Highlights of the Legislature's FY 2019 Budget

July 26, 2018
Analyzing-the-Senate-Ways-and-Means-Committee-Budget-for-FY-2018

OVERVIEW

Reconciling House and Senate budget proposals in the context of higher revenue estimates, the Legislature enacted a state budget that makes some targeted new investments, including the following:

  • New funding for early education and care to expand access and modestly improve the wages of child care providers, who have long been poorly paid (with these increases, funding for early care and education is still 17.1 percent below what it was in 2001, after accounting for inflation).
  • A restructuring and funding increase for adult mental health services. The reforms are aimed at providing more coordinated, standardized, and consistent treatment that will better align with health care systems, and will be more comprehensive, particularly for people who also have substance use disorders.
  • An increase in the state Earned Income Tax Credit (EITC), from 23 percent of the federal credit amount to 30 percent. Research has shown that—in addition to encouraging people to work and helping families to make ends meet—the EITC improves health outcomes for mothers and children, and boosts children’s academic performance and lifelong earnings.

With the amount collected in tax revenue by the end of Fiscal Year 2018 significantly exceeding official projections, the Legislature’s Conference Committee that negotiated the final budget chose to adjust upwards the revenue estimate for Fiscal Year 2019. This allowed the Conference Committee to choose the higher of the House and Senate recommendations in many instances. It also allowed the Conference Committee to properly fund some non-discretionary accounts (such as for snow and ice removal after storms) that had been underfunded in prior versions of the budget and would have likely required supplemental funding later in the year.

In another move to improve future budgeting, the Legislature required the Department of Revenue to provide greater scrutiny of tax expenditures. The Department will report on the cost effectiveness of these tax breaks, including special tax breaks meant to incentivize particular industries or business activities, which have tripled in value since 1996 and now cost the Commonwealth over $1 billion annually.

This budget does not provide significant new funding to address a number of long term problems, including years of deep cuts to public higher education funding that have increased student costs and indebtedness, and years of underinvestment in our transportation systems.

The rest of this Budget Monitor describes the resolutions of the major differences between the House and Senate budget proposals.


TABLE OF CONTENTS


Overview Early Education K-12 Education Higher Education
Environment & Recreation MassHealth & Health Reform Mental Health Public Health
State Employee Health Insurance Child Welfare Disability Services Elder Services
Juvenile Justice Transitional Assistance Other Human Services Transportation
Housing Economic Development Law & Public Safety Local Aid
Libraries Additional Line Items Revenue (tax & non-tax) Summary Chart

EDUCATION


Early Education

High quality early education and care helps prepare young children in Massachusetts for success throughout their education and allows them to thrive. Early education also provides critical support for working parents with young children by offering safe and reliable care for kids while parents provide for their families.

The Legislature’s Fiscal Year (FY) 2019 budget includes $629.1 million in support for early education and care. This is a significant increase of $52.1 million (9.0 percent) above current FY 2018 levels.

Due to higher than expected tax revenue projected to be available for FY 2019, total early education funding in the Legislature’s FY 2019 budget is $8.4 million (1.4 percent) higher than the proposed House budget and $31.8 million (5.3 percent) higher than the Senate’s proposal. All programs are at or near the highest level proposed by the two branches and several are higher than either proposal.

The Legislature’s FY 2019 budget includes support for several programs to increase professional development of early educators, as well as other quality measures, such as increasing the rates paid to child care centers by the state. It also includes funding that should allow modest expansion of access to early education.

While the proposed increase to early education funding in the Legislature’s FY 2019 budget is a positive step for early education and care programs, it does not reverse the long-term cuts to early education and care since tax cuts in the late 1990s and early 2000s. Despite the proposed increase by the Legislature for FY 2019, funding for early education and care would still be $130.0 million (17.1 percent) below FY 2001 levels, adjusting for inflation. The Legislature’s proposal is unlikely to end the challenge of significant waitlists in early education and care, which contained over 19,000 children in July of 2018.

For detail on how differences in early education funding between the Senate and House were resolved in the Legislature’s FY 2019 budget, see the table below.


table: Resolution of differences in early education line items

For information on funding for early education programs going back to FY 2001, please see MassBudget’s Budget Browser here.


K-12 Education

Providing an excellent education to all children in Massachusetts supports future generations in the Commonwealth while contributing to a strong economy over the long term. Chapter 70 education aid is the main program for delivering state support to local schools, ensuring districts across Massachusetts have sufficient resources to serve all students.

Due to higher than expected revenue projected to be available for Fiscal Year (FY) 2019, total K-12 education funding in the Legislature’s FY 2019 budget is roughly in line with the Senate’s higher FY 2019 proposal and is $58.7 million above the House proposal. Many programs are at or near the highest level proposed by the two branches, and several are higher than either proposal.

The Legislature’s Fiscal Year FY 2019 budget increases Chapter 70 Aid and Reserves by $160.6 million (3.4 percent) to $4.92 billion. This is somewhat larger than the 2.9 percent increase from FY 2017 to FY 2018.

