The Metropolitan Area Planning Council sent out the email below about the Governor’s budget proposal –
FY14 Budget – House 1
On January 23, Governor Patrick released his FY2014 budget recommendations including appropriations totaling $34.8 billion, a 6.9% increase from FY2013. The proposal recommends several significant changes to the tax code, but because most of these changes take effect halfway through the fiscal year, the plan borrows $400 million in anticipated revenue from FY2015 and FY2016, and withdraws $400 million from the rainy day fund. This budget is part of his long-term plan to significantly increase investments in education, transportation and innovation.
The following changes to the tax code are included:
- Sales: Decreases the state sales tax to 4.5% and modestly increasing the sales tax base by repealing exemptions on certain computer services, candy, and soda. Establishes the Commonwealth Public Infrastructure Fund that will dedicate sales tax revenue for public infrastructure. Estimates collection of $26.2 million in new sales tax from amazon.com purchases in FY2014.
- Income: Increases the state income tax rate to 6.25% from 5.25%. Doubles the personal exemption to $8800 and eliminates several personal deductions.
- Other: Indexes the gas tax to inflation. Taxes security and utility corporations like other corporations. Makes changes to the sales factor to benefit home-state companies over out-of-state companies. Repeals the FAS 109 deduction. Caps the film tax credit at $40 million per year. Increases the cigarette excise tax $1 to $3.51 per pack and increases other tobacco products taxes to achieve parity with cigarette taxes.
As part of the Governor’s ten-year transportation plan (read more here about the proposed $13 billion capital plan including an additional $100 million per year for Chapter 90 funding), the FY2014 proposal includes a $269 million increase for operating expenses for public transportation. This increase would eliminate the MBTA’s structural operating deficit, provide modest service enhancements for the MBTA, begin to end the process of paying for MassDOT personnel costs with bonds, and forward-fund the Regional Transit Authorities (RTAs).
- Allocates $630 million, a $131 million increase over FY2013, to the early education and care system. This would eliminate the current birth to age-five waitlist.
- Allocates $226 million in increased Chapter 70 local aid, ensuring that all districts are at foundation levels.
- Proposes $5 million for expanded learning time initiative
- Includes $9 million for comprehensive supports to students and their families in Gateway Cities
- Level funds the Special Education Circuit Breaker
- Establishes the Commonwealth Innovation Trust Fund, eligible to receive funds from the Commonwealth, non-profits, individuals, and businesses to foster innovation in public education.
- Level-funds regional school transportation and McKinney-Vento school transportation reimbursement (post-9C cut level)
- Increases charter school reimbursements by $9.8 million
- Also increases Higher Education funding by $152 million
Other Local Aid:
- Proposes $930 million for Unrestricted General Government Aid (UGGA), a $31 million increase over FY2013. Proposes distributing the first $899 million (based on FY2013 levels) to cities and towns, and the additional $31 million would be appropriated through a new formula called “Annual Formula Local Aid.” This formula would modify the existing lottery formula by adding a local income measure to the existing property wealth and population factors. Beginning in FY2015, 25 percent of the Annual Formula Local Aid will fund an incentive aid program promoting strong fiscal management, municipal health care cost management, and local government performance management.
- Level-funds library aid
STATUS OF MAPC PRIORITIES/OTHER ITEMS OF NOTE
Senator Charles Shannon Community Safety Initiative
FY2013: $6.25 million
MAPC Request: $8 million
Governor’s recommendation: $6.25 million
District Local Technical Assistance Fund
FY2013: $2 million
MAPC Request: $2.8 million
Governor’s recommendation: $0
Community Innovation Challenge Grant Program
FY2013 (after 9C cuts): $2.25 million
MAPC Request: At least $4 million
Governor’s recommendation: $7 Million
Expanded Bottle Bill:
An expanded bottle bill would generate $24 million in FY2014 by subjecting bottled water and other non-carbonated beverages to the $.05 deposit.
Allocates an additional $19.25 million to the Massworks Infrastructure program from anticipated expanded gaming license revenue.
The budget uses $83 million from expanded gaming license fees that would fund advanced manufacturing, transportation, and infrastructure.
The surplus from the end of FY2013 would be allocated as follows to the extent that funds are available:
1. $25 million to the Community Preservation Act Trust Fund.
2. $25 million to the newly established Housing Preservation and Stabilization Trust Fund (a flexible method for funding affordable housing for low income families and individuals in the Commonwealth, particularly those most at risk of becoming homeless).
