Analyzing-the-Governor’s-Budget-for-FY-2020











TABLE OF CONTENTS





OVERVIEW





REVENUE HIGHLIGHTS





EDUCATION





Early
Education





K-12
Education





Higher Education





HEALTH 





MassHealth
(Medicaid)
and Health Reform





Public
Health





HOUSING





HUMAN SERVICES





LOCAL AID





Unrestricted Local Aid





Other
Local Aid





TRANSPORTATION





OTHER NEWS IN THE BUDGET





REVENUE





Tax
Proposals





Other
Revenue Proposals





Stabilization Fund





TOTAL BUDGET BY CATEGORY
AND SUBCATEGORY












OVERVIEW





The Governor’s Fiscal Year (FY) 2020 budget proposal provides
modest increases in funding for public education, human services, and
several other important investments. This new funding does not, in many
cases, reverse deep cuts imposed across the state budget after the tax
cuts of the late 1990s and early 2000s — despite a decade of
expansion in the economy. Lost revenue from tax cuts has limited the
Commonwealth’s ability to adequately fund education,
infrastructure, and other building blocks of healthy communities and a
strong economy.






While the Governor’s proposal would increase year over year
funding for several programs, it provides the same or less funding for
programs such as Public Health, Local Aid, Juvenile Justice,
Transitional Assistance, and others. The Governor’s proposal
recommends 16 percent less funding for Early Education and Care
compared to FY 2001 (adjusting for inflation). Funding for Local Aid is
similarly down 38 percent and Environment and Recreation programs
remain 29 percent below 2001 levels. Making the necessary investments
in our schools, transportation, housing, and other essential programs
will require bold, new revenue sources.






Tax revenue growth was unusually strong in FY 2018 and may continue to
be strong for most of FY 2019. The Department of Revenue expects that,
without policy changes to increase revenue, overall revenue growth will
slow markedly in FY 2020 — putting a strain on our capacity
to support public programs and invest in infrastructure. While the
Governor’s FY 2020 budget proposal includes a variety of new
and expanded taxes and other revenues, a number of previously-scheduled
tax cuts and other revenue-losing policy changes will take a
significant bite out of revenue totals in FY 2020 and beyond.






Much of the additional revenue proposed by the Governor would come from
a variety of consumption taxes, which typically are regressive (meaning
people with lower incomes contribute a larger share of their household
incomes toward these taxes than do people with higher incomes).
Meanwhile, the tax revenue reductions mostly come from progressive
revenue sources. Therefore, these proposals do not help turn
Massachusetts’
upside-down tax system right-side up. (For
more information on these expected revenue decreases, see the Revenue
section.)






The Governor’s proposal is accompanied by a plan to overhaul
Massachusetts’ school funding formula that could help ensure
that all schools, especially those in low-income districts, are
adequately funded. The plan makes some progress, over a seven-year
timeline, to implement the 2015 Foundation Budget Review Commission
(FBRC) recommendations related to health insurance, special education,
and greater support for low-income and English Language Learner
students. However, without substantial, new revenues the Commonwealth
can only adopt a moderate plan to implement the FBRC recommendations.






The budget proposal includes other notable initiatives. For instance,
the Governor proposes creating a trust fund to prevent childhood lead
exposure and increasing the “Real Estate Transfer
Tax” to invest in climate change adaptation. Further, the
Governor proposes new systems for negotiating the cost of drugs used
under MassHealth and expands eligibility for low-income elders to
qualify for the Medicare Savings Plan.






Like MassBudget’s previous analyses, this report takes a deep
dive in several areas across the budget. More so than in past years, we
focus on key stories while inviting readers to use our Budget Browser
to compare the Governor’s specific proposal with previous
budgets going back to FY 2001. Readers can use the table of contents to
jump to specific sections of this analysis.







REVENUE HIGHLIGHTS








The Governor’s Fiscal Year (FY) 2020 budget proposes
using a variety of new and expanded tax and other revenues, while a
number of scheduled tax cuts and other revenue losses will take a
significant bite out of revenue totals in FY 2020 and beyond. Tax
revenue growth was unusually strong in FY 2018 and may continue to be
strong for most of FY 2019. But the Department of Revenue expects that
without policy changes to increase revenue, overall tax revenue growth
will slow markedly in FY 2020, putting a strain on the
budget’s
capacity to support essential services.











The Governor’s FY 2020 budget includes additional revenue
from more than a dozen sources, both tax and non-tax (see table below).
Some of the additional revenue will come from recently-enacted changes
(such as taxes on recreational marijuana and on short-term rental
accommodations like Airbnb); some from anticipated growth in non-tax
sources (such as expanded casino resort gambling); and still other
revenue is expected from initiatives newly proposed by the Governor,
either in his FY 2020 budget or accompanying legislation. Together,
these various additions would boost FY 2020 revenues by an estimated
$860.2 million. Approximately $549.2 million of this total would come
from ongoing revenues (available in FY 2020 and future years), while
the remainder ($311.0 million) is temporary, one-time revenue and thus
would not be available in future years.
































































































































































































































































































































































































NOTABLE
ADDITIONS TO FY 2020 REVENUE













($
millions)





Governor



TAX
REVENUES – TEMPORARY













Sales
Tax Acceleration





306.0



Life
Sciences Tax Credit Cap





5.0
SUBTOTAL 311.0



TAX
REVENUES – 
ONGOING













Recreational
Marijuana





132.5



Tax-Related
Settlements & Judgments





50.0



Sales
Tax Marketplace Reforms





41.7



Transient
Accommodation/Room Occupancy





27.5



Tax
on Opioid Gross Receipts





14.0



Excise
Tax on Vapor (Vaping) and E-Cigarette Products





6.0



Withholding
on Non-Residential Property Sales





4.0



Sales
Tax Integrity Measures





2.0



Real
Estate Transfer Tax Increase (in separate legislation)





75.0
SUBTOTAL 352.7



NON-TAX
REVENUES – ONGOING













Expansion
of Resort Casino Gambling





155.5



Casino-Based
and Online Sports Wagering (separate legislation)





35.0



Recreational
Marijuana Vendors Licensing





6.0
SUBTOTAL 196.5



TOTAL





860.2





Offsetting
most of the estimated gain from these additional revenues are
anticipated revenue losses of $489.7 million due to scheduled changes
in existing law. These scheduled cuts include reductions in the
personal income tax rate, the planned sunsetting of the temporary
supplemental Employer Medical Assistance Contribution, and an increase
in the state’s Earned Income Tax Credit program (a successful
income-boosting tax credit program for low- and moderate-income working
households — see more discussion below). These changes will
remove $489.7 million in ongoing revenues in the coming fiscal year
(see table below). While these reductions already have been factored
into budget writers’ revenue estimates (including the
Governor’s) and thus do not create an unexpected hole in the
FY 2020 budget, they nevertheless reduce the revenue available in the
coming fiscal year and beyond.






















































































































































































NOTABLE
REDUCTIONS TO FY 2020 REVENUE






($
millions)





Governor



TAX
REVENUES – 
ONGOING













Personal
Income Tax Rate Reductions to 5.05%





(175.0)



Personal
Income Tax Rate Reductions to 5.00%





(88.0)



Increase
in State’s Earned Income Tax Credit Amounts





(65.4)
SUBTOTAL (328.4)



NON-TAX
REVENUES – ONGOING













Sunset
Supplemental Employer Medical Assistance Contribution





(161.3)
SUBTOTAL (161.3)



TOTAL





(489.7)





For more details about revenue proposals in the
Governor’s FY 2020 budget, see the Revenue section of this
analysis.






EDUCATION






Early Education





Quality early education and care help prepare our young
children for
success in school and allows them to thrive. Early education and care
also provide critical support for working parents with young children,
by offering safe and reliable care for kids while parents provide for
their families.






The Governor’s Fiscal Year (FY) 2020 budget proposal
allocates $656.8 million to early education and care. The proposal
would generally continue early education programs and services at
current levels, but would make no significant progress on expanding
services for many low-income kids. The total amount of early education
funding in the Governor’s proposal is a slight increase of
$7.9 million (1.2 percent) above budgeted FY 2019 levels.






There have been significant long-term cuts in early education and care
since state tax cuts in the late 1990s and early 2000s. Funding for
early education and care in the Governor’s FY 2020 budget is
$121.2 million (15.6 percent) below what was available in FY 2001,
adjusting for inflation (see chart below). For information on funding
for all early education budget items going back to FY 2001, please see
MassBudget’s Budget
Browser
here.











bar graph: Early education funding down 16 percent since 2001














The Governor’s FY 2020 budget provides $276.5
million for
Income
Eligible Child Care
, $9.3 million (3.3 percent) below
budgeted
FY 2019 levels but in line with projected FY 2019 spending. Income
Eligible Child Care provides subsidies for low- and moderate-income
families not eligible for other child care assistance. With
insufficient funding to meet child care needs across the state, the
waitlist for these subsidies contained over 17,900 kids in January
2019. The state is unlikely to significantly reduce waitlists for
income-eligible services given this proposed allocation for FY 2020.






