MTA analysis of governor's FY2019 budget

Governor Charlie Baker released his annual budget recommendation on Wednesday, Jan. 24. His proposed plan, known as House Bill 2, is the first step in the development of a state budget for fiscal year 2019, which begins July 1. The House and Senate will each recommend and adopt their own spending plans in the spring.

House 2 proposes $40.9 billion in state appropriations, an overall increase of 2.6 percent over projected spending for Fiscal Year 2018.

Throughout the budget there are a number of proposals of concern to the MTA, including: paltry 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 $103.6 million over FY18, an increase of 2.2 percent. This increase does fully fund the current foundation budget requirement for each school district, but it provides an increase of only $20 per pupil for two-thirds of the state’s 320 operating districts. The budget also includes a $15 million reserve for students displaced by Hurricane Maria in Puerto Rico.

Accounting for inflation and enrollment factors over a longer period of time reveals that Chapter 70 funding is 5 percent below its FY02 peak. This is a primary driver in the MTA’s desire to support both the full implementation of the Foundation Budget Review Commission’s recommendations and the Fair Share Amendment, which would generate additional funding for education and transportation.

As in last year’s budget, the governor does implement one of the FBRC’s recommendations in a minor way by making a small adjustment to the component of the foundation budget that funds health insurance and other employee benefits.

Circuit Breaker

Funding for the Special Education Circuit Breaker was increased by $9.9 million. The circuit breaker program reimburses districts for high-cost special education students. “High-cost” is defined as four times the state average per pupil (based on state funding formulas). The state reimburses districts for 75 percent of costs above this threshold. The program funds cover prior-year costs. 

Charter School Reimbursement

State funding for charter school reimbursements was level-funded at $80.5 million. In FY18, this amount was less than half the amount needed to fully fund this program. Under current statute, communities receive tuition 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 in the past communities have not received the full amount of funds owed to them because of insufficient state funding.

Early College

A number of months ago, the state Secretary of Education announced the launch of a new early college initiative. The administration funds this new program at $3 million.

MCAS Funding

Funding for MCAS administration is substantially increased in the governor’s budget. An additional $5.1 million (19 percent) is added to cover the costs of developing additional tests.

Non-Chapter 70 Education Programs

The governor makes a number of changes to non-Chapter 70 grant programs.

Programs receiving funding increases in the FY19 budget:

• Office of School and District Accountability — $1,634
• Teacher Certification Retained Revenue — $21,104
• Literacy Programs — $1,579,321
• School-to-Work Connecting Activities — $364,499
• DOE Information Technology — $4,011

Programs level-funded in FY19 include:

• Smart Growth Reimbursement — $250,000
• Regional School Transportation — $61,521,000 
• Non-resident Transportation to Voc-Tech Programs  — $242,500 
• Transportation of Homeless – $8,099,500 
• Advanced Placement Math and Science Programs — $2,592,809 
• Charter School Reimbursements — $80,500,000 
• Regionalization Bonus — $56,920 
• Expanded Learning Time Grants — $13,975,592 
• Mentoring Matching Grants — $475,000 
• METCO — $20,642,582 
• School Lunch Public — $5,314,176 
• School Breakfast Program — $4,666,445 
• Safe and Supportive School Grants — $400,000 
• Youthbuild Programs — $1,750,000 
• Child Sex Abuse Prevention — $150,000 
• WPI School of Excellence — $1,400,000 

Programs receiving funding cuts in FY19 include:

• Institutional Schools —$37,342
• Impact Aid Shortfall Mitigation – $100,000
• Targeted Intervention (Partnership Network) – $246,226
• Adult Basic Education —$1,435,957
• After-School Programs —$1,547,837 (43.9% cut)
• Department Operating Budget —$340,022

Programs such as English Language Acquisition and Literacy Programs, English Language Acquisition and Bay State Reading Institute were consolidated in the FY19 Budget. However, in total, they lost $300,198 in funding.