The Legislature’s FY 2019 Chapter 70 budget takes steps towards implementing two recommendations of the 2015 Foundation Budget Review Commission (FBRC), which found that schools across the state are significantly under-resourced, limiting the capacity of schools to help all children succeed. This is because components of the Chapter 70 formula fail to reflect actual costs and student needs in several areas, especially supports for English Language Learners (ELL) and low-income kids, as well as employee health care and special education. For details on implementing changes to Chapter 70 in all of the areas highlighted by the FBRC, see MassBudget’s Building an Education System That Works for Everyone.

The Legislature’s FY 2019 budget partially addresses two areas discussed by the FBRC: employee health care and support for ELL students. On health care, the Legislature’s budget increases allotments for employee benefits by between 6 and 15 percent depending on grade level and student category, more than the standard 2.6 percent inflation factor used in the rest of the formula. The changes proposed by the Legislature for FY 2019 would collectively implement 29 percent of the FBRC’s health care related recommendations. At that rate, it would take five more years for these changes to be fully phased in.

The Legislature addresses a second area of the FBRC recommendations in its FY 2019 budget, related to ELL students. This budget proposes converting the additional funding in Chapter 70 for ELL students from an entirely separate rate (which takes the place of other categories such as elementary, middle school etc.) to an increment on top of these other rates. This is similar to how the Chapter 70 formula calculates additional funding for low-income students. Contrary to current practice, the Legislature’s FY 2019 budget also applies this ELL increment to vocational students.

In line with the FBRC recommendation, the Legislature makes the various increments for ELL students more uniform, ranging from roughly $1,530 for vocational students to $2,354 for middle school. This compares to a current range between no additional funding for vocational, through $2,331 for middle school. Overall, the Legislature implements 65 percent of the ELL changes proposed by the FBRC.

FY 2019 will be the third year that Massachusetts has used the Economically Disadvantaged metric for calculating the number of students in poverty across the state. In this process, the number of kids considered economically disadvantaged is determined by certifying kids through their enrollment in other public services, including MassHealth, TANF (limited cash assistance and work training for low-income families), SNAP (food stamps), and if they meet other criteria such as being in foster care.

Implementation of this process initially caused a drop in the statewide poverty count compared to prior years. To offset that drop, the FY 2017 and FY 2018 budgets increased the amount of funding directed to each economically disadvantaged student. The Department of Elementary and Secondary Education (DESE) and other agencies have made significant progress in identifying more students participating in various public programs. The Legislature’s budget appears to be in line with a count of over 339,000 students in poverty, up 7.8 percent from FY 2018. Identifying additional students tends to increase aid. However, the Legislature’s FY 2019 budget reverses some of the policy changes from the prior two years by lowering the amount of funding included for each economically disadvantaged student by around 5 percent (about $200 per student). This counteracts some potential aid increases from improved identification of low-income kids. 

A new problem could arise in FY 2019 if economically disadvantaged counts begin to decline because people in some communities in the Commonwealth, particularly immigrant families, become less likely to enroll in programs for which they are eligible. This is a reasonable possibility due to attempts at the federal level to vastly expand the connection between participation in public benefits (potentially including those for eligible United States citizen children and work supports such as the EITC) and some immigration processes such as applying to obtain or adjust legal status.

The Legislature’s FY 2019 budget does not include an Outside Section of the Senate’s proposal that could have addressed this specific issue as well as the overall challenges of counting kids in poverty accurately in schools. The Senate’s proposal would have allowed districts in FY 2020 to revert to the prior system where schools certified income levels through standard state-based forms where families reported their income. This change could have simplified the process of counting low-income kids for some schools, and would also address the undercounting of kids who are ineligible or unenrolled in public benefit programs, despite being low-income.

For detail on how differences in K-12 education funding between the Senate and House were resolved in the Legislature’s FY 2019 budget, see the table below.

table: Resolution of differences in K-12 education line items

Higher Education

The Legislature’s Fiscal Year (FY) 2019 final budget provides $1.22 billion for higher education. This final budget amount is $45.3 million (3.9 percent) more than the current FY 2018 budget.

The budget Conference Committee resolved a number of key differences between the House and Senate higher education budget proposals, including:

  • Over $7.5 million in additional scholarship funding above current FY 2018 levels, pretty much following the House budget proposal. Whereas the Governor, who proposed the same increase in his budget, specified that this money is for community college students, the Legislature’s budget does not specify the uses of the new funding.
  • An increase from current FY 2018 levels of $11.9 million (4.3 percent) in direct funding to community college campuses and $12.1 million (4.9 percent) to state university campuses—higher than both the House and Senate proposals.

The Legislature’s budget leaves out a number of higher education policy proposals that the Senate had proposed, including:

  • A requirement that any public or private college or university in Massachusetts provide advanced notice to the Board of Higher Education that “it may not have the financial resources to sustain the quality of its education programs, support institutional improvements, or graduate its entering class.” The Legislature’s budget also omits Senate language calling for notice of plans to shut down, merge with or acquire another institution, or open a branch campus. (For more detail and background, see the Higher Education section of MassBudget’s FY 2019 Conference Preview Budget Monitor.)
  • The creation of a commission on UMass-Boston debt, which would have considered how much of this debt “should either be reimbursed, paid off, and/or assumed by the Commonwealth instead of UMass-Boston.”
  • A ban on increasing tuition and fees at state universities and UMass campuses more than once every five years, except as “necessary to adequately fund student education and services in rare and extraordinary circumstances.”
  • The creation of a commission to study debt-free and tuition- and fee-free public higher education.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, see the table below.