The Governor’s FY 2020 budget provides $276.0 million for
Supportive
and TANF Child Care
, $36.5 million (15.2 percent) above
budgeted FY 2019 levels. This increase should support services for more
children. Supportive and TANF Child Care provides subsidies to children
under the care of the Department of Children and Families and those
receiving Transitional Aid to Families with Dependent Children (limited
cash assistance along with work training programs for low-income
families).






The Governor’s FY 2020 proposal generally maintains FY 2019
increases in early education and care funding. However, the budget does
not propose any additional funding dedicated to improving early
education quality through further increases to the rates paid by the
state to child care providers. In FY 2019, recognizing the importance
of providing decent pay and reducing turnover at child care facilities,
the budget provided $20.0 million in dedicated funding to support these
rate increases.









K-12 Education





Providing an excellent education to all children in
Massachusetts supports future generations while contributing to a
strong, knowledge-driven economy. Chapter 70 education aid is the main
program for delivering state support to local districts across
Massachusetts and ensuring that schools have sufficient resources to
serve all students. For further background on the state’s
education funding system and the path forward to greater support for
our students, see
Demystifying
the Chapter 70 Formula
and Building
an Education System That Works for Everyone
.





The Governor’s Fiscal Year (FY) 2020 budget proposal
would increase Chapter
70 Aid and Reserves
by $185.3 million (3.8 percent) to
$5.11 billion. This matches the overall inflation rate required under
the Chapter 70 law. It is also roughly the same as the 3.4 percent
($160.6 million) increase in FY 2019. All education grants outside of
Chapter 70 that support local districts and other K-12 education
programs would be increased to $786.8 million (up $84.6 million or 12
percent.) Much of this new spending is in two education trusts funded
with a one-time shift in sales tax revenue (see the Revenue section of
this budget analysis for further detail). The projected 12 percent
increase includes all the funding deposited in these trusts. However,
the projected total spending from these trusts in FY 2020 is unclear
given currently available information (see discussion below).





The Governor’s FY 2020 budget continues to take
moderate steps to implement the recommendations of the 2015 Foundation
Budget Review Commission (FBRC). The FBRC found that the Chapter 70
system and many schools across the state are significantly
under-resourced relative to the Commonwealth’s estimate of
the costs of educating children, called the “foundation
budget.” This underfunding limits the capacity of schools
across the state to help all children succeed, particularly those that
educate a high proportion of disadvantaged students.





Over the past two years, the state has begun implementing some
of the changes recommended by the FBRC. The Governor’s FY
2020 budget, along with accompanying
legislation
, would create a seven-year implementation
timeline for changes in all four areas of the foundation budget
highlighted by the FBRC. These areas include health care, special
education, support for low-income students, and support for English
Language Learners (ELL). In these areas, the Governor’s FY
2020 Chapter 70 proposal would:









  • Provide additional per pupil funding of $26 (0.2 to 1.7
    percent more than the current budget after accounting for inflation)
    for the top half of districts with the largest concentration of
    low-income and ELL students. All other districts would have a standard
    inflation increase for low-income students. When fully phased in
    through FY 2026, this proposal would result in each district receiving
    a maximum of $4,800 per low-income student, up modestly from $4,000 in
    FY 2019. This change to low-income rates would be significantly less
    progressive than the $8,200 maximum proposed by the FBRC.












  • Move the rate for out-of-district special education
    students towards a goal of three times the statewide per-pupil average,
    increasing this rate to $29,500 in FY 2020 (up 7.5 percent).












  • Increase the allotments for employee benefits, including
    health insurance, closer to the goal of matching what the Group
    Insurance Commission pays for state employees. Overall, this increases
    health benefit rates by roughly 4.9 to 9.2 percent in FY 2020,
    depending on grade level, with further increases for disadvantaged kids
    (see bullets below).












  • Expand the allotments for ELL students, with a particular
    emphasis on high school ELL students, who gain a rate increase of 87
    percent (compared to roughly 16 percent increases for elementary and
    middle school ELL students). The Governor’s proposal differs
    from the original FBRC recommendation of consistent ELL rates across
    grade levels and is intended to provide greater support for teenage ELL
    students who may have particular challenges learning English. But the
    proposal excludes extra funding for roughly 6,000 students (according
    to the Department of Elementary and Secondary Education) formerly
    classified as ELL but who have reached a passing benchmark on the state
    language test (called ACCESS for ELL).








Aside from the FBRC recommendations, the Governor’s
FY 2020 Chapter 70 proposal creates a new enrollment category for teens
in Early College and
Innovative Pathways
, which would be roughly $1,050 (11.0
percent greater) than that for regular high school students. Early
college programs typically involve high schoolers who are
simultaneously enrolled in college, earning credits towards a higher
education degree, while finishing K-12 education. In a related move,
the Governor proposes $3.0 million to the separate Early College Program
line item, with a specific focus on science, technology, engineering,
and math (STEM) coursework for disadvantaged students. Finally, $15
million over three years is allocated to early college programs from a
new College
Affordability and Success Trust Fund





The Governor’s proposal uses one-time revenue to
create three other new education-related trust funds that would be
available in FY 2020 and possibly several years thereafter. The first
is the Public School
Improvement Trust Fund
, funded at up to $50.0 million,
which would support initiatives to improve schools with low rankings on
the state’s accountability framework. The second is the School Safety Trust Fund,
funded at $30.0 million, which would support safety improvements such
as enhancements to building infrastructure, communications, and staff
training. The third (which is technically spending from a public health
trust) is the Water
Pollution Abatement
, funded at $20.0 million, which would
be used for de-leading projects in public schools. The funding amounts
listed above are the maximum that could be spent for these purposes. It
is unclear how much would actually be spent in FY 2020.





The Governor’s FY 2020 budget provides $106.0
million to Charter
School Reimbursements
, $16.0 million (17.8
percent) above current FY 2019 levels. Historically, when fully funded,
this program is intended to reimburse 100 percent of outgoing student
funding from traditional districts to charter schools in the first year
and 25 percent of this amount for each of the following five years.
Under the Governor’s FY 2020 proposal and accompanying
legislation, charter reimbursements would be more heavily weighted
early on and only go for three years along a 100 percent, 60 percent,
and 40 percent schedule.





According to recent FY 2019 projections from the Department of
Elementary and Secondary Education current funding levels only support
55 percent of the amount called for by the charter school reimbursement
formula, leaving a $72.2 million gap. This underfunding means that only
80 percent of first-year outgoing student funding has been reimbursed
by the state to districts in FY 2019, with no reimbursements available
for students who left in any of the prior years. With additional aid,
these gaps may be mitigated depending on how many additional charter
school seats are added and how districts claim more reimbursements from
the fund. For additional detail on charter school funding, recent
proposals to alter the reimbursement system, and the impact of recent
underfunding, see Charter School Funding Explained.





The Governor’s FY 2020 budget proposes merging Extended Learning Time Grants
into the Targeted
Intervention in Underperforming Schools
program and level
funding the new combined program at $26.5 million. Additionally, the
budget would provide the commissioner of the Department of Elementary
and Secondary Education authority to use some of this funding to
support a variety of initiatives, such as so called
“empowerment zones” or “innovative
partnership zones.” Typically, these arrangements have meant
individual schools or neighborhoods would be taken out of traditional
district governance under local school committees. Such zones are
typically placed under the governance of alternative institutions,
sometimes private non-profit education organizations or charter schools.





The Governor’s FY 2020 proposal provides $970.0
million to the Massachusetts
School Building Authority
(MSBA) to support
district construction and renovation projects across the state. This
amount is $87.9 million (10.0 percent) above current FY 2019 levels.











Higher Education





Higher education is an important factor in the success of our
Commonwealth. Adequate state funding for higher education helps ensure
that its benefits are broadly available to all who want to pursue a
degree or credential beyond high school. Insufficient state funding, on
the other hand, leaves students and their families facing higher
tuition and debt, and threatens to put higher education—and
the
opportunities it offers—beyond the reach of those who cannot
afford it.