Programs eliminated in the governor’s FY19 budget:

• Innovation Schools — $165,000
• Intensive Support for Low-Scoring Districts — $700,000
• English Language Learners in Gateway Cities — $250,000
• Center for Collaborative Education — $200,000

The elimination of these programs continues a trend by the Baker administration of reducing programs local districts depend on to meet the needs of their students. Education programs previously eliminated during the governor’s tenure include:

Programs eliminated in the governor’s FY18 budget:

• MCAS Low-Scoring Support — $1,238,828
• Intensive Support for Low-Scoring Districts — $1,100,000
• Bay State Reading Institute — $1,200,000
• Center for Collaborative Education — $1,050,000
• Innovation Schools — $1,050,000

Higher Education

Taking estimated tuition remission into account, the governor's budget includes a 0.5 percent average increase for higher education operating budgets over FY18, including a 1 percent increase to UMass and a 1 percent increase to state universities. Community college funding was cut by 0.1 percent, or $275,000.  

Funding for the MassGrant program was increased by $7.7 million (8%).   

Underfunding of public higher education is a perennial issue in the Commonwealth. To try to alleviate both the issue of campus funding (including benefits available to employees) and high student debt, MTA supports H.639, An Act investing in public higher education and the Fair Share Amendment.

Collective Bargaining Reserve

The governor’s budget also includes a $107 million collective bargaining reserve. At the time this analysis was written, the intended distribution of these funds is unclear.

Tuition Retention Study Commission

The governor’s budget calls for the creation of a study commission to investigate the feasibility of implementing in-state tuition retention at state colleges and universities and community colleges. UMass currently has an in-state tuition retention policy. The commission’s charge is to analyze the cost/benefit of such a program; how to handle tuition waivers mandated by statute; a method for determining cost allocations; and a revenue-neutral implementation plan. No educator voice is included on the commission.

Employee Benefits

Group Insurance Commission Funding

Funding for the Group Insurance Commission premium plan and costs account was decreased by $37.1 million. Budget documents released by the administration indicated that this funding was decreased to “meet projected need.” It is unclear if the GIC’s recent procurement decision is reflected in the number.

Premium Contribution Split

The governor’s budget did not seek to change premium splits for active or retired state employees as he has tried unsuccessfully to do in past years. This may be a result of GIC’s intention to shift additional costs to GIC members through plan design changes such as increased out-of-pocket costs (co-pays and deductibles), effective July 1, 2018.

Sick Leave Accrual

The governor’s budget includes language similar to a bill he filed last session, which would cap the accrual of sick leave for employees. Under the plan, accrued sick time would be capped at 1,000 hours, or six months of work, for all state employees. Current employees who have already accrued over 1,000 hours of sick leave will be able to retain their accrued hours but will be prohibited from accruing additional time until they have dropped below 1,000 hours. This proposal appeared in last year’s budget; however, this year higher education employees are specifically mentioned.

Retiree Benefits

State Pension Fund Contributions

Funding for teacher and state employee pension systems was increased in House 2. FY19 funding totals $2.608 billion in state appropriations.

Cost of Living Adjustment (COLA)

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

Despite these increases, retiree pensions do not keep pace with inflation or the rising costs of health care. To help address this, MTA supports S.1481, An Act to provide fair and affordable public retiree benefits.

Revenue

Revenue

The governor’s budget anticipates $41.581 billion in revenue, including $27.594 billion in state tax revenue and $11.357 billion in federal reimbursements.

Temporary Stay Tax

Governor Baker’s FY19 budget amends Chapter 64G of the Massachusetts General Laws to make short-term housing rentals, such as those made available through Airbnb and other online home-rental platforms, subject to the state’s 5 percent occupancy tax currently paid by hotels and motels. This provision will apply only to rooms rented 150 or more nights per year. The governor’s amendment will also allow the majority of municipalities to levy an additional tax of up to 6 percent, while the City of Boston will be authorized to tax up to 6.5 percent. It is estimated that this proposal will generate approximately $13 million in new state revenue. Baker introduced a similar provision in last year’s budget. The tax was ultimately dropped from budget negotiations after the Senate pushed to tax short-term units that are rented for significantly fewer days than the 150-day threshold proposed by the governor.