table: Resolution of differences in higher education line items

table: Resolution of differences in higher education line items (continued)

ENVIRONMENT & RECREATION

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $220.1 million for environment and recreation programs. This amount is $19.8 million (9.9 percent) more than the FY 2018 budget. For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

Because state tax revenues have significantly exceeded projections in FY 2018, the budget Conference Committee increased the tax revenue estimate for FY 2019 which allowed it frequently to choose the higher of the House and Senate recommendations when resolving differences between the budget proposals for environment and recreation programs. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

One notable increase in the Legislature’s budget is funding for the Department of Environmental Protection (DEP). In FY 2016, DEP lost over 100 employees as part of the state’s early retirement incentive program. The Legislature’s budget provides DEP with $29.1 million, an increase of $4.4 million over FY 2018 which could allow DEP to hire additional staff to help with environmental planning, permitting, compliance and other activities. 

table: Resolution of differences in environment line items

table: Resolution of differences in fish and game line items

table: Resolution of differences in parks and recreation line items

For information on funding for environment & recreation programs going back to FY 2001, please see MassBudget’s Budget Browser here.


HEALTH CARE


MassHealth (Medicaid) & Health Reform

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $17.59 billion to support the state’s MassHealth (Medicaid) program and provide payments to health providers, such as hospitals that serve large numbers of low-income patients and nursing homes (see table below.) For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table at the end of this section.


table: MassHealth (Medicaid) and health reform

Because state tax revenues have significantly exceeded projections in FY 2018, the Legislature’s budget includes an increased tax revenue estimate for FY 2019. In some instances, the Conference Committee recommended the higher of the House or Senate proposal, and in some instances recommended an amount higher than either the House or Senate, incorporating recommendations from both budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

The Legislature’s budget does not include the major health reform initiatives proposed by the Governor and the Senate during budget debate. Instead, the House and Senate are debating separate health reform legislation outside of the budget process.  The Conference Committee did not include the Senate’s proposal—similar to one originally introduced by the Governor—that would work towards reducing the increasing costs of pharmaceuticals by allowing the state to negotiate drug prices directly with manufacturers to obtain rebates for prescription drugs. The Legislature’s budget also does not include the Senate’s proposed annual prescription drug spending target. Accordingly, the Conference Committee’s budget proposal does not include savings that the Senate had built into its totals.

The Legislature’s budget includes the House proposal to provide $14.8 million in supplemental payments for pediatric hospitals, and the House and Senate proposals for $13.0 million in supplemental payments for hospitals that have a high share of low-income patients. The Conference Committee includes the House budget’s higher recommendation for supplemental nursing home rates, and the Senate’s proposals to spend $4.0 million for increased rates for outpatient and diversionary behavioral health and $2.0 million for increased rates for children’s behavioral health.

Although the Conference Committee did not follow the Senate’s proposal to create a new tax credit offsetting costs for businesses that are now paying both federal and state assessments to cover the costs of health insurance, the Legislature’s budget does include Senate’s proposal to allow a “hardship exemption” for employers encountering financial difficulty in covering the increased payment for the state assessment.

table: Resolution of differences in masshealth (medicaid) and health reform line items

Mental Health

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $876.0 million to support the state’s Department of Mental Health. For a full list of line items with House and Senate funding differences resolved by the Conference Committee, please see the table at the end of this section.

Because state tax revenues have significantly exceeded projections in FY 2018, the Legislature’s budget includes an increased tax revenue estimate for FY 2019. In some instances, the Conference Committee recommended a higher amount than either the House or Senate, incorporating recommendations from both budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

At the beginning of the budget deliberation process, the Governor’s proposal included an expansion and realignment of adult mental health services, in order to focus on community-based services, and to better coordinate and target treatment for adults with substance use disorders and behavioral health needs. The Legislature’s budget incorporates the Governor’s recommendations, and funds these services at a level higher than proposed in either the House or Senate budget.

Child and adolescent mental health is also funded at a level higher than in either the House or Senate proposals, recommending $92.9 million. This total includes $3.9 million for the Massachusetts Child Psychiatry Access Project (MCPAP)—the higher amount recommended by the Senate. The funding for MCPAP designates $675,000 to expanding consultation to primary care providers on services addressing mental health concerns of pregnant and postpartum women, and following a recommendation from the Senate, includes consultation on substance use disorders.

table: Resolution of differences in mental health line items

Public Health

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $657.6 million to support the state’s public health programs. For a full list of line items with House and Senate funding differences resolved by the Conference Committee, please see the table at the end of this section.

Because state tax revenues have significantly exceeded projections in FY 2018, the Legislature’s budget includes an increased tax revenue estimate for FY 2019. In some instances, the Conference Committee recommended a higher amount than either the House or Senate, incorporating recommendations from both budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

Throughout the FY 2019 budget process, starting with the Governor’s proposal and continuing through the House and Senate deliberations, the budget proposals have included additional funding overall to address substance use disorder prevention and treatment. This is particularly evident in funding for several line items at the Department of Public Health. The Conference Committee recommended funding above the amounts in both the House and Senate budgets for the Bureau of Substance Addiction Services, for the Nasal Narcan Pilot Expansion, and for the Substance Abuse Grants. For Secure Treatment Facilities and the Grandparents Raising Grandchildren Opioid Commission, the Conference Committee chose the higher of the House or Senate proposals.