The Governor’s Fiscal Year (FY) 2020 budget
increases funding
for public higher education by 11.9 percent over FY 2019. However, the
vast majority of this increase comes from a temporary $100 million
trust fund, paid for by a “sales tax modernization”
proposal. Excluding this one-time infusion, the increase over FY 2019
comes to 3.7 percent. Of that 3.7 percent, most covers increases
negotiated with various campus unions via collective bargaining
agreements.





As detailed in MassBudget’s March 2018 report, Educated
and Encumbered
,
state funding for public higher education in Massachusetts dropped 32.3
percent per student, adjusted for inflation, from FY 2001 through FY
2018 (the most recent year for which we have enrollment figures). These
funding cuts followed a series of state tax cuts in the late 1990s and
early 2000s. The results have been sharp increases in tuition and fees,
which in turn have led to some of the fastest-rising student debt in
the nation. The Governor’s FY 2020 budget remains well below
FY
2001 levels and does not meaningfully reverse these trends, though as
detailed below the budget does include substantial temporary funding
for certain programs aimed at making college more affordable. For
information on funding for all higher education budget items going back
to FY 2001, please see MassBudget’s Budget Browser here.





The effects of this reduced funding fall on a student body
that is
increasingly Black and Latinx, whose share of undergraduate enrollment
at our state universities and University of Massachusetts has more than
doubled from 8.5 percent in the 2001-2002 academic year to 18.4 percent
in 2016-2017. At state universities, Black and Latinx enrollment shares
nearly tripled, from 6.5 percent to 19.1 percent. Black and Latinx
enrollment shares at community colleges have nearly doubled, from 19.5
percent to 34.9 percent. (See chart below.) These shifts, and parallel
state funding cuts, raise important racial equity concerns.





chart: Higher Ed is Becoming More Diverse, Especially Public Higher Ed








Instead of restoring the Commonwealth’s long-term
commitments
to higher education as a public good, the Governor’s FY 2020
budget proposes up to $100 million in one-time, off-budget higher
education spending, paid for by “sales tax
modernization.”
(See the Revenue section of this budget analysis
for more discussion of this sales tax modernization.) These additional
funds will be “committed” in three phases starting
in the
fall semester of 2020. The final commitment phase will start in the
fall semester of 2022. Each phase will fund students for up to six
years, so the fund should be completely spent by the end of the
2027-2028 academic year.





This money will be sent to the new College Affordability and Success
Trust Fund
(CAST), and allocated from the CAST as follows:









  • 25 percent
    for the Commonwealth Commitment program
    ,
    which allows students to save money on bachelor’s degrees by
    enrolling first in a community college and then transferring to a state
    university or UMass campus. The administration hopes to fund 4,000
    Commonwealth Commitment enrollees by 2024 from the CAST.








Since Commonwealth Commitment began in 2017, 363 students have
participated, according to the Executive Office of Education (EOE). The
program requires students to enroll full-time and maintain a 3.0 grade
point average (GPA). In Massachusetts, college students at public
institutions work about 28 hours per week, on average. Among those
working students, most work more than 20 hours a week. Research has
shown that when students work too much, it can hurt their GPAs and can
significantly hinder degree completion. The CAST’s
substantial
(albeit temporary) additional funding for the Commonwealth Commitment
could help thousands of students better afford a bachelor’s
degree, but it will be important to help them meet the
program’s
rigorous standards — especially low-income students who need
to
work to make ends meet while enrolled.













  • 15 percent
    for early college programs
    ,
    wherein high-school students take college-level courses and pursue work
    experience, with the aim of being better prepared them for
    postsecondary and career success. According to EOE, about 1,000
    students were enrolled in the first early college cohort as of October
    2018. The allocation from CAST could be enough to fund another 6,800
    participants. For more on early college, see the K-12 Education section
    of this budget analysis.












  • 25 percent
    for scholarships
    to students participating in
    “college success” programs at public and private
    four-year institutions.












  • 25 percent in
    matching grants for paid internships and co-ops

    for students enrolled in public colleges and universities. At an
    average cost of $4,500 per semester-long placement (assuming students
    work 20 hours per week, at $15 per hour, for a 15-week semester), this
    funding could support over 5,500 semester-long internships or co-ops.












  • 10 percent
    for “pilot programs that demonstrate innovative financial aid
    strategies,”
    including income-share agreements,
    efforts targeting disconnected youth and adult learners, and
    competency-based education.








The Governor calls for funding from the CAST to prioritize
public
colleges and universities that “develop long-term plans for
reducing student charges and ensuring financial
sustainability.”
Institutions, however, may find it challenging to make such long-term
plans on the basis of temporary funding while the overall higher
education budget remains so far below FY 2001 levels.






HEALTH






MassHealth (Medicaid) and Health
Reform






The Commonwealth subsidizes health insurance for about 1.8 million
people, including about half of the state’s children. In
addition, the state budget funds payments to health providers
— such as hospitals that serve large numbers of low-income
patients and nursing homes — to help pay for care provided to
low-income patients. The MassHealth program is funded by a combination
of state and federal revenues. Although there is some variation,
overall, the federal government reimburses the state for more than 50
percent of spending on MassHealth. For this reason, the gross spending
on the program (as presented in the budget) is significantly more than
the actual “
net” cost to the state,
taking into account the federal reimbursement. For information on
funding for all MassHealth (Medicaid) and Health Reform budget items
going back to Fiscal Year (FY) 2001, please see MassBudget’s Budget Browser here.






The Governor’s FY 2020 budget includes two major health
reform initiatives. In order to address the state’s
increasing spending on prescription drugs within MassHealth, the
Governor proposes new systems for negotiating and monitoring the costs
of these drugs. The Governor also expands eligibility for the Medicare
Savings Plan for low-income elders.






Prescription
Drug Pricing





The
Governor’s budget language proposes a four-step process
to curb the high cost of prescription drugs. The first step would
authorize MassHealth to directly negotiate with drug manufacturers for
supplemental rebates and what the Governor refers to as
“cost-effective outcomes-based contracts.” If that
step were to be insufficient, MassHealth could then set target values
for high-cost drugs through a public process, and MassHealth would seek
a rebate based on that determined value. If neither of those steps were
sufficient, MassHealth could refer specific, high-cost drug
manufacturers to the Health Policy Commission. The Health Policy
Commission could require the manufacturers to submit cost disclosures
and to testify at public hearings to justify their drug prices. This
option would be for manufacturers whose drugs cost at least $25,000 per
person per year or $10 million in total annually. Finally, the Governor
proposes that if the Health Policy Commission determines a
manufacturer’s price for a particular drug is too high, the
Attorney General could be brought in to determine whether the
manufacturer might be violating consumer protection laws. This proposal
is anticipated to save $70 million ($28 million in savings net of
reduced federal reimbursement).






In materials accompanying the budget, the Governor noted that
MassHealth will also put in place requirements making the pricing of
pharmacy benefits in Managed Care and Accountable Care Organizations
more transparent. This reform should save $10 million ($4 million net)
in FY 2020.






Unlike in his FY 2019 budget proposal, the Governor has not included
any restrictions to the MassHealth drug formulary for FY 2020, but the
Governor estimates these pharmacy reforms will save the state $80
million in FY 2020.






Expansion
of the Medicare Savings Plan






The other major initiative in the Governor’s health
care budget is a significant expansion of the Medicare Savings Plan,
which would benefit about 40,000 low-income elders in Massachusetts.
The Governor is proposing expanding eligibility for elders in two
ways: increasing the program’s income threshold by 30
percentage points (bringing the eligibility threshold up to 165 percent
of the federal poverty level) and doubling the eligibility asset limit.






The Medicare Savings Plan encompasses three separate federal
programs (with tiered eligibility and benefits). In Massachusetts,
these programs operate through the MassHealth Buy-In program and
MassHealth Senior Buy-In program. Massachusetts is reimbursed 50
percent
by the federal Medicaid program for the MassHealth portions of these
programs. The federal government, however, fully funds the Medicare
portions of these programs. Moreover, Massachusetts has a separate
state-funded program (Prescription Advantage) that helps low-income
elders with prescription drug costs that are not covered by MassHealth
or the Medicare subsidies.






Currently, the lowest-income beneficiaries (under 100 percent of
the federal poverty level) may be eligible for MassHealth, which pays
for Medicare Part A and B premiums, deductibles and co-payments,
and eligible through Medicare for subsidies for Medicare Part
D prescription drug coverage. For Medicare beneficiaries with
incomes between 100 and 135 percent of the federal poverty level,
MassHealth covers Medicare Part B premiums, and Medicare provides
subsidies for Part D prescription drug coverage. (The income
eligibility
threshold for the state-funded Prescription Advantage program for
elders
eligible for Medicare is 500 percent of the federal poverty level.)