3. The remaining balance to the Commonwealth Stabilization Fund.
PATRICK OUTLINES “GROWTH BUDGET” BUILT UPON SCHEDULE OF TAX INCREASES
By Matt Murphy
STATE HOUSE NEWS SERVICE
STATE HOUSE, BOSTON, JAN. 23, 2013.. Gov. Deval Patrick rolled out an aggressive $34.8 billion spending plan for fiscal 2014 on Wednesday, calling it a “growth budget” that relies heavily on $1.2 billion in new revenue generated from higher taxes to support investments in education and transportation.
“This is a plan to grow jobs,” Patrick said at an early afternoon press conference, proposing a 6.9 percent spending increase and fully lifting the curtain on a spending plan he has rolled out in bits and pieces over several days.
Patrick is seeking $1.9 billion a year in new revenue driven by a major reform the of the tax code to increase the income tax to 6.25 percent and reduce the sales tax to 4.5 percent. Patrick’s budget proposes to repeal the exemption of candy and soda from the sales tax and increase the cigarette excise tax by $1 to $3.51 per pack, provisions not previously highlighted by the administration as it unveiled its plans for new state revenues.
The governor’s budget also includes $34 million to begin implementing last summer’s health care cost containment bill that administration and legislative leaders believe will save $200 billion over 15 years, and directs $30 million for rate increases to hospitals to help them shift away from fee-for-service to accountable care models.
MassHealth, the state Medicaid program, would receive a 13 percent budget increase under the plan, allowing for 325,000 new members to enroll through the increased eligibility standards under the federal Affordable Care Act, which includes federal reimbursement.
The administration also hopes to take advantage of new federal supports through ObamaCare to restore full adult dental coverage to income-eligible MassHealth enrollees, a benefit that was cut during the recession.
Because the tax code changes he is seeking would not take effect until next January, the administration is balancing its budget for fiscal 2014 on $1.2 billion in new tax revenue, an $838 million increase in existing revenue streams, and $555 million in one-time resources, including $400 million from the “rainy day” fund.
Money from the tax increases would be channeled back into transportation and education, including $550 million in new resources for early education, longer school days, college tuition grants and funding for community colleges and the University of Massachusetts.
The budget also includes a $269 million increase for transportation to close the MBTA’s budget gap, expanded evening and weekend operating hours in service regions that have been cut, moving employees off the capital budget and boosting Chapter 90 funding for local road and bridge projects by $100 million to $300 million.
“This budget begins paying for the 21st Century transportation system that the people and business of Massachusetts need and deserve,” Patrick said.
After steady rounds of budget cuts fueled by the recession and weak recovery, neither the governor, nor his budget team could point to a specific program that got cut in the budget proposal. Patrick said not every program has been fully restored to pre-recession levels, nor did every program and agency receive the full funding they requested to maintain services at the current levels.
Under the budget proposal to be filed with the House, Chapter 70 funding for local school districts would increase by $226 million to $4.39 billion in fiscal 2014, which starts on July 1. Unrestricted local aid would see a more moderate increase of $31 million to $930 million. The total amount of funding in the budget dedicated to local aid would increase to $5.57 billion, accounting for 14.6 percent of the total budget.
Patrick said he didn’t “submit this proposal lightly,” knowing that while the recession may be over families have still not recovered. But, he said his tax reform would create a more fair and simple system that would be less burdensome for low-income families by reducing the emphasis on the sales tax and doubling the personal tax exemption to $8,800.
The governor also rejected the notion that his plan would stymie economic growth and cost the state’s economy jobs, calling investments in infrastructure and innovation a historically proven strategy for growth.
“I reject the notion of this self-defeating strategy of not shaping our future . . . If we want growth then we’re going to have to have to invest in it,” Patrick said.
Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the tax proposal carried “some risk to the economy in the short term.”
“There are probably more moving pieces in this tax proposal than anything I’ve ever seen from a governor,” Widmer said.
Widmer did not take a firm position against the income tax hike idea, but questioned whether it made sense to put more focus on the income tax as a revenue generator with an increase that would give Massachusetts the highest income tax burden – though not the rate – of any state in the country. “He’s really rolled the dice. This is a very aggressive budget and depends on a lot of things happening, but he’s put his stake in the ground,” Widmer said.
Patrick said he could not envision supporting an income tax increase to 6.25 percent without the accompanying decrease in the sales tax, suggesting they are a package deal that will only work when coupled together with the other reforms.
The reliance on new revenue to support significant increases in spending in key areas will complicate the budget process as the bill heads to the House. Any changes to the governor’s tax proposal will require lawmakers to scale back spending elsewhere.
House Speaker Robert DeLeo told the News Service on Wednesday that he asked House Democrats during a private caucus to “keep your powder dry” until the governor’s full proposal can be reviewed and the House crafts a response. “Quite frankly, I want to give the governor his due and see exactly what that means, especially to the middle class, the folks that I represent. Where’s this money going to be coming from?” DeLeo said.