Youth engagement and violence prevention programming also received additional funding beyond the House or Senate proposals, including $8.1 million for the Safe and Successful Youth Initiative, $2.0 million for the Violence Prevention Grants, and $5.0 million for Youth-At-Risk Matching Grants. This is a 21.7 percent increase over current funding in FY 2018.


table: resolution of differences in public health line items

For information on funding for all Public Health programs going back to FY 2001, please see MassBudget’s Budget Browser here.


State Employee Health Insurance

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $1.59 billion to support health insurance for state employees provided by the Group Insurance Commission (GIC). For a list of line items with House and Senate funding differences resolved by the Conference Committee, please see the table below.

The Conference Committee did not includes the Senate’s proposed amendment which would have required the Group Insurance Commission to include members with expertise in behavioral health care delivery.


table: Resolution of differences in state employee health insurance line items

For information on funding for State Employee Health Insurance going back to FY 2001, please see MassBudget’s Budget Browser here.


HUMAN SERVICES


Child Welfare

The Legislature’s final Fiscal Year (FY) 2019 budget provides $1.01 billion for child welfare services, which are designed to support families and protect children at risk of neglect or abuse. This amount is $30.5 million (3.1 percent) more than current FY 2018 levels.

The Conference Committee largely followed the Senate’s proposal for child welfare services. One notable exception to this is in the foster care and adoption account, for which the Committee provided more funding than both the House and Senate. This is because the Committee accepted both House and Senate proposals to fund specific local and regional child welfare services—such as youth services, foster care programs, and advocacy centers—around the state. The Legislature’s final budget funds this account at $298.8 million, which is $8.9 million (3.1 percent) more than current levels.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.


table: Resolution of differences in child welfare line items

Disability Services

The Legislature’s Fiscal Year (FY) 2019 budget provides $2.01 billion for disability services, which include job training programs and community-based supports for people with disabilities and their families. This amount is $53.7 million (2.7 percent) more than current FY 2018 levels.

The Legislature’s final budget provides $6.7 million for Community Services for the Blind, which provides rehabilitation and social services to Massachusetts residents who are blind. This amount is more than both the Senate and House proposals and is $2.5 million (60.7 percent) more than the current FY 2018 budget.

Because state tax revenues have significantly exceeded projections in FY 2018, the budget Conference Committee increased the tax revenue estimate for FY 2019 which allowed it to frequently choose the higher of the House and Senate recommendations when resolving differences between the budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

The Conference Committee also accepted the Senate’s funding level of $1.7 million for Inclusive Concurrent Enrollment, a grant program for school districts and public higher education institutions to support students with disabilities who want to enroll in higher education. This is $318,000 more than FY 2018 budget levels. This account is included in the Higher Education section of this Budget Monitor and is not included in the table below.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, see the table below.

table: Resolution of differences in disability services line items

Elder Services

The Legislature’s final Fiscal Year (FY) 2019 budget provides $301.0 million for elder services, $15.0 million (5.2 percent) more than current FY 2018 levels. Elder services promote independence, safety, and wellbeing among the state’s older adults.

Of the few programs where the House and Senate budget proposals differed, the Conference Committee mostly followed the House proposal. This includes $286,000 in funding for Elder Homeless Placement, which is a $100,000 increase from current FY 2018 levels.

In one area, the Grants to Councils on Aging account, the Conference Committee provided more funding than the House and Senate proposals. Councils on Aging offer services like transportation, food programs, health screenings, recreation, and education. The Legislature’s final budget funds this account at $17.8 million, which is $3.5 million (24.8 percent) more than current FY 2018 levels. This will support an increase to the elder formula grant from $9.70 per elder to $12 per elder. Further, the Conference Committee accepted both House and Senate budget proposals to fund different specific items—such as infrastructure repairs and service enhancements—for local and regional councils on aging around the state.

Because state tax revenues have significantly exceeded projections in FY 2018, the budget Conference Committee increased the tax revenue estimate for FY 2019, which allowed it frequently to choose the higher of the House and Senate recommendations when resolving differences between the budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

table: Resolution of differences in elder services line items

Juvenile Justice

The Legislature’s budget for Fiscal Year (FY) 2019 includes $178.3 million for juvenile justice services, which is $2.1 million (1.2 percent) less than current FY 2018 levels.

The Conference Committee largely followed the Senate’s budget proposal for juvenile justice programs, by providing modest increases to most Department of Youth Services (DYS) accounts.

In juvenile justice accounts housed under the Trial Court (rather than DYS), the Conference Committee also followed the Senate proposals. The Legislature’s budget provides $350,000 for a Juvenile Justice Pilot, which takes multidisciplinary approaches such as youth mentoring and restorative justice. It also provides $21.3 million for Juvenile Court, of which $1.5 million will go toward raising salaries for juvenile court investigators. (For more information on courts and probation-related accounts, see to the “Law Enforcement” section of this Budget Monitor.)

