FY18 Final Budget Analysis

Governor Charlie Baker signed a $39.4 billion Fiscal Year 2018 budget on July 17 that vetoes some items and slices $320 million from the compromise budget reached by a House and Senate Conference Committee.

Given the overwhelming Democratic majority in the Legislature, many of the governor’s vetoes and reductions could eventually be overridden.

On July 7, the House and Senate had passed a $40.2 billion budget that reduced anticipated revenue by $733 million.

In general, the budget makes few substantive policy changes, including several that the MTA had advocated for throughout the process.

The final document does not include Senate budget language that would have:

• Eliminated the use of student test performance in teacher evaluations.
• Changed the composition of the Group Insurance Commission.
• Mandated recess for students in kindergarten through fifth grade.
• Expanded a line-of-duty death benefit to all public-sector employees.
• Capped employee sick leave accrual. The MTA opposed this measure.
• Established a schedule for implementing the 2015 recommendations of the Foundation Budget Review Commission.

With a year left in the current legislative session, the MTA will continue to coordinate activity around these policies.

K-12 EDUCATION

Chapter 70 aid to municipalities and regional school districts The budget increases Chapter 70 funding by $118.9 million, or 2.6 percent, over FY17. This is approximately $9.8 million lower than the Senate proposal but higher than the governor’s spending proposal made in January.

Of note is the distribution of this additional funding. The budget utilized the House version of the Chapter 70 distribution formula, which incorporated a lower foundation budget than the Senate version. Oddly, the House also relied on calculations in the governor’s budget —rather than its own budget —for allocating “hold-harmless” funds to districts negatively affected by a recent change in how low-income students are counted. The Conference Committee also followed this approach. As a result, a number of districts are worse off than they would have been had the hold-harmless calculations been based on the House budget. For example, Brockton receives no hold-harmless funds rather than $990,000; Lawrence receives $270,000 instead of $750,000. On the other hand, Lynn and Revere are significantly better off.

Programmatic Funding

The budget released by the Conference Committee on July 7 reduced funding for a range of education programs, in some cases to amounts lower than what had been proposed by the House or Senate. In making his cuts, the governor further reduced several of these programs.

The following programs were reduced from FY17 funding levels:

• Intensive Support for Low-Scoring Districts: Reduced by $400,000, or 36 percent, in Conference Committee and an additional $866,000 through the governor’s veto.
• Targeted Intervention: Reduced by $1 million, or 13 percent, in Conference Committee and an additional $1.5 million through the governor’s veto.
• English Language Acquisition Grants: Reduced by $888,000, or 50 percent; English Language Learners in Gateway Cities: Reduced by $750,000, or 75 percent, in Conference Committee and by an additional $1 million through the governor’s veto.
• Concurrent Enrollment: Reduced by $1.9 million, or 100 percent.
• Literacy Programs: Reduced by $1.7 million, or 50 percent, in Conference Committee and an additional $2 million through the governor’s veto.
• School to Work: Reduced by $644,000, or 15 percent, in Conference Committee and an additional $1 million through the governor’s veto.
• Center for Collaborative Education: Reduced by $850,000, or 81 percent, in Conference Committee and eliminated through the governor’s veto.
• After-School Programs: Reduced $1.3 million, or 27 percent.

Funding Policy Changes

Like the House budget, the current budget makes small increases in allocations for employee benefits, including health care, as recommended by the Foundation Budget Review Commission. It does not include the broader implementation proposed in the Senate budget, however.

HIGHER EDUCATION

Taking remitted tuition into account, the House budget included a 1.2 percent increase for higher education operations over FY17, including a 1 percent increase to UMass, 0.9 percent to state universities and 1.9 percent to community colleges. This is nearly the same funding increase recommended by the governor in January, but lower than the 4.8 percent increase proposed in the Senate version.

Funding for state university incentive grants and community college coordination, which the House and Senate initially proposed funding at approximately $2.5 million and $2.9 million, respectively, was eliminated in the comprise budget.

EMPLOYEE/RETIREE BENEFITS

COLA

The budget provides a 3 percent cost-of-living adjustment on the first $13,000 in pension benefits for retired members of the Massachusetts State Employees’ Retirement System and the Massachusetts Teachers’ Retirement System.

Group Insurance Commission

The compromise budget reduced funding for GIC premium and plan cost payments by approximately $17.9 million from the appropriation previously recommended by both the House and Senate. The rationale for this reduction is unclear. While it does not trigger any immediate changes in employee health insurance, it could lead to further plan design changes if no supplemental funding is provided during FY18.