Legislature sends FY25 budget bill to the governor

The House and Senate today enacted a $58 billion state budget bill for fiscal 2025 that has significant increases for a number of key local accounts.

Both chambers took quick action on a compromise budget bill that was released by a six-member House-Senate conference committee yesterday evening.

Despite the current period of softening state revenue collections, the budget has good news for cities and towns, as it increases the main discretionary local aid account by 3% over fiscal 2024 — a critical priority pushed by the MMA — and significantly increases Chapter 70 school aid to fully fund the Student Opportunity Act on its intended schedule and provide $104 per student in minimum new aid to districts.

The budget also fully funds the state’s obligations for the Special Education Circuit Breaker and Charter School Mitigation Payments, includes $16 million for rural school aid, and has $53 million for payments-in-lieu-of-taxes for state-owned land. Legislators also provided supplemental funding for local road maintenance, the Green School Works program, and universal free school lunches.

“On behalf of cities and towns across Massachusetts, we applaud the significant investments that the Legislature is making in our communities, especially in unrestricted municipal aid, increased funding for our local roads and key infrastructure, and essential school programs,” said MMA Executive Director Adam Chapdelaine. “This is particularly important and welcome news considering the uncertainty surrounding state tax collections for fiscal 2025.”

Gov. Maura Healey has 10 days to approve the spending appropriations and proposed law changes, veto certain items, or return items with amendments.

The Division of Local Services will be posting preliminary Cherry Sheet estimates for each city, town and school district based on the Legislature’s budget.

Here’s a review of key municipal budget issues:

Appropriations
UGGA: The budget increases Unrestricted General Government Aid by $38.1 million, bringing the total to more than $1.3 billion. With property taxes tightly capped by Proposition 2½, cities and towns rely on state revenue sharing to provide municipal and school services, ensure safe streets and neighborhoods, and maintain vital infrastructure — services that are fundamental to the state’s economic recovery and competitiveness.

Chapter 70: The budget’s $6.9 billion for Chapter 70 aid represents a commitment to fund the Student Opportunity Act on schedule, with fiscal 2025 as year four of a six-year implementation. The Legislature recognized the challenges facing “minimum aid” districts — nearly three-quarters of all school districts — by including a significant increase in minimum aid above the $30 per student proposed by the governor in January. The budget leverages $37 million of Fair Share surtax funding to increase minimum aid.

Special education: The budget provides $492 million for the Special Education Circuit Breaker, which reimburses school districts for the high cost of educating students with disabilities.

Charter schools: The budget includes $199 million for charter school mitigation payments, which funds the state’s obligation under the Student Opportunity Act.

School transportation: The budget funds regional school transportation at $99.4 million, an increase of $2.3 million over fiscal 2024, representing a reimbursement rate of 84% of estimated costs for fiscal 2025 as estimated by the Department of Elementary and Secondary Education. The budget funds the McKinney-Vento account for transportation of homeless students at $28.6 million, approximately 70% of anticipated claims, and level funds out-of-district vocational transportation at $1 million.

Rural schools: The $16 million for rural school aid would provide assistance to eligible towns and regional school districts. The grant program helps districts facing the challenge of declining enrollment to identify ways to form regional school districts or regionalize certain school services to create efficiencies.

PILOT: The budget increases payments-in-lieu-of-taxes by $1.5 million over fiscal 2024, aiding municipalities with state-owned land.

Surtax revenue programs
Fiscal 2025 will be the second fiscal year to realize revenue from a voter-approved surtax on annual personal incomes over $1 million, called the Fair Share Amendment. The Legislature’s budget allocates $1.3 billion in anticipated Fair Share revenue, which must be dedicated to education and transportation-related programs.

This funding includes:

• $45 million in supplemental aid to support the construction and maintenance of municipal roadways

• $170 million to fund the universal school meals program, which would provide free lunches at public schools for all students, regardless of household income

• $10 million for the new Green School Works grant program, which provides financial support to K-12 districts to install or maintain clean energy infrastructure

Outside sections
Disaster relief fund: The Legislature’s budget would establish a permanent Disaster Relief and Resiliency Fund to assist municipalities impacted by extreme weather events. An additional section would also direct the state’s comptroller to transfer $14 million from any consolidated net budget surplus for fiscal 2025 to the Disaster Relief and Resiliency Fund. The MMA has strongly advocated for the creation of the fund, which would support rapid-response efforts by cities and towns as they incur emergency response costs due to extreme weather.

Tax title: The Legislature’s budget includes several outside sections related to the tax title foreclosure process, which would impact liens on properties due to nonpayment of property taxes. Many of these changes are intended to adhere to a 2023 U.S. Supreme Court decision. An initial review of the related outside sections shows some concerning impacts for cities and towns, including exposing municipalities to excess equity claims for tax title foreclosures going back to May 24, 2021, two years before the Supreme Court decision.

Electronic Lottery: Another outside section would authorize an online state Lottery (iLottery), with $100 million of anticipated new revenue targeted to early education programs.