For a full list of differences between the House and Senate budgets resolved by the Conference Committee, see the table below.

table: resolution of differences in juvenile justice line items

Transitional Assistance

The Legislature’s Fiscal Year (FY) 2019 final budget provides $668.6 million for transitional assistance programs, which help low-income individuals and families meet their basic needs. This final budget amount is $15.0 million (2.3 percent) more than current FY 2018 levels.

The final budget includes $201.6 million for Transitional Aid for Families with Dependent Children (TAFDC), which is $13.1 million more than current FY 2018 levels. This reflects multiple areas where the budget Conference Committee resolved the House and Senate proposals:

  • It removes a restriction that bars families from receiving Department of Transitional Assistance (DTA) benefits for a child conceived while the family was receiving public assistance. The final budget includes $5.5 million for removal of this restriction to take effect January 1, 2019.
  • It raises the TAFDC assets cap from $2,500 to $5,000, which would allow families to save money as they return to work.
  • It will not count any of a working recipient’s earned income for the first six months of employment or when the recipient starts receiving TAFDC benefits (as long as total income does not exceed 200 percent of the federal poverty level). After these initial six months, half of the recipient’s earnings will be disregarded in determining benefits.
  • It increases the annual back-to-school clothing allowance for TAFDC recipients from $300 to $350, as proposed by the Senate.

The Legislature’s final budget includes $4.0 million for the Healthy Incentives Program (HIP) within the SNAP Participation Rate line item. HIP enables people to purchase local fruits and vegetables at farmers’ markets and community-support agriculture farm share programs.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

table: Resolution of differences in transitionla assistance line items

Other Human Services

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $208.1 million to support a variety of human service programs, including $148.4 million for veterans’ programming, $18.4 million for emergency food programs, and $38.5 million held in a reserve account for a variety of health and human services providers that we include in this subcategory of this Budget Monitor. For a full list of line items with House and Senate funding differences resolved by the Conference Committee, please see the table below.

Because state tax revenues have significantly exceeded projections in FY 2018, the Legislature’s budget includes an increased tax revenue estimate for FY 2019. In some instances, the Conference Committee recommended a higher amount than either the House or Senate, incorporating recommendations from both budget proposals, as the Legislature did in its recommendation to fund all of the specially earmarked programs recommended by the House and the Senate in the appropriation for Emergency Food Assistance (food banks) and in the appropriation for Veterans’ Outreach Centers and War Memorials. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of revenue assumptions.

table: Resolution of differences in other human service line items

INFRASTRUCTURE, HOUSING & ECONOMIC DEVELOPMENT


Transportation

The budget Conference Committee resolved differences between House and Senate proposals for Fiscal Year (FY) 2019 transportation funding by sometimes choosing lower spending amounts and sometimes higher amounts from the two chambers’ recommendations.

The Committee adopted a transfer of $127.0 million to support operation of the Massachusetts Bay Transportation Authority (MBTA) as proposed by the Senate and Governor rather than the $27.0 million higher figure proposed by the House. As part of that decision, the Committee adopted language to allow the MBTA to continue paying certain long-term employees from the capital budget rather than fully comply with a previous law requiring the authority to shift these employees to the operating budget. The MBTA had earlier intended to pay these employees from the operating budget in order to free up capital funds for repairs and improvements. (For a more detailed description of these proposals, see the “Transportation” section of the Senate Ways and Means Committee Budget Monitor.)

The Conference Committee adopted the Senate proposal of $88.0 million for the Commonwealth’s 15 Regional Transit Authorities (RTAs) in FY 2019, $6.0 million more than proposed by the House. The Senate’s proposal to tie future RTA distributions to the inflation index was not adopted. Following recommendations from both chambers, the Massachusetts Department of Transportation (MassDOT) will be enabled to require RTAs to annually report on ridership, customer service, asset management, and financial performance. Moreover, a task force will be established to determine best practices for RTAs. Of the total $88.0 million transfer, $4.0 million was set aside to be distributed to RTAs conditioned upon their agreement to a memorandum of understanding with the Department of Transportation about adhering to best practices and filing information reports with MassDOT. Similarly, $2.0 million is set aside for RTAs that agree to remedial plans with MassDOT to use performance indicators to eliminate unfunded deficits within three years.

The Massachusetts Transportation Trust Fund (MTTF) is provided with $358.5 million, approximately $35 million more than proposed by either the House or Senate. The MTTF contributes to highways, transit, intercity rail, small airports, the Massachusetts Turnpike, and Motor Vehicle Registry. Unlike the House or Senate, the Committee more fully funds snow and ice control at anticipated amounts, rather than waiting to provide supplemental funding to the MTTF later in the year for clean-up from winter storms. The Governor had proposed $9.1 million more for the MTTF in combination with a proposed new trust fund to fully pre-fund clean-up for snow and ice. The Conference Committee also adopts $867,000 of targeted funding for local projects and to support regional studies that had been proposed in the House and Senate budget recommendations.


table: Transportation line tiems with funding differences

The Committee adopted additional policy amendments from the House and Senate budget proposals:

