Governor’s FY15 deficit plan protects unrestricted municipal aid and Ch. 70, impacts few local accounts

The comprehensive plan announced by Gov. Charlie Baker on Feb. 3 to close a $768 million mid-year state budget deficit protects Unrestricted General Government Aid and Chapter 70 education aid, as the governor promised at the MMA Annual Meeting late last month.

The governor’s package would make $514 million in mid-year spending reductions, including $150 million in cuts implemented using the governor’s “9C” emergency budget powers. The plan also relies on $254 million in revenue directed into the state’s general fund – most of which will come from capital gains taxes – that otherwise would have flowed into the Commonwealth’s “rainy day” fund.

The governor’s 9C reductions cover 300 line items in the state budget and are much more modest in terms of their municipal impact than any of the 9C cuts implemented over the past decade.

The most significant impact to Cherry Sheet accounts was a $1.9 million reduction in charter school reimbursements (a 2.46 percent cut below the November level), which will affect communities that lose Chapter 70 school aid to charter schools and rely on the state reimbursement account to make up a portion of the lost funds. This reduction will vary from community to community because the $1.9 million will be taken from reimbursements for students in years two through five of the formula, so the impact will depend on the specific profile of area students attending charter schools. Cities, towns and school districts are advised to contact the Department of Elementary and Secondary Education for more information.

The other cuts to Cherry Sheet local aid accounts were a $943,000 reduction (5 percent) for the METCO program, and reductions of less than half of 1 percent for library aid programs ($42,499 from regional public libraries and $38,700 from non-regional libraries). There were no programmatic cuts to regional school transportation, payments-in-lieu-of-taxes (PILOT), or other Cherry Sheet items.

There are several 9C reductions to non-Cherry Sheet accounts, however, that are important to cities and towns:

• A $5 million reduction to kindergarten development grants (a 21 percent cut below the November level) will impact those communities that are relying on kindergarten grants to offer or expand this service locally.

• A $1.25 million reduction to Shannon anti-gang grants (a 15 percent cut below the fiscal 2015 appropriation) will impact communities scheduled to get the grants.

• A modest $250,000 reduction to the Special Education Circuit-Breaker (slightly less than 1 percent below the November level), which should have no impact on the distribution to cities and towns, because the intent is to eliminate a state agency earmark.

Beyond the 9C cuts, the governor has filed legislation to impose reductions to other areas of the state budget and to implement other revenue transfers and policies.

The governor’s proposed legislation would generally require a 1.79 percent reduction to those state accounts outside of his 9C authority. The legislation specifically exempts Unrestricted General Government Aid and Chapter 70 from mid-year cuts, consistent with the governor’s pledge. In general, the reductions are designed to include the Legislature, judiciary, constitutional officers, and quasi-independent agencies in the budget-balancing plan.