Rep. Brian Dempsey, who chaired the House Ways and Means Committee last session and will likely remain in that post, said it’s “hard to rule things in or out right now.” “All of these priorities are ones that most members would agree with, in terms of education, higher education, early childhood. The question is at what pace can we solve for some of the challenges in those areas,” Dempsey said.
Dempsey said there are “obviously concerns” about the use of more than $550 million in one-time revenue, citing the importance of rebuilding the state’s stabilization account after leaning heavily on reserves to get through the recession.
Secretary of Administration and Finance Glen Shor called the use of one-time revenue “completely in accord with the long-term fiscal plan,” and said the total would be significantly less that the $919 million being relied upon now to balance the current fiscal 2013 budget. The fiscal 2013 budget took $350 million in stabilization funds, and Patrick has asked the House and Senate to approve a new $200 million draw to help close a $540 million mid-year deficit identified late last year. That deficit caused Patrick to slash spending only weeks ago.
Sen. Stephen Brewer, last session’s chairman of Senate Ways and Means, said he anticipates taking “a hard look” at the use of $400 million in stabilization account funding.
“I think the Senate will have a few adjustments and that’s how we always do things,” said Brewer, who added that the fate of the governor’s plan could depend on the feedback senators receive from citizens during the seven public hearings they are planning on the budget.
“Clearly its am ambitious revenue leap at $1.9 billion, but we’re mindful the governor has a vision and two years from now on this very day he’ll be a private citizen, so we have to take into account the priorities of the members,” Brewer said.
House Minority Leader Brad Jones, a North Reading Republican, accused Patrick of “prioritizing his legacy over the needs of the Commonwealth’s residents.”
“The Administration’s method of reckless taxation as a means towards revenue, while tapping into the ‘Rainy Day’ fund, is both shortsighted and extremely irresponsible. I encourage Governor Patrick himself to engage the Commonwealth’s residents in the factual debate that he so desperately wants to conduct,” Jones said.
The governor’s budget includes $75.5 million in additional funding for innovation and job creation, including a $10 million increase to $25 million for the Massachusetts Life Sciences Center, and $18.75 million from gaming license revenue to jumpstart the Advanced Manufacturing Futures Program created in 2012 that the administration projects will create or retain 1,856 jobs in the next five years.
Regional school transportation is level funded in the budget at $44.5 million, cities and towns will see $230 million through the special education circuit breaker, and library aid is level funded at $16 million.
The budget also recommends capping the popular, but also controversial, film tax credit program at $40 million a year, a response Patrick said was in part due to concerns that the money was being used to fund the excessive salaries of movie stars.
As he outlined two weeks ago in a series of announcements, Patrick is also proposing to freeze the unemployment insurance rate, reform the municipal unemployment benefit system, consolidate the more than 240 local housing authorities into six regional authorities and enhance oversight of sterile compounding pharmacies in the wake of the nationwide fungal meningitis outbreak.
The budget also relies on $83 million in gaming revenue the governor expects to collect in 2014 after the first licenses are issued, only a portion of which is being counted on for recurring operating budget costs, officials said.
The governor is estimating the state will also collect $26.2 million next year from its agreement with Amazon to begin collecting sales taxes on purchases made in Massachusetts, and proposes to collect an additional $24 million by expanding the bottle redemption law to bottled water and sports drinks. Like his candy, soda and tobacco tax proposals, Patrick’s bid to expand the bottle law failed to make it through the Legislature last session.
The budget also supports 30 new full-time positions at the Department of Public Health, and dedicates $1 million for staffing to allow the Board of Pharmacy to hire inspectors to conduct new spot check of sterile compounding pharmacies after New England Compounding Center was cited for unsanitary conditions that led to this year’s meningitis outbreak.
Similar to the process used by the federal government when considering military base realignments and closures, Patrick is also proposing to create a Courts Re-Alignment Commission to study the potential for court closures and realignment to better meet the judiciary’s needs within the constraints of its budget. The commission would report to Trial Court Administrator Harry Spence, who would then act on the commission’s recommendations.
For all the spending increases, Mass Home Care spokesman Al Norman said the governor’s budget does nothing to reduce the wait list of 1,224 elderly resident seeking health attention at home. “We are now in our fourth straight year of home care waiting lists,” Norman said in a statement. “It’s becoming a chronic condition for us, like walking pneumonia. We had hoped the Governor would cure the problem.”
Serving the working press since 1910
Government Affairs Coordinator
Metropolitan Area Planning Council
60 Temple Place, 6th floor
Boston, MA 02111
phone: (617) 933-0710 *please note new telephone number*
fax: (617) 482-7185