  • A Senate-proposed temporary tolling pilot program intended to test the technological feasibility of reducing traffic congestion by charging different toll rates at different times of the day in order to incentivize some rush-hour drivers to shift their trips to off-peak hours. The program will create off-peak time discounts of at least 25 percent for motorists using transponders to pay tolls. There will be a report detailing the results, as well as analyzing how tolls can be used to reduce congestion, as well as proposals for next steps toward implementation. 
  • A new Senate-proposed subcommittee to the currently established Berkshire Flyer working group, which is tasked with examining possible seasonal rail service between Pittsfield and New York City, via Springfield. The new subcommittee will explore improvements for ground transportation once riders arrive in Pittsfield, as well as marketing possibilities, and identification of potential private partners to support future service. The MTTF budget includes $100,000 for the Berkshire Regional Planning Commission to support this work.
  • A Senate proposal for MassDOT to conduct a study of how the MBTA currently sets commuter rail fares to inform future faresetting policy. The study would include proposals about potentially setting discounts for Gateway city riders, lower interzone fares to encourage ridership, and variable pricing based on time of day.

The Conference Committee did not include a House proposal to enable municipalities to enter agreements with the Secretary of Transportation for “Supplemental Infrastructure Financing for Transportation” (SIFT). These agreements would have allowed municipalities to capture tax revenues from future increases in real estate value in a designated district to finance a specific infrastructure project that is expected to boost those property values.


Housing

In its final budget for Fiscal Year (FY) 2019 the Legislature provides $480.7 million for affordable housing and homelessness assistance programs which is $20.1 million (4.4 percent) more than the FY 2018 current budget. Because state tax revenues have significantly exceeded projections in FY 2018, the budget Conference Committee increased the tax revenue estimate for FY 2019 which allowed it frequently to choose the higher of the House and Senate recommendations when resolving differences between the budget proposals. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue. The table below provides a complete listing of the resolution of housing funding differences between the House and Senate budgets.

The Legislature’s budget provides $161.7 million, which is above both the House and Senate budgets, for the Emergency Assistance (EA) program. Because EA provides shelter to low-income families with children who are homeless and meet certain eligibility requirements, the state must provide sufficient funding to meet need. In years past the Legislature has often had to provide supplemental funding for EA to provide shelter to low-income, homeless families. With this higher amount, the Legislature’s budget is expected to meet anticipated caseload costs for the program in FY 2019. The Legislature’s final budget for EA does not include language approved by the Senate that would have required DHCD to allow low-income, homeless families to enter shelter if they would otherwise have to live in a place not meant for human habitation like a car, a park, or an emergency room. 

table: Resolution of differences in housing line items

For information on funding for housing programs going back to FY 2001, please see MassBudget’s Budget Browser here.


Economic Development

The Legislature’s Fiscal Year (FY) 2019 final budget provides $171.0 million for economic development—$27.8 million (19.4 percent) more than the current FY 2018 budget.

The budget Conference Committee resolved a number of key differences between the House and Senate economic development budget proposals. The Legislature’s budget:

  • Adopts the Senate proposal to triple funding to train and place unemployed and underemployed workers. These line items would go from $2.0 million in the current FY 2018 budget to $6.0 million in FY 2019. (For more detail, see the Economic Development section of MassBudget’s FY 2019 Senate Ways and Means Budget Monitor.)
  • Funds YouthWorks, a summer jobs program for at-risk youth, at $12.8 million—slightly over the House proposal and $1.8 million (16.8 percent) over the current FY 2018 budget.
  • Follows the House budget in reinstating funds for the Massachusetts Manufacturing Extension Partnership (MassMEP), a collaboration of government, business, and academic partners, to help manufacturers plan and implement strategies for increased competitiveness. MassMEP is unfunded in FY 2018 but would get $2.0 million in FY 2019 under the Legislature’s budget.
  • Cuts $8.6 million (44.5 percent) in funding for tourism promotion from the current FY 2018 budget, following the House proposal.
  • Increases funding for the Massachusetts Cultural Council by $3.4 million (24.4 percent) over FY 2018, essentially in keeping with the Senate budget proposal.
  • Restarts the Massachusetts Office for Employee Involvement and Ownership (MASSEIO) with $50,000 in funding within the Executive Office, as proposed by the Senate. MassEIO had been defunct since 2008. (For more detail, see the Economic Development section of MassBudget’s FY 2019 Conference Preview Budget Monitor.)
  • Omits a Senate proposal to create a task force to study the classification and misclassification of independent contractors in Massachusetts.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

table: Resolution of differences in economic development line items

LAW & PUBLIC SAFETY

The Legislature’s Fiscal Year (FY) 2019 final budget provides $2.93 billion for law and public safety. This final budget amount is $106.0 million (3.8 percent) more than estimated FY 2018 spending.

The budget Conference Committee resolved a number of key differences between the House and Senate budget proposals, including:

  • A $4.0 million reserve to increase minimum salaries for assistant district attorneys to over $46,000 per year, following the Senate proposal.
  • $5.0 million for community based residential re-entry programs to “reduce recidivism by providing transitional housing, workforce development and case management to individuals returning to the community from county jails and state prisons.” This funding is $2.0 million above the House proposal; the Senate did not include it in its budget.

