Massachusetts Finalizes State Budget, Advances Numerous Policy Priorities

OA State Government Relations Experts Recap Governor Baker’s First Budget

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This year’s budget process concluded in late July when Governor Baker signed the FY16 budget into law.  Beginning in January, state lawmakers began work in advance of Governor Baker’s first budget by meeting with the hundreds of advocacy organizations and advocates to begin crafting the FY16 budget. In the end, the new fiscal year officially began on July 1 of this year, but the FY16 budget was delayed due to a number of policy, budgetary, and constitutional issues between the House and Senate.

Governor Charlie Baker filed his budget proposal in early March, which was highly anticipated as it was his first budget proposal and one of the first opportunities that he could use to demonstrate his policy goals.  During the campaign and his first few months in office, Governor Baker expressed a strong interest in tackling the opioid epidemic as well as the challenges faced by the MBTA during this year’s crippling winter. In his budget, he addressed these issues, while also maintaining spending growth at around three percent without a reliance on new taxes – a large departure from his predecessor. He also dedicated more resources to the underfunded Department of Children and Families (DCF), increased unrestricted local aid to cities and towns by 74 percent of the projected revenue growth, and expanded the Earned Income Tax Credit (EITC) by tying to a repeal of the film tax credit.

The House and Senate then had their turn to craft, debate, and amend their versions of the budget.  After their respective budget debates, the two branches disagreed on whether the FY16 budget as it stood was a “money bill,” or a piece of legislation that changed the amount of revenue collected by the state by increasing or decreasing taxes. As a result, the House of Representatives sought advice from the state’s Supreme Judicial Court (SJC). While the House believed the budget was not a “money bill,” the Senate believed that policies in the House’s version of the budget allowed the Senate to include tax proposals in theirs, including a tax on flavored cigars and an expansion of the EITC by freezing the scheduled income tax rollback at 5 percent. The SJC filed a non-binding advisory opinion that the FY16 budget could be considered a “money bill,” and the two houses formed a six-member conference committee to work out their differences and develop a compromise bill.

A major policy proposal that all parties agreed should be included was the expansion of the EITC, though disagreement continued on how to finance the expansion. After deliberating for weeks, the Conference Committee proposed a compromise budget bill that included an expansion of the EITC through further suspending the implementation of a tax deduction for multinational corporations known as FAS-109 that, since its inception, has never been put into effect.  This protected the much-debated film tax credit that the Senate originally proposed to eliminate in order to pay for the expansion, while the House adamantly supported maintaining it.

Another point of contention between the houses related to the MBTA.  Both the House and Senate felt it was important to give the Governor enforceable tools that would enable him to have more control over the crumbling system. The compromise budget sent to the Governor included a suspension of the so-called Pacheco law – a measure aimed at preventing privatization of government services – for three years as opposed to eliminating it as the Governor originally proposed. It also gives the Secretary of Transportation authority over the MBTA general manager, increases the size of the state Transportation Board, and creates Governor Baker’s proposed fiscal and management control board.  The House plans to address other issues with the MBTA in further legislation this session.

The final budget also provides $4.1 billion in local aid, expands grants for early education, increases funding to end family homelessness by an additional $61 million, and ensures that the Legislature must pass a separate spending bill before public monies are spent on the 2024 Olympics.

After having ten days to review the $38.1 billion conference committee budget, Governor Baker signed most of the budget bill and sent amendments and vetoes back to the Legislature for consideration.  The Governor vetoed more than $5 million for the University of Massachusetts, $2.37 million in funding for the arts and cultural sectors via the Massachusetts Cultural Council, $200,000 for a state climatologist, and $17.6 million in kindergarten expansion grants. Having cut $162 million total, including $38 million in legislator earmarks, we now wait for the House and Senate to review and then either maintain or override the amendments and vetoes.

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