Because the federal government pays for Medicare Part D drug
subsidies, the Governor notes that expanding eligibility for the
Medicare Savings Plan will bring in federal dollars to cover costs
previously covered by the state, and will also significantly expand the
number of elders eligible for prescription drug subsidies.






Raising the income threshold and increasing the asset limit for
the Medicare Savings Plan means that approximately 15,000 elders
currently enrolled will be eligible to move to one of the programs with
more generous benefits, and as many as 25,000 more elders will become
newly eligible.






The Governor estimates that the cost to the state of
expanding eligibility for the program would be approximately $30
million, which would amount to about $4 million after accounting for
federal reimbursement. The budget anticipates a 10.9 percent reduction
in funding for the Prescription Advantage program as more elders
become eligible for the more generous Medicare Savings Plan. There is
also language in the budget that would allow the Administration to
transfer funding from Prescription Advantage and from the Health Safety
Net to cover the expansion of the Medicare Savings Plan if needed.
The Governor also estimates this program change would bring in about
$100 million more federal Medicare dollars into the
state’s economy.






MassHealth
Program and Administration






The Governor’s total funding for the MassHealth program
is $16.54 billion, $180.0 million more than the current FY 2019
budget total and slightly above FY 2019 estimated spending, but only
after accounting for some “cash management”
strategies to shift some costs (see below). After accounting for
federal reimbursement, the net cost of the Governor’s total
is
$6.59 billion. The MassHealth budget’s low growth rate
compared to FY 2019 is partly due to a quirk associated with an
accounting “leap year” in that there will be
53 weeks’ worth of MassHealth claims in FY 2020. The Governor
is choosing to pre-pay (move) this extra week of MassHealth expenses
from FY 2020 to FY 2019, adding $116 million to the FY 2019
estimated spending total. The Administration is also planning on
pre-paying an additional $107 million in other claims in the
MassHealth Fee-for-Service program. These cash management strategies
increase FY2019 spending totals by $222 million ($100 million net of
federal reimbursement) and decrease the FY 2020 MassHealth budget by
the
same amount.






The Governor also states that the Administration has been able to
hold down MassHealth costs by improving the efficiency of
the program’s eligibility and other management systems.
The Governor is projecting minimal enrollment growth in FY 2020
and anticipating that the continuing restructuring of MassHealth into
a system of Accountable Care Organizations will also help hold
down costs. The Governor projects that these efforts should generate
$169 million in savings, $75 million net of federal reimbursement.
Finally, the Governor is projecting savings from prescription drug
reforms. (See discussion above.)






One area where MassHealth will continue to expand services is
in combatting substance misuse to address the opioid epidemic.
The Governor notes that the MassHealth budget include $49.4 million
to expand treatment services for people struggling with
addiction, particularly individuals with co-occurring mental health
disorders. This is more than double the amount spent in FY 2019, and is
part of an ongoing effort to expand these services. The Governor also
states that these dollars will help expand residential rehabilitation
and better coordinate recovery services.






ConnectorCare
and
the Health Connector






ConnectorCare, the publicly-subsidized, commercial health
insurance available for eligible, lower-income Massachusetts residents
through the Mass. Health Connector, is funded through the Commonwealth
Care Trust. The budget includes a transfer of $123.6 million to this
trust from tobacco excise revenue (see table). One of the other
funding sources for ConnectorCare is what is known as the Employer
Medical Assistance Contribution, or EMAC. Most employers that
contribute
to unemployment insurance must pay this contribution to support
health insurance that is provided by the Connector, including health
coverage for people receiving unemployment insurance.










Starting in 2017, the Legislature added a temporary
(two-year) supplemental assessment to the EMAC on employers with
employees covered under either MassHealth or receiving subsidized
commercial coverage through ConnectorCare. The temporary EMAC will
bring
in about $231.4 million in FY 2019, but only $70.3 million in FY 2020,
as the assessment sunsets on December 31, 2019.













































































































































































































































































































































































































































































































































































MASSHEALTH
(MEDICAID) AND HEALTH REFORM














FY
2019 Current Budget
FY
2019 Estimated Spending
FY
2020





Governor
FY
2020 Gov. minus





FY 2019 Est. Spending
Notes



MASSHEALTH
(MEDICAID)








MassHealth
Programs





16,358,817,944
16,528,513,972
16,538,785,380
10,271,408
Does
not include Community Choices program



MassHealth
Administration





161,535,714
161,138,321
164,566,936
3,428,615
SUBTOTAL 16,520,353,658
16,689,652,293
16,703,352,316
13,700,023



SPENDING
TO TRUSTS








Medical
Assistance Trust





586,600,000
586,600,000
481,260,000
(105,340,000) Timing
of funding to Medical Assistance Trust does not align with fiscal
year



Safety
Net Provider Trust





167,640,000
167,640,000
165,100,000
(2,540,000)
SUBTOTAL 754,240,000
754,240,000
646,360,000
(107,880,000)



OTHER
HEALTH SUBSIDIES








Commonwealth
Care Trust





169,679,079
123,906,140
123,633,865
(272,275)







Prescription
Advantage





16,939,784
16,947,199
15,101,313
(1,845,886)
SUBTOTAL 186,618,863
140,853,339
138,735,178
(2,118,161)



OTHER
ADMINISTRATION AND OPERATIONS








Center
for Health Information & Analysis





28,474,170
28,586,496
28,031,406
(555,090)







Information
Technology





112,736,495
130,372,865
134,036,256
3,663,391



Health
Connector Operations





16,775,216
16,775,216
15,000,000
(1,775,216)



Health
Policy Commission





9,319,931
9,319,932
9,003,931
(316,001)



Other
Health Finance





1,210,793
1,210,793
1,060,793
(150,000)
SUBTOTAL 168,516,605
186,265,302 187,132,386
867,084















Public Health





In his FY 2020 budget proposal, the Governor creates two trust
funds — totaling $22.7 million — to launch efforts
to prevent lead exposure among children who are at highest risk.
Preventing lead poisoning among children features prominently in the
public health portion of the Governor’s Fiscal Year (FY) 2020
budget proposal. Lead poisoning a serious hazard and low-income
children in poorly resourced communities are at highest risk.





Some of these lead prevention efforts would fall under the
Department of Public Health (DPH), which protects the health and
well-being of people in Massachusetts. These include prevention and
treatment services, improving health care access, and ensuring the
safety of food and water in the Commonwealth. For information on
funding for all public health budget items going back to FY 2001,
please see MassBudget’s Budget
Browser
here.





The Childhood
Lead Poisoning Prevention Trust Fund
includes $2.7 million
for training lead paint inspectors and homeowners on how to prevent or
treat lead exposure from paint. Although lead poisoning rates dropped
significantly from 1997 to 2015, the majority of housing units in
Massachusetts still have paint containing lead. And, low-income
families who have limited housing options and those living in old
housing are at higher risk of lead poisoning. Swallowing lead particles
from paint chips or breathing in air with lead particles can cause
brain damage, learning disabilities, and behavioral problems.
Communities with particularly high rates of childhood lead poisoning
— from about seven to 14 cases per 1,000 — include
Brockton, Springfield, North Adams, Southbridge, and Ware.





The Governor also dedicates $20 million to removing lead from
water used in public schools through the Water Pollution Abatement
Revolving Fund
.





In other areas of public health, the Governor proposes some
increases, such as $850,000 more for a Healthy
Relationships Grant Program
to prevent domestic
violence and sexual assault, particularly in “high-risk
communities.” This builds on the $150,000 for this program in
FY 2019 and will support the work of community-based or school-based
organizations.





The Governor also proposes decreases for several programs in
FY 2020. These include:









  • A $1 million (8 percent) decrease for School-Based
    Health Programs
    .
    (In FY 2019, a small portion of this funding went to the school-based
    Bridge programs that help students transition back to school following
    prolonged absences caused by hospitalization for physical or mental
    health. The Governor’s FY 2020 budget language does not
    specify
    how this money would be spent.)
















  • A $4.5 million (90 percent) decrease for a Youth-At-Risk
    Matching Grants
    program (which helps support
    youth organizations like YMCAs and Boys and Girls Clubs).








Some of these funding amounts are similar to what the Governor
proposed last year for FY 2019, but the Legislature subsequently
proposed increases to these programs to get closer to meeting projected
needs.





Additionally, the Governor’s FY 2020 budget proposal
contains language to impose a 13.75 percent tax on the retail sale of
electronic cigarettes and “vapor products”
(popularly knowns as “e-cigarettes” and
“vape pens”), just like tobacco products. This
proposed rule change follows the launch of a state campaign to educate
parents of middle-school and high-school children about the dangers of
e-cigarettes and vape pens. Almost 45 percent of Massachusetts high
school students surveyed by the state reported they had used an
e-cigarette or vapor product at one point and close to 24 percent said
they had used one in the past month. (More information about the
proposed regulations for electronic cigarettes and vapor products are
in the Revenue section of this analysis.)