The Legislature’s budget also includes a number of policy proposals, including two regarding oversight of the state police that were in the House proposal:

  • The creation, under the auspices of the state’s inspector general, of a “special audit unit” to “monitor the quality, efficiency and integrity” of the state police.
  • The establishment of a special commission to review hiring and promotion policies and practices of the state police, in order to “recommend steps to increase transparency and accountability with respect to recruitment, hiring, retention and promotion decisions.”

The Legislature’s budget excludes a Senate provision that would have prohibited law enforcement officers in Massachusetts from asking people about their immigration status and would have strictly limited the cooperation of law enforcement with federal immigration and customs enforcement programs.

Because state tax revenues have significantly exceeded projections in FY 2018, the budget Conference Committee increased the tax revenue estimate for FY 2019. (Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue.) With this extra revenue in hand, the Legislature’s budget fully funds accounts that are normally underfunded, including a $50.0 million reserve for sheriffs’ departments, and another $50.0 million to compensate private attorneys—called “bar advocates”—to defend people in court who cannot afford their own representation. The Legislature’s budget also increases hourly rates for these bar advocates.

For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

table: Resolution of differences in law and public safety line items
table: Resolution of differences in law and public safety line items (continued)

table: Resolution of differences in law and public safety line items (continued)

LOCAL AID

Unrestricted Local Aid

In its final budget for Fiscal Year (FY) 2019, the Legislature provides $1.10 billion for Unrestricted General Government Aid (UGGA), the same amount proposed by the House, Senate and Governor.


Other Local Aid

The Commonwealth provides other sources of local aid to cities and towns for specific purposes. The largest form of local aid is for K-12 education, which is discussed separately in the K-12 Education section of this Budget Monitor; aid for libraries is also discussed separately.

For FY 2019 the Legislature provides the Municipal Regionalization and Efficiencies Incentive Reserve with $10.9 million. The Conference Committee largely combined the House and Senate’s recommendations for funding different grants programs and targeted local projects.

The Conference Committee adopted the Senate recommendation to provide $28.5 million for local payments in lieu of taxes to communities with state-owned land that is not subject to local property taxes. This amount is $1.7 million more than the House proposal.

The Legislature did not include a Senate proposal to buttress funding for the Community Preservation Act (CPA) Trust Fund with funds from higher Registry of Deeds fees.


table: Resolution of other local aid line items

For information on funding for Local Aid programs going back to FY 2001, please see MassBudget’s Budget Browser here.


OTHER


Libraries

The Legislature’s final budget for Fiscal Year (FY) 2019 provides $27.2 million in support for public library programs. The final budget for all library programs is $1.8 million more than the FY 2018 current budget. For a full list of differences between the House and Senate budget resolved by the budget Conference Committee, please see the table below.

Because state tax revenues have significantly exceeded projections in FY 2018, the Legislature’s budget Conference Committee increased the tax revenue estimate for FY 2019 which allowed it frequently to choose the higher of the House and Senate recommendations when resolving differences between the budget proposals for libraries. Please see the Revenue section at the end of this Budget Monitor for a fuller explanation of this issue. In the case of local aid to public library branches located in cities and towns around the Commonwealth, the Legislature’s final budget is $9.6 million which is higher than both the House and Senate budgets and $523,000 more than the FY 2018 current budget.


table: Resolution of differences in library line items

For information on funding for all libraries line items going back to FY 2001, please see MassBudget’s Budget Browser here.


Additional Line Items

In addition to the spending accounts discussed above in this Budget Monitor, the Legislature’s budget also reconciled spending differences detailed in the tables below. These tables are organized in the following MassBudget subcategories: Commercial & Regulatory Entities, Constitutional Officers, Executive & Legislative, and Other Administrative.

table: Resolution of differnces in commercial regulatory entity line items
table: Resolution of differnces in constitutional officer line items
table: Resolution of differences in executive and legislative line items
table: Resolution of differeences in other administrative line items

REVENUE

The Legislature’s budget Conference Committee upwardly revised the Fiscal Year (FY) 2019 Consensus Revenue Estimate, which had provided the tax revenue estimates on which the Governor, House, and Senate based their earlier budget proposals.

The Committee also adopted several policy recommendations. It increased the state match to the federal Earned Income Tax Credit (EITC) and directed the Department of Revenue in the future to examine and report on the effectiveness of the state’s special tax breaks.

Tax Revenue

Encouraged by FY 2018 revenues that were $1.135 billion dollars over the benchmark set in January, the Legislature increased its FY 2019 revenue estimates by $667.3 million. This recognizes the higher than expected revenues last fiscal year, while also acknowledging that some of that increase is likely the one-time result of individuals and corporations adjusting the timing of their taxable income in connection with changes in the federal tax law. For instance, estimated taxes—which individuals and corporations have greater discretion over than other tax payments—increased by $711 million over benchmark in FY 2018, a jump of 29.3 percent.  For FY 2019, personal income taxes are anticipated to contribute the largest component of additional revenue ($402.8 million), followed by corporate taxes ($121.2 million). Of this total projected increase in tax revenue, a projected $300.7 million in capital gains taxes will automatically be deposited in the Commonwealth’s Stabilization Fund, as discussed below.

