MTA analysis of governor’s 2020 budget

On Jan. 23, Governor Charlie Baker released his annual budget recommendation, House Bill 1. His proposed plan is the first step in the development of a state budget for Fiscal Year 2020 (FY20), which begins on July 1. The House and Senate will each recommend and adopt their own spending plans later this spring, with the ultimate goal of having a final budget in place on July 1.

H.1 proposes $42.7 billion in total spending, an overall increase of 1.5 percent over Fiscal Year 2019 projected spending. Additionally, the governor anticipates being able to deposit $297 million in the state stabilization fund.

Throughout the budget, there are a number of proposals of concern to the MTA, including inadequate funding increases across all levels of education; severe underfunding of charter school tuition reimbursement; potential elimination of key services to urban districts; and restrictions on the accrual of sick time.

K-12 Education

Chapter 70 Funding

The governor proposes increasing Chapter 70 funding by more than $200 million over FY19, an increase of 4.1 percent. This increase fully funds the current foundation budget requirement for each school district, but it provides only a $20-per-pupil aid increase for almost 60 percent of the state’s 318 operating districts.

H.1 includes funding to implement year one of the governor’s proposed foundation budget bill, which the MTA strongly opposes due to its punitive nature and failure to adequately implement the proposal of the 2015 Foundation Budget Review Commission pertaining to low-income students. A complete summary of the governor’s foundation budget bill (H.70) will be posted shortly.

Circuit Breaker

Funding for the Special Education Circuit Breaker was increased by $4.5 million over FY19 levels and is more than 5 percent lower than the amount required for full funding. The circuit breaker program reimburses districts for the high-cost of special education. “High cost” is defined as four times the state average Chapter 70 foundation budget per pupil. The state is supposed to reimburse districts for 75 percent of prior-year costs above this threshold.

Charter School Reimbursement

In H.1, state funding for charter school reimbursements was funded at $106 million, an increase of $16 million over FY19. The allocation is about 15 percent, or $20 million, below what is required for full funding. Under current statute, communities receive reimbursement for any increase in tuition paid to charter schools over the previous year. That reimbursement is 100 percent of the increase in the first year and then 25 percent of the increase for the next five years. It is important to note that these reimbursements are subject to appropriation and that in the past several years, districts have not received the full amount owed to them because of insufficient state funding.

MCAS Funding

Funding for MCAS administration and the development of new high school assessments and assessments in history and social science is set at $32.2 million in H.1. This represents a small increase of $100,000 over FY19.

Targeted Intervention Line Item (Partnership Network)

For FY20, the budget proposal combines the targeted assistance line item with the Extended Learning Time Initiative for a total of almost $26 million. The total is about the same as the amount allocated to both programs in FY19. The budget describes the purpose of the funds as “targeted assistance and innovation support.” Eligible schools include those at risk of being designated, or that have been designated, as underperforming or chronically underperforming; schools demonstrating innovative approaches that have improved student performance, such as those in Empowerment Zones, Innovation Partnership Zones and School Leadership Initiative programs; and schools, including charter schools, planning and implementing expanded learning time, including summer learning time.

Unrestricted Local Aid

H.1 funds unrestricted local aid at $1.129 billion, an increase of 2.7 percent over the final FY19 budget.

Education Trust Funds

H.1 creates several education-related trust funds, including:

A more thorough summary of each fund will be included as part of the MTA’s forthcoming summary of the governor’s foundation budget bill (H.70).