Outside of the budget, the Governor includes $10.8 million in
the Public
Health Trust Fund
, which was created for social
service and public health programs dedicated to gambling prevention,
substance abuse services, and other services related to compulsive
gambling. This funding is $7.8 million more than current budget levels
and comes from fees on casinos and other gaming establishments. More
information can be found in the Non-tax Revenues section of this
analysis.









HOUSING








The state’s housing budget funds programs that help
people earning low incomes afford housing and provides shelter to
families and individuals, including youth, who are homeless or at risk
of homelessness. Because of high costs, particularly in Greater Boston,
housing claims a large portion of incomes earned by both renters and
homeowners. According to the 2017
Greater Boston Housing Report Card
more than half of renters and one third of homeowners are
cost-burdened, meaning they pay more than 30 percent of their incomes
in rent or mortgage, respectively. 











The Governor’s budget proposal for Fiscal Year (FY) 2020
provides $490.2 million for affordable housing and homelessness
assistance programs across the budget, $5.1 million above the amount
the state expects to spend in FY 2019. For information on funding for
all housing budget items going back to FY 2001, please see
MassBudget’s Budget
Browser
here.











The Governor proposes about the same level of funding for affordable
housing programs in FY 2020 as the state provided in FY 2019 with one
exception. His budget recommends $5.3 million for the Housing Choice
program, which receives funding from a variety of sources to provide
incentives to cities and towns to increase and diversify their housing
stock. The Governor included this program in his budget proposal last
year, but it was not included in the final budget for FY 2019. The
Governor’s budget recommends level funding the
state’s two largest affordable housing programs: subsidies
for local housing authorities
, which provides
support for local housing authorities, and the Massachusetts
Rental Voucher Program
(MRVP), which helps
low-income people pay rent. In past years the state has increased
funding for MRVP in part to help reduce the number of low-income
families who become homeless and require shelter. Without an increase
in MRVP in FY 2020, the state may not be able to create additional
vouchers.











A large share of the state’s housing budget provides shelter
and assistance to families, adults and youth who are homeless or at
risk of becoming homeless. The Governor’s proposal
essentially level funds the Emergency
Assistance
(EA) program at $178.0 million which
is only slightly above the amount the state expects to spend in FY
2019. The Administration estimates the FY 2020 budget will fund EA for
the full fiscal year. Because EA serves all low-income families who are
homeless and qualify for shelter, if the state runs out of funding the
Legislature must provide supplemental funding. In the last several
years the state has reduced funding for EA as it tries to move more
families into housing using programs like MRVP. However, as noted
above, because the Governor’s budget does not propose
additional funds for this voucher program in FY 2020 the state may not
be able to create additional vouchers to help families move out of EA
shelters and into permanent housing. 











The Governor’s budget also proposes reducing or level funding
programs that provide short-term housing assistance to low-income
people who are homeless or at risk of becoming homeless. The
Governor’s budget recommends reducing funding by $1.6 million
below the amount the state expects to spend in FY 2019 for HomeBASE
which provides short-term funding to help families living in EA
shelters to move into permanent housing or stay in current housing so
that they can avoid shelter altogether. The Administration may
recommend reduced funding for this program in FY 2020 because it
estimates a smaller caseload as the number of families living in EA
shelters also falls. The second program, Residential
Assistance for Families in Transition
(RAFT),
provides one-time assistance to help low-income families remain housed
and avoid homelessness. The Governor’s budget proposes $15.3
million for RAFT and recommends transferring an additional $4.7 million
from the Housing Preservation and Stabilization Trust Fund (HPSTF) for
a total of $20 million to support the program. (MassBudget does not
include the $4.7 million transfer from HPSTF to RAFT because the
transfer is not new funding.)









HUMAN SERVICES





Human services include an array of programs to promote the
well-being of children, seniors, veterans, people with disabilities,
and others across Massachusetts. The Governor’s budget
proposal for Fiscal Year (FY) 2020 would fund these supports at over
$4.78 billion. For information on funding for all individual human
services budget items going back to FY 2001, see MassBudget’s
Budget Browser
here.





In the Governor’s FY 2020 budget proposal, there are
several reforms to the Transitional
Aid to Families with Dependent Children
(TAFDC)
program which provides cash assistance to families with little to no
income. With these proposed reforms, the Governor takes steps to help
more families access needed benefits, but also includes provisions that
could make it more difficult for others.





First, the proposal lifts the
restriction that prevents families from
claiming the benefit for children conceived or born after a family has
begun receiving aid, also described as the “cap on kids.”
This would enable over 9,000 children in low-income families to now be
included in the calculation of their families’ TAFDC
benefits.





Previously, the Governor had opposed lifting the cap in the
Legislature’s FY 2019 budget, at the time saying that
removing the restriction “without other accompanying changes
could have the perverse effect of reducing incentives for TAFDC
recipients to get back to work, and cause existing inequities in the
TAFDC program to persist and expand.” To address this, the
Governor amended the language to include counting adult Supplemental
Security Income (SSI) in determining eligibility and benefit amount,
including all members of the household who receive SSI in each TAFDC
case. This new criterion could result in a reduction of benefits for
almost 7,000 children, based on an FY 2018 estimate. The Legislature
rejected the amendment during the FY 2019 budget debate, and the
Governor then vetoed lifting the cap. The Governor’s FY 2020
budget proposal re-introduces similar language as part of the larger
set of TAFDC reforms.





Additionally, the budget proposes that the value of a single
car would not be counted among assets in determining a
family’s TAFDC eligibility. This would protect or improve
TAFDC recipients’ access to transportation without affecting
their qualification for the benefit. The proposal also removes a grant
deduction for homeless families so that families would not have their
benefit value reduced due to the cost of temporary shelter.





The Governor proposes $15.0 million for the Department of
Children and Families’ Family
Resource Centers
, which is essentially level
with appropriations from the previous year. This amount is higher than
estimated spending for FY 2019, which is $12.3 million. These centers
provide community-based services, resources, and support to families,
including assistance during crises. Of this funding, $2.7 million would
be used for the expansion of five existing centers and the development
of two new ones.





For elder services, the Governor proposes a 33.6 percent
increase in funding for the Elder
Nutrition Program
, which would bring it to an
all-time high of $9.7 million. This increase seeks to maintain
nutritional quality and meet higher projected need for the program,
which provides healthy meals, screenings, education, and counseling for
over 9 million seniors each year.





Notable among the Governor’s FY 2020 proposals in
disability services is $6.9 million in funding for Autism
Omnibus Services
, a 38.0 percent increase that
follows a similarly large increase of 35.6 percent in FY 2019. These
services expand the scope and quantity of supports available to youth
under 21 with autism spectrum disorders. The proposed increases reflect
higher projections of need for these services since the program was
established 2014.





The Governor also proposes keeping funding for the Office for
Refugees and Immigrants’ Low-Income
Citizenship Program
essentially flat from FY
2019. This program provides assistance to legal permanent residents in
becoming citizens, with priority given to those with low incomes.









LOCAL AID





“Local aid” refers to money that flows from the state budget
to city
and town budgets, helping municipalities fund local services such as
police and fire protection, parks, and public works. Some local aid has
few restrictions on its use, while other aid goes to some cities and
towns for specific purposes. Local aid for education is discussed in
the Education section of this report. For information on funding for
all Local Aid budget items going back to FY 2001, please see
MassBudget’s Budget Browser here.









Unrestricted Local Aid





Massachusetts is made up of 351 separate city and town
governments
whose levels of wealth range widely. Yet each of them is charged with
providing similar levels of vital public services. State government in
Massachusetts uses general local aid as a mechanism to help offset
inequality of local services that would otherwise exist if these cities
and towns primarily funded their budgets with local property tax
revenue.





The Governor proposes to provide cities and towns with $1.13
billion in
Unrestricted General Government Aid in Fiscal Year (FY) 2020. This
would be an increase of $29.7 million over the FY 2019 amount, or 2.7
percent. It would be the smallest annual increase of any year since
Governor Baker took office. Last year’s budget provided a 3.5
percent increase over FY 2018.





The Commonwealth’s capacity to fund general local
aid has
been hindered by a series of significant state-level tax cuts during
the 1990’s and 2000’s. While over the past several years, general local
aid funding has increased in step with or slightly above inflation, it
still remains 40.0 percent below FY 2001 levels, when adjusted for
inflation.





bar graph: General Local Aid Remains 40% Below Fiscal Year 2001 Levels





For more information on general local aid, please see Demystifying
General Local Aid in Massachusetts
.