The Legislature adopts a version of the Senate’s recommendation to provide greater scrutiny and reporting on “tax expenditures,” which are special tax exemptions, deductions, credits, or other rules that result in forgone revenue with the intention of advancing other policy goals. For instance, the Commonwealth forgoes over $1 billion annually in special business tax breaks meant to spur economic development (see MassBudget’s report, “The Growing Cost of Special Business Tax Spending”). Under this proposal, the Department of Revenue will evaluate the administration, fiscal impact, and cost-effectiveness of the Commonwealth’s tax expenditures on a rotating schedule. Unlike the Senate’s proposal to provide this function through a permanent commission, the Legislature’s budget recommends the Department conduct the review. Also unlike the Senate proposal, the Conference Committee does not require the Department to recommend specifically whether particular tax expenditures should be changed or discontinued.

The Conference Committee’s budget proposal included a House recommendation for a $2 million increase to the total amount of Dairy Farmer tax credits. The Committee did not include a separate House proposal to increase by $1 million annually the current $2 million cap on the Commonwealth’s Conservation Land Tax Credit.

The Legislature’s budget does not rely on any revenue from an anticipated extension of the occupancy tax to short-term rentals such as those booked online through Airbnb. The Senate budget proposal had relied on $20.0 million from this source and the Governor’s budget had relied on $13.0 million.

While it will not impact this year’s budget, the Committee adopted the identical Governor, House, and Senate proposals to expand the state’s Earned Income Tax Credit (EITC) by increasing the state match of the federal EITC from 23 percent to 30 percent. This is a refundable tax credit for low-income workers to increase the after-tax rewards from work. It is available only to tax filers with earned income and provides benefits primarily to workers with children. The new federal tax law erodes the value of the EITC over time by using a slower adjustment for inflation. Research has shown that, in addition to helping families make ends meet and encouraging people to work, the EITC improves health outcomes for children and their mothers, and improves children’s academic performance and lifelong earnings (see MassBudget’s A Credit to Health: The Health Effects of the Earned Income Tax Credit” for more information). The proposed increase begins January 1, 2019, meaning workers will see higher credits when they file their taxes in 2020. The annual cost for the increase will be about $65 million when fully implemented. The last time the Governor’s budget proposed increasing the EITC, it proposed cuts to the state’s Film Tax Credit to pay for the change.  This year, the Governor, House, and Senate FY 2019 budgets do not propose a funding source for the cost of this initiative when the state begins paying for it in FY 2020.

Non-Tax Revenue

The expansion of gambling in Massachusetts has generated some new revenue for the Commonwealth. Of approximately $114 million in total non-tax revenues, the Legislature’s budget uses $92.2 million to balance the budget and support a variety of programs, $6.0 million to deposit into the state’s Stabilization Fund (see below), and $16.2 million for “pre-budget” transfers to support a variety of specific programs described in relevant sections of this Budget Monitor. The Conference Committee did not follow the Senate’s proposal to take $1.5 million of this total from the Race Horse Development Fund to pay for general appropriations throughout the budget, or the Senate’s recommendation to transfer an additional $15.0 million from the Race Horse Development Fund to support budgeted agricultural and environmental expenses.

During budget debate, the Senate added a new $2.00 fee on every “vehicular rental transaction contract” (such as car, truck, or van rentals) to support municipal police training initiatives. The Conference Committee did not include this language in the budget, but the Legislature recently enacted legislation that the Governor signed which will have this same effect.

Temporary Budget-Balancing Strategies

Because of the recent upward revision of tax estimates for FY 2019, the Legislature’s budget relies less than the House or Senate on temporary budget-balancing strategies. A budget-balancing strategy is “temporary” when it does not permanently affect the balance between revenues funding the budget and spending from the budget. To balance the budget, sometimes lawmakers provide funding for an activity through a source that can’t be counted on in future years or they put off a budget appropriation in the short term that will likely require a supplementary appropriation later in the year. Using temporary spending and revenue strategies to balance the budget can lead to long-term fiscal problems because temporary strategies are useful for balancing the budget only in the short term, and their use most often creates a future budget gap that adds to the challenge of balancing the budget in future years. (See table below, and the Revenue section of MassBudget’s pre-Conference preview Budget Monitor for details.)


table: FY 2019 temporary budget-balancing measures

The Stabilization (“Rainy Day”) Fund

Due to anticipated higher capital gains taxes in the revised revenue estimate, the Conference Committee budget assumes automatic deposits of $389.2 million into the state’s Stabilization (“Rainy Day”) Fund in FY 2019. This amount is $300.7 million more than estimated from the earlier Consensus Revenue Estimate (all capital gains tax revenue over approximately $1.212 billion in FY 2019 is automatically deposited into the Stabilization Fund by law). The Legislature’s budget, like the House and Senate budgets, further directs $4.4 million of that total into the state pension fund, and $4.4 million into the State Retiree Benefits Trust. The Legislature also directs $6.0 million in revenues from expanded gambling (see above) into the Stabilization Fund.

The Conference Committee did not include a Senate proposal authorizing a comprehensive study evaluating the fiscal management of the Stabilization Fund. This study would have reviewed investment strategies, and considered whether to divide the fund into higher- and lower-yield investments to protect the long-term purchasing power of the fund, and to consider the use of the Stabilization Fund as a source of short-term borrowing funds for the Commonwealth.


TOTAL BUDGET BY CATEGORY & SUBCATEGORY

table: Budget by category and subcategory