Non-Chapter 70 Education Programs

Programs receiving funding increases in H.1
  • Office of School and District Accountability — $33,260 increase
  • Teacher Certification Retained Revenue — $432,547 increase
  • Early College Programs — $1,250,000 increase
  • Literacy Programs — $2,260,764 increase
  • DOE Information Technology - $55,253 increase
  • School Modernization and Reconstruction Trust Fund (pre-budget transfer) — $38,600,000 increase
  • Institutional Schools — $181,721 increase
  • Targeted Intervention (Partnership Network) — $18,975,591 increase
  • Adult Basic Education — $4,268,112 increase
Programs level-funded in H.1
  • Smart Growth Reimbursement — $500,000
  • Regional School Transportation — $68,878,679
  • Non-resident Transportation to Voc-Tech Programs — $250,000
  • Transportation of Homeless — $9,099,500
  • Advanced Placement Math and Science Programs — $2,892,809
  • Mentoring Matching Grants — $750,000
  • YouthBuild Programs — $2,400,000
  • Child Sex Abuse Prevention — $400,000
  • WPI School of Excellence — $1,500,000
Programs receiving funding cuts in H.1
  • School-to-Work Connecting Activities — $497,953 decrease
  • METCO — $40,000 decrease
  • School Lunch Public — $10,000 decrease
  • School Breakfast Program — $350,000 decrease
  • Safe and Supportive School Grants — $191,872 decrease
  • Impact Aid Shortfall Mitigation — $100,000 decrease
  • After-School Programs — $1,710,000 decrease
  • Department Operating Budget — $1,385,959 decrease
Programs for which funding was eliminated in H.1
  • Regionalization Bonus — $56,920 in funding eliminated
  • Expanded Learning Time Grants (Combined with Targeted Intervention Line Item)
  • Innovation Schools — $200,000 in funding eliminated
  • Intensive Support for Low-Scoring Districts — $700,000 in funding eliminated
  • Center for Collaborative Education — $400,000 in funding eliminated
  • Summer Learning Grants — $500,000 in funding eliminated
  • Education Improvement Grants — $1,625,000 in funding eliminated
  • Rural School Aid — $1,500,000 in funding eliminated
  • Foundation Reserve — $15,000,000 in funding eliminated

Higher Education

Higher Education Campus Funding

Taking estimated tuition remission into account, H.1 includes a 5.5 percent average increase for higher education operating budgets over FY19, including a 7.5 percent increase for UMass, a 4.4 percent increase for state universities and a 3 percent increase for community college campuses.

College Affordability and Success Trust Fund

H.1 creates a College Affordability and Success Trust Fund, which would be funded based on above-benchmark revenues collected by the Commonwealth through certain tax sources. Specified percentages of the funds in the account would be disbursed by the Executive Office of Education to the following programs: the Commonwealth Commitment Program; early college programs; a matching grant scholarship program for students participating in college success programs; a matching grant program to fund internships for public higher ed students; and pilot programs that demonstrate innovative financial aid strategies that improve affordability.

Employee Benefits

Group Insurance Commission Funding

Funding for the Group Insurance Commission premium plan and costs account was increased by approximately $17 million in H.1.

Group Insurance Commission Balance Billing

In H.1, the governor included language to expand balance billing protections to all plans offered through the GIC. Under current law, only subscribers to GIC indemnity plans are afforded this protection. This provision prevents providers from billing subscribers for the difference between what the provider may charge for a service and what the insurance carrier will reimburse for that service.

Premium Contribution Split

H.1 did not seek to change premium splits for active or retired state employees, as the governor has tried unsuccessfully to do in the past.

Sick Leave Accrual

The governor’s budget includes language that would cap the accrual of sick leave at 1,000 hours for state employees, including higher education employees. Current employees who have already accrued more than 1,000 hours of sick leave would be able to retain their accrued hours but would be prohibited from accruing additional time until they drop below 1,000 hours.

Collective Bargaining Reserve

The governor’s budget includes a $45.2 million collective bargaining reserve.

Retiree Benefits

State Pension Fund Contributions

H.1 transfers $2.842 billion to the state and teachers’ retirement systems, as required by law.

Cost of Living Adjustment (COLA)

H.1 provides a 3 percent COLA on the first $13,000 in pension benefits for retired members of the state and teachers’ retirement systems.


Anticipated State Revenue

The governor’s budget anticipates $43.718 billion in revenue, a figure that includes $24.496 billion in state tax revenue after accounting for statutorily required budget transfers such as the state pension liability payment. The remaining amount of anticipated revenue comprises non-tax revenue, such as federal reimbursements.

New Revenue Proposals

The governor’s proposal includes language to implement a 15 percent tax on opioid manufacturers on gross receipts from the sale of opioids. This would be expected to generate approximately $14 million in new state revenue. The governor also proposed expanding current tobacco excise taxes to e-cigarettes and vapor products, which would generate an estimated $6 million in new revenue.

Additionally, H.1 includes language that would require online marketplaces, such as Amazon, to collect and remit sales and use taxes on behalf of third-party vendors that sell items in the marketplace. The administration estimates that this change would bring in approximately $42 million in new revenue.

The governor has also proposed increasing the real estate transfer tax, which would generate an estimated $137 million in new revenue. The funds generated by the increase would be directed to the Global Warming Solutions Trust Fund to support projects aimed at mitigating the impacts of climate change.