Other Local Aid





The Commonwealth provides other sources of local aid to cities
and
towns for more 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 analysis.





Some smaller programs provide local aid only to a subset of
qualifying
cities and towns. The Governor proposes no increase or minor cuts to
these programs for FY 2020:












  • $10.8 million for the Municipal
    Regionalization and Efficiencies Incentive Reserve,
    which
    is
    targeted to several local grant programs and incentives to promote
    municipal best practices. The amount is $135,000 below the current FY
    2019 budget.












  • $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 is the same amount as in the
    current FY 2019 budget.












  • $721,000 to share state horse
    racing revenue
    with cities and towns, the same amount as
    in FY 2019.












There are other proposals in the Governor’s budget
that would
increase resources available for municipal governments for some
activities and decrease it in others. Some revenues from the
Governor’s proposed increase to the real estate transfer tax
would provide off-budget support to help cities and towns make their
infrastructure more resilient to climate change (see the Revenue
section of this report). Meanwhile, the Governor proposes to redirect a
portion of gaming revenue from the Transportation Infrastructure and
Development Fund, of which half is required to supplement funding for
municipal transportation, to the Commonwealth Transportation Fund
without any specific designation for local uses.









TRANSPORTATION





The state supports an
array of transportation systems, including roads, bridges, rail, buses,
airports, and ferries that enable people and goods to travel where they
need to go. Much state funding for transportation takes place through
dedicated revenue sources and a separate capital budget process. For
information on funding for all transportation budget items going back
to Fiscal Year (FY) 2001, please see MassBudget’s Budget Browser
here.





Governor
Baker’s Commission on the Future of Transportation in the
Commonwealth last month urged as its first recommendation for the state
to prioritize investment in public transit. Despite this
recommendation, for FY 2020 the Governor proposes to cut funding for Regional Transit Authorities
(RTAs) and to freeze at previous levels operating assistance for the Massachusetts Bay Transportation
Authority
(MBTA), which would see a mostly one-time
increase of sales tax transfers due to other changes proposed in the
budget. For these two transit systems, the Governor recommends:









  • Decreasing support for RTAs to $86.0 million, a reduction
    of $2.0 million from FY 2019 levels. Of this total, $4.0 million would
    be directed to the Massachusetts Department of Transportation (MassDOT)
    to eventually transfer to individual RTAs contingent upon
    MassDOT’s determination that each RTA follows certain
    practices that will be laid out in a memorandum of understanding with
    each authority. The FY 2019 budget set aside the same $4.0 million
    amount to be distributed to RTAs, conditioned upon their agreement to
    adhere to best practices, though these funds have not yet been made
    available to the RTAs. For FY 2020, the Governor’s budget
    proposes that MassDOT would establish performance metrics, including
    explicitly a target for the ratio of revenue obtained through passenger
    fares. The policy, if implemented, could encourage RTAs to increase
    fares in the future to ensure they receive these conditional funds.












  • The same $127.0 million amount for MBTA operating
    assistance as the prior two years. This funding would be $60.0 million
    below the $187.0 million provided in FY 2016 and FY 2017 as a result of
    a shifting of funds from operations to capital investment. As with the
    previous two years, the MBTA board has taken the position that $127.0
    million in state operating support will be sufficient for FY 2020,
    opting for the $60.0 million to instead be used in a supplemental
    capital funding account for MBTA repair and modernization projects.
    However, soon after the Governor’s budget was filed the MBTA
    board proposed to raise $32 million in additional revenues from fare
    increases to reduce operating deficits — while acknowledging
    that the fare increases will reduce ridership by 1.3 percent.












  • Under current law the MBTA would receive an anticipated
    increase of $34.9 million in sales tax transfers — the
    MBTA’s largest source of revenue — which is
    slightly more than last year’s growth. The Governor’s
    proposed
    changes to sales tax collection
    in FY 2020
    would, if enacted, provide an additional $54 million in mostly one-time
    increases to the MBTA’s sales tax transfer, bringing the
    anticipated total transfer to $1.13 billion. The sales tax transfer is
    the largest source of revenue for the MBTA operating budget, though it
    has grown more slowly than anticipated since its inception. To read
    more on the transfer, see How
    Slow Sales Tax Growth Causes Funding Problems for the MBTA
    .








The Governor proposes $361.9 million
to support the Massachusetts
Transportation Trust Fund
(MTTF), which has also
traditionally funded snow and ice control. The MTTF contributes to
highways, transit, intercity rail, small airports, the Massachusetts
Turnpike, and the Motor Vehicle Registry. The MTTF receives funds from
tolls, federal transportation sources, and the state’s
Commonwealth Transportation Trust Fund. The Governor’s FY
2020 proposal would provide $32.8 million less than current FY 2019
funding for this account. As part of this proposal, the Governor would
create a new Snow and
Ice Control fund
with $105.0 million. By fully funding
anticipated spending for snow and ice upfront, this new account would
break with the longstanding practice of annually funding snow and ice
control below anticipated amounts with the expectation that lawmakers
will provide supplemental funding to the MTTF later in the year for
clean-up from winter storms.





Debt payments for capital projects
are the largest component of the FY 2020 General Fund support for
transportation, and they are separate from the accounts detailed above.
Like a household that pays a mortgage over many years to finance the
purchase of a home, the Commonwealth finances long-term capital
investment projects such as reconstructing bridges or ordering new
train vehicles by issuing bonds—that is,
borrowing—and paying interest, principal, and other costs
related to these bonds over future years. Debt payments are not
negotiated as part of the budget process because they are dictated by
the bond agreements. A total of $1.44 billion in FY 2020 is scheduled
to be transferred from the Commonwealth
Transportation Fund
(CTF) to make transportation-related
debt payments (this account does not include debt payments from other
separate transportation entities such as the MBTA or Massport). For FY
2020 these debt payments include:












  • $1.16 billion as part of Consolidated Long Term Debt
    Service, an account
    that pays for several sources of state debt. Payments from the CTF
    constitute just over half of all such long-term debt service.












  • $209.7 million for debt incurred to finance the largely
    completed Accelerated Bridge Program and the Rail Enhancement Program.












  • $70.0 million for debt incurred from funding shortfalls for
    the “Big Dig” — the Central Artery/ Third
    Harbor Tunnel project.








The Governor’s budget anticipates $32.3 million of
gaming revenue will be transferred to the CTF, up from $9.0 million in
FY 2019.








For an illustrated chart and description of funding flows
for transportation debt service and operations together (as of 2015),
see MassBudget’s fact sheet, What
Does
Massachusetts Transportation Funding Support and What Are the Revenue
Sources?
To read about different areas of
federal
support for state transportation programs in Massachusetts, see
MassBudget’s How
Vulnerable
is Massachusetts Transportation to Federal Spending Cuts?






OTHER NEWS IN THE BUDGET





The Governor’s Fiscal Year (FY) 2020 budget includes
$2.5
million within the Secretary of State’s office to develop
systems
to ensure an accurate
count in Massachusetts the upcoming 2020 Census
.
FY 2020 is the important year for Census preparations and this proposal
is $1.5 million more than in FY 2019, but still 11.9 percent less than
the amount budgeted in FY 2010 — the comparable preparation
year
for the prior Census. The budget language does not specify how this
funding would be used, for example whether it will support the
Secretary’s work with municipalities to develop local
complete
count committees, whether it will be available for distribution to
community-based organizations that will be critical for on-the-ground
work, or for other important initiatives to ensure a complete count in
the upcoming Census.





In the Department of Mental Health (DMH), the Governor
proposes
$221.5 million for hospital facilities and community-based mental
health services, which is $13.3 million (6.4 percent) more than current
budget levels. Of this, $20,000
accounts for the new minimum wage
,
which increased from $11 to $12 per hour at the beginning of this year.
Many workers who care for children, elders, and people with
disabilities do so for low wages at places funded through state
contracts. These workers will benefit from the new minimum wage, which
will rise to $15 per hour by 2023. Several other DMH accounts also make
adjustments based on cost of living.






The Governor accompanied his FY 2020 budget proposal with
separate
legislation providing $75 million in FY 2020 and $137 million in
subsequent years for the Global
Warming Solutions Trust Fund
.
The revenue to support this fund would be raised through a proposed
increase to the real estate transfer tax — please see the
Revenue
section of this budget analysis, for a full discussion of this tax
proposal. Because the legislation to increase the transfer tax was
filed separately from the Governor’s budget, we do not
include
the $75 million in our funding totals for
Environment and Recreation programs. The Executive Office of Energy and Environmental Affairs
(EOEEA)
will oversee this new trust fund, which was created in the
environmental bond bill of 2018. The trust will provide grants or loans
to government, quasi-government authorities, and non-profit entities.
The funds will help cities and towns with activities such as reducing
emissions, developing strategies to adapt to climate change, monitoring
or reducing the impact that climate change could have on public health,
and funding new strategies or technologies to support carbon emission
reduction.





