is now around 30,000 children statewide.

Revenue

Governor Patrick is proposing significant increases in revenues to pay for major investments in education, innovation and infrastructure in order to foster economic growth and to continue to make our communities good places to live.

The governor’s proposal is similar to one of MTA’s other legislative priorities, An Act to Invest in Our Communities, because the centerpiece of the proposal is increasing the income tax rate and at the same time increasing the personal exemption to lessen the impact on low- and middle-income families. Both proposals make the tax system more fair.

Governor Patrick’s budget proposal is built on increasing revenue in a variety of ways. These include:

  • Increasing the income tax rate from 5.25 percent to 6.25 percent (raises $2.6 billion a year).
  • Doubling the personal exemption amount from $4,400 to $8,800 for a single filer and from $8,800 to $17,600 for married filers (reduces taxes by $1.1 billion a year).
  • Reducing the sales tax rate from 6.25 percent to 4.5 percent (reduces taxes by $1.4 billion a year) and dedicating all sales tax revenue to transportation, the school building fund and other infrastructure.
  • Applying the sales tax to the purchase and installation of custom-modified computer software (raises $265 million per year).
  • Eliminating dozens of special tax breaks that reduce personal income taxes for eligible filers (raises $1.1 billion a year).
  • Eliminating a number of special tax breaks for businesses and clarifying the corporate tax code to prevent certain kinds of tax avoidance (raises $194 million per year)
  • Indexing the Motor Fuels Tax to inflation, which would prevent the further erosion of collections from this source.
  • Eliminating the sales tax exemption for soda and candy (raises $53 million a year).
  • Increasing the cigarette tax by $1 per pack, thus raising the tax to $3.51 per pack (raises $150 million a year).
  • Updating tobacco tax laws in order to equalize tax rates on cigars and "smokeless" tobacco products with the tax rate applied to tobacco sold in the form of cigarettes (raises $16 million a year). Smokeless tobacco products include items such as chewing tobacco, snuff, and nicotine-containing breath mints and lozenges. 
  • Capping revenue lost through the Film Tax Credit at $40 million (raises $40 million a year).

It appears that an additional $57 million in tax revenue mostly will come from the following sources:

  • $27 million from enhanced tax enforcement by the Department of Revenue, using special software and processes to identify promising collection and audit opportunities.
  • $26.2 million from the agreement the administration reached with Amazon.com for the online retailer to collect sales taxes from Massachusetts customers.
  • $2.6 million from eliminating the exemption from the room occupancy excise tax for certain types of short-term room rentals (such as B&Bs, rental vacation homes and corporate executive temporary apartments).

Governor Patrick’s budget proposal also relies on $555 million in one-time revenue, including $400 million from the state’s “rainy day” account, leaving the reserve fund with a balance of more than $1 billion.

Employee Benefits

  • Cost-of-Living Adjustment (COLA) – The governor’s budget provides for a 3 percent increase on the first $13,000 in pension benefits for retired state employees.
  • Group Insurance Commission (GIC) – There were no changes in the percentage of premiums paid for active or retired member’s health insurance.

Budget Spreadsheets