Massachusetts Gov. Maura Healey on Wednesday rolled out a $58 billion budget proposal that does not raise state taxes, while using the commonwealth’s existing so-called “Millionaire’s Tax” to boost spending for schools and transportation.
The Democratic governor revealed the broad contours of her priorities for the new fiscal year that starts July 1 during her first State of the Commonwealth address last week. There, she underlined her commitment to fighting the state’s housing crisis; tackling the funding crunch facing Massachusetts’ emergency shelter system, and improving access to childcare and early childhood education.
During a news conference on Wednesday, Healey, joined by Lt. Gov. Kim Driscoll, called the budget plan “balanced, responsible, and forward-looking,” arguing that it “protects taxpayer dollars,” while making “crucial investments” across state government.
With that in mind, here are 5 critical things to know about Healey’s spending proposal and what happens next.
The bottom line
Healey’s budget calls for $56.1 billion in gross spending for the fiscal year that starts July 1. That’s an increase of $1.59 billion, or 2.9%, over current, approved spending of $55.98 billion. Administration officials were quick to note Wednesday that the baseline spending number was coming in below inflation, which was “up 3.4% over last year.”
That figure, however, does not include spending that’s tied to the state’s Fair Share Amendment, popularly known as the “Millionaire’s Tax,” or the appropriation for Massachusetts’ Medical Assistance Trust Fund, which provides supplemental Medicaid payments to certain safety-net hospitals, according to an analysis by the Massachusetts Budget & Policy Center.
The administration’s spending blueprint recommends $1.3 billion in spending funding by the “Millionaire’s Tax,” which is an additional 4% income tax paid by anyone who makes $1 million or more. Spending from the tax will be split, 55%-45%, between education and transportation, a senior administration official said Wednesday.
The administration’s spending plan calls for a $682 million appropriation for the Medical Assistance Trust Fund, according to the analysis provided by Healey’s office
Taken together, that brings the spending plan’s total bottom line to $58 billion.
Taxes/revenue
The new spending plan does not raise any broad-based, state taxes. But the administration has proposed giving cash-strapped municipal governments the option of raising local taxes on restaurant meals, hotel stays, and cars.
The Democratic governor rolled out the proposal, which she said would give local leaders the option to raise badly-needed revenue, during an appearance before the Massachusetts Municipal Association at the Hynes Convention Center in Boston last week.
Legislative Republicans and their allies on Beacon Hill sounded cautionary notes about the proposal, which comes just months after lawmakers passed, and Healey signed, a $1 billion tax break package that’s expected to benefit families, seniors, renters, businesses and more.
The spending plan “fully phases in” the second year of those “historic” tax breaks, according to the administration’s analysis.
And with state tax revenues flagging, the Democratic front office balanced its spending plan by trimming $450 million from programs across state government, while tapping a number of one-time and recurring revenue sources, including a one-shot $75 million tax amnesty program, along with $100 million in redirected casino gaming revenue, State House News Service reported.
The administration’s spending blueprint does not call for tapping the state’s more than $8 billion “Rainy Day Fund” emergency savings account.
The ‘Millionaire’s Tax’
Healey’s spending proposal uses $750 million of the anticipated $1.3 billion in “Millionaire’s Tax” revenue to fund a variety of education and childcare-related initiatives.
The proposal devotes $210 million to early education and care, funding such initiative as grants to providers ($150 million), child care affordability efforts ($75 million), and a pre-kindergarten initiative ($21 million) aimed at putting the state on a path toward universal preschool, starting with all Gateway cities, by 2026, according to the administration’s analysis.
A further $170 million at the K-12 level funds the continuation of the state’s existing free meals program, while $30 million is dedicated to a childhood literacy initiative that Healey unveiled during her speech last week. An additional $5 million provides “mental health supports and wraparounds,” to young people, according to the administration’s analysis.
The spending plan appropriates $125 million of the “Millionaire’s Tax” revenue earmarked for schools and sets it aside for capital improvements at public colleges and universities; $24 million funds the state’s MassReconnect program at community colleges, and $80 million is set aside for financial aid at state colleges and universities.
The $550 million in revenue earmarked for transportation would, among other things, provide $127 million more in state operating assistance to the MBTA, where officials are struggling to right the agency’s finances, even as they work to correct service and safety issues across the nation’s oldest subway system.
The administration’s proposal also calls for using the tax revenue to backstop $1.1 billion in new borrowing for transportation-related projects, according to State House News Service, with funding spread across the T and the rest of the state, officials said.
Meanwhile, the administration also dropped a bill on Monday that could boost local road funding, with a combination of general fund and Millionaire’s Tax revenue, according to State House News Service.
Aid to cities and towns
All told, the administration’s spending proposal channels nearly $8.7 billion in assistance to cities and towns, a $261.6 million, or 3%, increase over current spending. The largest chunk of that is earmarked for education, with nearly $7 billion dedicated to so-called “Chapter 70″ funding, which is the main way Massachusetts pays for K-12 education. That’s up from current spending of $6.6 billion.
A further $129 million underwrites pupil transportation, up from the current $126.7 million, while charter school reimbursements are cut from the current $243 million to $199 million in the administration’s spending proposal.
On the municipal side of the ledger, so-called “unrestricted state aid,” the biggest chunk of state assistance to cities and towns, increases from the current $1.27 billion to a proposed $1.3 billion, while funding for veterans’ benefits rises from the current $68.2 million to $70.4 million in the administration’s new spending blueprint.
Payments to in lieu of taxes, or PILOT, payments, for state-owned land that’s off the local tax rolls rises slightly from the current $51.5 million to $51.8 million in the administration’s latest spending proposal.
Several accounts are flat-funded in the budget plan unveiled Wednesday, including regional library aid ($16.7 million); tax abatements for veterans, widows, blind persons and the elderly ($24 million), and payments for Local Share Racing Tax Revenue ($1.1 million).
The shelter crisis
On Wednesday, alongside the budget proposal, Healey also filed a supplemental funding bill aimed at “covering known deficiencies” in the state’s emergency assistance shelter program for 2024 and 2025.
In a December report to the Legislature, the Democratic administration said emergency shelter costs were expected to cost nearly $1 billion a year for the next two budget years. Healey’s office also said it planned to drain a $700 million state escrow account to cover a portion of those costs.
Last July, Healey and the Legislature appropriated just $325 million to fund the already strained system, State House News Service reported. The new spending plan flat funds that same $325 million in 2025.
On Wednesday, Healey emphasized the state’s commitment to funding the system, even as she repeated the administration’s long-standing call for policymakers on Capitol Hill to step up to help states contending with an influx of new arrivals.