The Governor includes $25.1 million for “other post-employment
benefits
” (“OPEB”) for state
retirees, paid from debt
reversions or, if those reversions are not available, using Tobacco
Settlement funds. However, statute requires that by FY 2020 the state
should be transferring 80 percent of the Tobacco Settlement to the
State Retiree Benefits Trust (which holds the money for OPEB), or
$201.0 million. This means the Governor’s budget is
underfunding
this liability for retiree benefits by $175.9 million.









REVENUE





See table for a summary of revenue proposals in the
Governor’s Fiscal Year (FY) 2020 budget.










































































































































































































































































































FY
2020 TEMPORARY AND ONGOING REVENUE PROPOSALS













($
millions)





Governor
Ongoing Temporary



TAX
REVENUES








Sales
Tax Acceleration






306.0



Sales
Tax Marketplace Reforms





41.7








Tax
on Opioid Gross Receipts





14.0








Excise
Tax on Vapor (Vaping) and E-Cigarette Products





6.0








Life
Sciences Tax Credit Cap






5.0



Withholding
on Non-Residential Property Sales





4.0








Sales
Tax Integrity Measures





2.0








Real
Estate Transfer Tax Increase (in separate legislation)





75.0





SUBTOTAL 142.7
311.0



NON-TAX
REVENUES








Casino-Based
and Online Sports Wagering (separate legislation)





35.0





SUBTOTAL 35.0
0.0



TOTAL





177.7
311.0











Tax Proposals





Two of the tax revenue raisers included in the
Governor’s
budget are ones that already are part of the tax code, but which were
added to the code recently enough that no estimate of anticipated
revenue from these sources was included in the “Consensus
Revenue Estimate,” the baseline tax revenue estimate used by
the Administration and the Legislature in crafting their budget
proposals. The Governor estimates that taxes associated with the sale
of recreational marijuana will deliver $132.5 million in FY 2020, and
revenue from the newly
adopted short-term room occupancy tax
(often referred to
as the “Airbnb Tax”) will total $27.5 million. Both
sources will deliver ongoing revenue.





A third addition of pre-existing revenue not counted already
in the
Consensus Revenue Estimate is the $50 million in tax-related settlements and
judgments
that the Governor builds into his FY 2020
revenue total. These are delayed or legally contested, tax-related
payments that the Governor anticipates will be resolved in the
Commonwealth’s favor in FY 2020. (The FY 2015 budget amended
the General Laws to allow much of the revenue derived annually from
large tax-related and non-tax-related settlements and judgments to be
used for budget appropriations rather than be deposited into the
state’s Stabilization Fund, as had been done in years prior.
Under the new law, each year, the annual average for these types of
collections over the prior five years is calculated and set as a
threshold. Collections below the threshold are available for budgetary
appropriations, but once total collections exceed the threshold, all
additional such revenues are deposited into the Stabilization Fund.
Individual settlements that exceed $10 million are designated for
deposit into the Stabilization Fund rather than the General Fund.)
Though the Commonwealth typically receives over $100 million annually
from this source, the amounts can vary significantly from year to year.
As these revenues are not included in the Consensus Revenue Estimate,
they constitute an increase in the Governor’s bottom line
revenue total.





Tax initiatives newly
proposed
in the Governor’s budget (or in
accompanying legislation) include:












  • A sales tax
    acceleration proposal
    , shortening the turnaround time
    during which businesses may hold onto the sales taxes they collect from
    customers before they must deliver (“remit”) these
    revenues to the state. Rather than the current 30-day remittance
    period, businesses would have only 20 days. This change would pull
    forward an estimated $306 million in one-time sales tax revenue from FY
    2021 into FY 2020. The Governor proposes depositing this revenue into
    the following special purpose funds: the College Affordability and
    Success Trust Fund, the Public School Improvement Trust Fund, the
    School Safety Trust Fund, and the Water Pollution Abatement Revolving
    Fund. (Read more about these funds in the K-12 section and Education
    section of this analysis.) A portion of the total would be deposited
    into the state’s Stabilization Fund.












  • Reforms to
    online, retail sales tax collection rules
    . Under the
    Governor’s proposal, “marketplace
    facilitators” such as eBay, Amazon, and Etsy would be
    required to collect and remit sales taxes on behalf of smaller vendors
    who sell through these sites. This and other associated changes would
    result in an estimated $41.7 million in additional, ongoing sales tax
    revenue in FY 2020, taxes that are owed under existing law, but which
    currently go uncollected.












  • Taxing opioid
    manufacturers on most opioids sales
    .
    This would generate
    an estimated $14 million in ongoing revenue in FY 2020 to help offset
    state costs associated with opioid misuse, and programs aimed at
    addiction prevention and treatment. (More information about the
    proposed regulations for electronic cigarettes and vapor products are
    in the Public Health section of this analysis.)












  • Applying to electronic
    cigarettes and “vapor products”
    the
    same tax and regulatory rules applied to cigars and other tobacco
    products, thereby generating an estimated $6 million in ongoing revenue
    in FY 2020.












  • Limiting the amount of funding to be transferred from the
    state’s consolidated net surplus to the Massachusetts Life
    Sciences Fund. This limit on the funding available for distribution
    through the Massachusetts
    Life Sciences Credit program
    is expected to save $5
    million in FY 2020. This fund supports the cost of a corporate tax
    credit program that is intended to incentivize companies involved in
    “life sciences research and development, commercialization
    and manufacturing” to create and retain full-time permanent
    jobs within the Commonwealth. Companies must apply for and be awarded
    these credits, but the state awards credits only to the extent that
    funds are available.












  • Making an administrative change that would require tax withholding on
    property sales made by non-resident owners
    . This would
    ensure that capital gains taxes due on these sales are collected at
    time of sale, rather than relying on non-residents (who may have no
    other reason to file Massachusetts taxes) to file and pay these taxes
    at year’s end. The Governor anticipates a gain of $4 million
    in ongoing capital gains revenue in FY 2020 from this source as a
    result of greater compliance with existing law.












  • Establishing significant
    civil penalties (up to $50,000) for falsifying electronic records in
    cash registers
    and other point-of-sales systems. The
    Governor expects that clarifying the rules regarding electronic cash
    registers and establishing stiff penalties for violators will encourage
    greater compliance with sales tax collection and remittance. The
    Governor estimates this Sales Tax Integrity initiative will generate $2
    million of ongoing revenue in FY 2020.












  • Another revenue proposal — one that would affect
    FY 2020 collections if approved — has been put forward by the
    Governor as a separate piece of proposed legislation, filed on the same
    day as his budget. “An
    Act Providing for Climate Change Adaptation Infrastructure Investments
    in the Commonwealth”
    would increase the rate of
    the Deeds Excise Tax (also called the “Real Estate Transfer
    Tax”). The Governor anticipates that this change would
    generate an additional $75 million in FY 2020 from the sale of property
    in the Commonwealth, and $137 million annually thereafter. These
    revenues would be deposited into the state’s Global Warming
    Solutions Trust Fund. (Read more about this proposal in the
    “Other News in the Budget” section of this
    analysis.)








Much of this additional
revenue noted above would come from a variety of consumption taxes,
which typically are regressive. The tax revenue reductions, by
contrast, mostly come from progressive sources — meaning
people with higher incomes contribute a larger share of their household
incomes toward these taxes than do people with low- and
moderate-incomes.





Massachusetts already has a regressive “upside down”
tax system
, one that collects a greater share of household
income from low- and moderate-income people than it does from those
with high incomes. Given the nature of the additional revenue sources
included in the Governor’s budget, it is unlikely they will
help flip Massachusetts’ upside-down tax system right-side
up.





An important exception to the foregoing discussion is the
scheduled
increase to the state’s Earned Income Tax Credit program,
which will begin offering larger tax credits in FY 2020. While the
$65.4 million in additional credits will reduce collections from the
state personal income tax (a progressive revenue source), nevertheless,
the net effect of this tax cut is progressive. The EITC program targets tax benefits
to low- and moderate-income working households, enhancing the overall
progressivity of the state personal income tax.





