More School Aid, But House Budget Trends Closely With Baker's Plan

Massachusetts House leaders unveiled a $39.48 billion annual budget proposal on Wednesday, a leaner spending plan for fiscal 2017 than that offered earlier this year by Gov. Charlie Baker, but one that nevertheless makes a more sizable investment in local aid for public schools.

The budget, which marks the sixth produced by House Ways and Means Chairman Brian Dempsey, limits spending growth to well under the 4.3 percent projected growth in state revenues next year as health care, pensions and debt payments continue to consume large portions of the $1.34 billion in proposed new spending.

Dempsey, in a briefing on his committee's spending plan, said the proposal would increase spending on local aid by $159 million next year, including a 2.3 percent boost in Chapter 70 aid for local school districts that exceeds Baker's recommendation by $33.7 million.

In January, 79 House and Senate lawmakers wrote a letter to legislative budget writers asking for an additional $20.2 million in school aid above Baker's recommendation for a 1.6 percent increase.

"This is a fiscally responsible budget that highlights our commitment to cities and towns, particularly as it relates to local aid and Chapter 70 and the various other accounts that are so important to our communities," said Dempsey, a Haverhill Democrat.

Compared to Baker's budget and its 3.5 percent spending growth rate, the House leadership proposal comes in $76 million under the governor's total, for about 3.3 percent growth. The restraint in spending and lack of new taxes or revenue proposals is likely to go over well, at least to start, with House Republicans, as well as moderate to conservative Democrats.

The House Ways and Means Committee on Wednesday afternoon voted to release the budget, setting up a debate in the House later this month starting on Monday, April 25. The trimmer bottom line should give lawmakers room to maneuver as they consider hundreds of amendments that will be filed, including many calling for more spending.

As expected, House leaders have not put any new taxes or fee increases on the table in their budget, and for the second year in a row leave the state's $1.25 billion "rainy day" fund untouched. Dempsey said he anticipates a $210 million deposit into reserves at the end of the fiscal year, in line with Baker's proposal, but also like the governor has proposed to spend $150 million from capital gains tax revenues that would otherwise go into the savings fund.

The Massachusetts Taxpayers Foundation has advocated for the Legislature not to use capital gains tax receipts in excess of $1 billion for general spending, and instead to put the entire estimated $356 million into reserves.

"I think that that this budget once again shows the fiscal discipline that the House, I think, has been known for over the years," House Speaker Robert DeLeo said.

Dempsey said he's confident that the diversion of capital gains taxes will not negatively affect how bond rating agencies view the state's credit rating if taken as part of the broader plan that would also reduce the use on one-time revenue sources to $253 million, down from $600 million in the current fiscal year.

DeLeo highlighted the budget's investment of $10 million into a fund to increase salary rates for early educators, a 2.2 percent increase, and $2 million set aside for a "Big Data" and innovation workforce training fund that he sees as a down-payment on an economic sector that could provide many jobs in the future.

"It's going to be, probably, one of the newest methods for job creation here in Massachusetts and we want to be there for the ground floor when that occurs," DeLeo said.

House leaders, in the budget, embraced Baker's proposal to increase by $250 million an assessment on hospitals that will support new MassHealth accountable care organization (ACO) incentive payments.

The higher charges on hospitals, according to Dempsey, would go into effect in October to generate $73.5 million for next year's budget, but also give the state leverage as the Baker administration tries to negotiate a new five-year Medicaid waiver with the Obama administration before the White House transition begins.

"We believe that it is certainly a good strategy for the Commonwealth to utilize the assessment as a way of leveraging additional federal dollars and by doing that we anticipate that will not only help with our long-term strategy of not only receiving additional federal dollars, we believe it's important as the administration is negotiating a new five-year waiver with the federal government, this allows Massachusetts to move in the direction of an ACO," Dempsey said.

As a collective group, Massachusetts hospitals will receive the $250 million back in the form of higher Medicaid reimbursements, helping some hospitals while others will pay more than they will receive back. The House plan does include a five-year sunset clause based on a request made by hospitals as a condition of their support.

While House leaders assume the same 5 percent spending growth in MassHealth for fiscal 2017 as Baker did and propose $15.4 billion for the agency with no changes in benefits or eligibility, Dempsey said his plan would retain a state contribution to the health care safety net fund of $15 million, down from $30 million. Baker proposed to eliminate the state contribution, which would have left hospitals and health plans on the hook for the entire bill for patients that receive treatment with no insurance.

The Ways and Means budget also scrapped for the second year in a row Baker's proposal to require all state employees to contribute 25 percent to their health insurance coverage, eliminating $33 million in savings that Baker had been counting on in his budget.

Employees hired after 2003 already contribute 25 percent to their health plans, but Dempsey said he thought it would be too significant a burden to put on longer-serving state workers after the Group Insurance Commission last year made a number of plan design changes, including higher co-pays and deductibles.

In the area of substance abuse, the House leadership budget supports 45 new treatment beds at Taunton State Hospital with $13 million and revives what Dempsey described as a popular program from the 1990s that would give police departments $2.5 million in grants for community policing strategies. The budget plan, however, does not recommend any additional funding to help schools implements new substance abuse screenings of students at two grade levels that was part of the opioid abuse prevention bill signed by Baker last month.

The Department of Children and Families would receive an additional $23 million over this year's budget, supporting 281 new hires next year as child welfare advocates work to reduce caseloads for social workers.

Dempsey said he decided against adopting the governor's recommended income eligibility changes within the Temporary Assistance for Needy Families program that would have saved the state $28 million. The House spending bill also increases funding for rental vouchers by $9.1 million to support 375 new vouchers.

"We felt that it would have negative consequences for roughly 6,900 families and felt it's important that that remain in tact," Dempsey said about Baker's proposed eligibility changes.

According to Ways and Means, the shelter population in Massachusetts dropped below 4,000 in March for the first time since the summer of 2013 and the number of families living in hotels and motels fell to 629 from nearly 2,160 in the fall of 2013.

Dempsey said he hopes the state budget will continue to invest in housing and transitional assistance to continue to drive down those totals.