Other Revenue Proposals





Every budget relies on a variety of non-tax
revenues—federal
revenues, which are mostly reimbursements for state spending on
Medicaid (MassHealth and related costs); departmental revenues, which
are fees, assessments, fines, tuition, and similar receipts; and
“transfer” revenues, which include lottery
receipts, revenues from the newly-licensed gambling facilities, and
funds that the state draws from non-budgeted trusts.





One of the most notable changes in these non-tax revenues in
the FY
2020 proposal is that only $70.0 million will be available from the
supplemental Employer
Medical Assistance Contribution (EMAC)
. This is a $161.3
million reduction from the available supplemental EMAC revenue in FY
2019. The supplemental EMAC is a temporary assessment on employers that
rely on publicly-subsidized health insurance (MassHealth or
ConnectorCare) for their employees. This temporary assessment was new
in FY 2018 but the Governor allows it to sunset as planned on December
31, 2019. (See also the MassHealth and Health Reform section of this
analysis.)





The Governor’s budget estimates that the continuing expansion of various
forms of gambling
in the state will bring in substantial
additional revenue in FY 2020. Legislation authorized the establishment
of one slot facility (currently operating in Plainville) and up to
three resort casinos (one has recently opened in Springfield, and
another is under construction in Everett). The legislation also
includes formulas that direct gambling revenues to specific purposes
within the budget, such as local aid. The Governor’s budget
anticipates gambling will generate a total of $293.5 million for the
budget, more than double the amount used in the FY 2019 budget. This
includes:












  • $78.0 million in revenues from slot machines, level with FY
    2019. This funding is directed to the state’s Gaming Local
    Aid Fund.












  • $215.5 million from the state’s two resort
    casinos, an increase of $155.5 million compared to FY 2019, as the
    Administration expects two casinos to be fully operational during the
    FY 2020.












  • $35.0 million from the anticipated legalization of
    casino-based and online sports wagering. In May 2018, the U.S. Supreme
    Court allowed states to legalize sports betting. The Governor has filed
    legislation to accompany his budget proposal that would legalize sports
    betting, but limit it to licensed casinos and certain online entities
    (such as DraftKings) and limit it to bets on professional sports
    (explicitly excluding bets on college or high school sports).









There are several other revenues in the Governor’s budget to
note:








  • $29.5 million from sale of the East Cambridge Court House.
    This one-time revenue was initially anticipated for the FY 2019 budget,
    but the sale has been moved to FY 2020. 












  • $12.0 million in licensing fees from the continued
    expansion of the retail recreational marijuana industry, $6.0 million
    more than the amount expected for FY 2019.












  • $85.9 million less in federal reimbursement for the Children’s
    Health Insurance Program
    (CHIP) in FY 2020
    compared to FY 2019, in part because an enhanced reimbursement rate (88
    percent) for that program drops back to 65 percent. One of the
    provisions of the federal Affordable Care Act was that the federal
    reimbursement rate for CHIP would increase by 23 percentage points
    until September 30, 2019, but after that the reimbursement rate drops
    back to its previous level.













Stabilization
Fund





In his FY 2020 budget, the Governor proposes depositing almost
$300
million into the state’s Stabilization Fund (often referred
to as the “Rainy Day Fund”). This total includes
revenue accounted for in the Consensus Revenue Estimate as well as
dollars from additional revenue sources presented or proposed in the
Governor’s FY 2020 budget and related legislation. If the FY
2019 deposit also occurs as the Governor anticipates, this would bring
the fund total to just under $2.8 billion at the close of FY 2020. This
deposit is an important step toward preparing for the next recession.
With very strong capital gains tax collections in FY 2018 and likely
again in FY 2019, the Stabilization Fund has grown significantly in the
last two years. If deposits are made as expected, by the end of FY
2020, the fund will have more than doubled since the close of FY 2017
(growing from $1.3 billion to almost $2.8 billion).










TOTAL BUDGET BY CATEGORY
AND SUBCATEGORY








FY 2020 Governor
is the Governor’s proposal. FY 2019 Current is
the budgeted FY 2019 General Appropriation Act (GAA) enacted in July
2018 as amended by supplemental budget legislation. All totals include
MassBudget adjustments to the state’s published numbers as
described below.









  • MassBudget’s budget totals include the “pre-budget transfers
    of funds. There are statutes requiring automatic appropriations of
    revenue to support certain functions independent of the annual budget.
    In FY 2020, these transfers add $5.23 billion to the total. These
    transfers include: tax revenues dedicated to the Massachusetts Bay
    Transit Authority (MBTA) and school building assistance, cigarette
    excises dedicated to the Commonwealth Care Trust Fund, state
    contributions to the pension system, transfers to the State Retiree
    Benefits Trust, transfers to the Workforce Training Trust, as well as
    others.








Although
these transfers
function no differently from other appropriations, the Governor and
Legislature do not reflect these expenditures in their budget totals;
instead, they are shown as amounts deducted or transferred from revenue
prior to the budgeting process.












  • MassBudget’s totals include annual appropriations
    into non-budgeted
    (“off-budget”) trusts
    in all budget
    years. Prior to FY 2011, the budget authorized these transfers in
    Outside Section budget language. Starting in FY 2011, a new section of
    the budget, Section 2E,
    has systematically accounted for the transfer of funds into
    off-budgeted trusts. MassBudget’s totals include these
    operating transfers in all budget years.












  • MassBudget reduces State
    Employee Health Insurance
    totals to exclude spending on
    health insurance for municipal employees and retired teachers for which
    the state is fully reimbursed by participating municipal governments.












  • MassBudget reduces funding for the community colleges,
    state universities, and University of Massachusetts campuses by the
    amount of tuition that these campuses remit to the state treasury each
    year. These adjusted totals more accurately reflect the
    “net” appropriations available to the campuses to
    support operations, and allow for more consistent comparisons across
    the years, since the policies about tuition
    remission
    have varied from year to year and from campus to
    campus. The MassBudget adjustments make it possible to make meaningful
    comparisons of appropriations to these campuses even with these policy
    changes.












  • MassBudget’s totals reflect
    legislatively-approved “prior
    appropriation continued
    ” (PAC) amounts.
    MassBudget typically shifts the PAC amount from the year in which the
    funding was first appropriated into the year in which the
    Administration expects to spend the totals.












  • Because MassBudget totals reflect budgeted appropriations
    and not actual spending, there can be apparent fluctuations in the
    MassHealth and Health Reform totals that are simply due to the timing
    of payments to certain off-budget trusts. These budget variations may
    not reflect real differences in spending.









































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































BUDGET
BY CATEGORY AND SUBCATEGORY













($
millions)





FY
2019 Current
FY
2020 Governor



EDUCATION





8,381.2
8,892.1



Early
Education & Care






649.0
656.8



Higher
Education





1,225.4
1,370.6



K-12:
Chapter 70 Aid





4,922.6
5,107.9



K-12:
Non-Chapter 70 Aid





702.2
786.8



K-12:
School Building





882.1
970.0



ENVIRONMENT
& RECREATION





222.0
229.9



Environment





95.6
101.7



Fish
& Game





31.2
31.1



Parks
& Recreation





95.2
97.1



HEALTH





20,768.9
20,937.2



MassHealth
(Medicaid) & Health Reform





17,629.7
17,675.6



Mental
Health





876.3
886.8



Public
Health





669.7
694.2



State
Employee Health Insurance





1,593.2
1,680.6



HUMAN
SERVICES





4,614.9
4,779.6



Child
Welfare





1,009.7
1,050.4



Disability
Services





2,018.9
2,166.7



Elder
Services





529.2
540.3



Juvenile
Justice





179.3
178.7



Transitional
Assistance





668.6
654.8



Other
Human Services





209.2
188.7



INFRASTRUCTURE,
HOUSING & ECONOMIC DEVELOPMENT





2,397.7
2,516.3



Commercial
Regulatory Entities





70.9
82.0



Economic
Development





187.7
197.5



Housing





481.3
490.2



Transportation





1,657.8
1,746.6



LAW
& PUBLIC SAFETY





2,990.5
3,152.1



Courts
& Legal Assistance 





812.2
848.6



Law
Enforcement





411.3
463.0



Prisons,
Probation & Parole





1,524.0
1,589.5



Prosecutors





181.8
189.7



Other
Law & Public Safety





61.3
61.4



LOCAL
AID





2,990.5
3,152.1



General
Local Aid





1,098.9
1,128.6



Other
Local Aid
 





44.0
54.0



OTHER





6,085.6 6,326.2



Constitutional
Officers





90.1
80.8



Debt
Service





2,678.8
2,772.0



Executive
& Legislative





77.2
79.8



Libraries





27.2
27.3



Pensions





2,612.9
2,852.8



Other
Administrative





599.3
513.5



TOTAL
BUDGET





46,603.9 48,016.1











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