Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
With the new fiscal year just hours away, the Legislature this evening passed and sent to the governor a slimmed-down $39.15 billion state budget for fiscal 2017 that spared the main local aid accounts from last-minute reductions.
Gov. Charlie Baker now has until July 10 to approve, veto or reduce the spending provisions.
Over the past several weeks, slumping tax revenues and turmoil in the global marketplace have caused state leaders to slash the forecast of state tax collections for next year by $750 million. As a result, legislative leaders last night unveiled a $39.15 billion budget bill that dramatically scales back funding in comparison to the spending plans approved by the House and Senate earlier this spring.
Lawmakers managed, however, to protect the two main local aid programs: Unrestricted General Government Aid and Chapter 70 education aid. The Legislature’s decision to prioritize local aid will benefit communities across the state, since cities and towns have already set their budgets based on expectations that UGGA would increase by $42 million and Chapter 70 education aid would provide at least $55 per student in new minimum aid. (Overall, the Chapter 70 account will grow by $116 million.)
A number of important municipal and school accounts have been affected, however, and some of the news will pose challenges for local budgets, especially in communities that rely on Kindergarten Development Grants and Charter School Reimbursements.
• Link to Legislature’s website to view fiscal 2017 Chapter 70 and municipal aid numbers for each community
• Link to Legislature’s website to view H. 4450, the Legislature’s final fiscal 2017 state budget
The House-Senate conference committee reduced overall spending in its final budget bill by $413 million. This includes cuts to state agencies and a large number of budget accounts and reimbursement programs, deferral of some Medicaid costs to fiscal 2018, reduced caseload assumptions, elimination of a $206 million transfer to the state’s stabilization fund, and smaller transfers to the MBTA and the School Building Assistance program than originally planned. The budget committee also increased some other revenue projections (including $100 million in “procurement efficiencies” and $80 million saved because an automatic reduction in the state income tax rate is now unlikely).
The following are the major local government provisions in the Legislature’s fiscal 2017 state budget:
Unrestricted General Government Aid
In a major victory for cities and towns, the Legislature’s budget provides $1.02 billion for Unrestricted General Government Aid, preserving the $42 million increase proposed in the budgets offered by the governor, House and Senate. This will be the largest increase in discretionary municipal aid in nearly a decade, and every city and town will see its UGGA funding increase by 4.3 percent.
Chapter 70
The Legislature’s budget includes a $116 million increase in Chapter 70 education aid above fiscal 2016 levels, providing every city, town and school district with an increase of at least $55 per student. The Chapter 70 numbers for each community will mirror the distribution numbers in the Senate version of the budget, as the budget conference committee also included Senate’s acceleration of the “target share” provisions, and additional funds to aid communities affected by changes in the calculations used to account for low-income students.
Overall, the Legislature’s budget provides $44 million more in direct Chapter 70 distributions than originally proposed by the governor.
Special Education Circuit Breaker
While House and Senate members support full funding of the Special Education Circuit Breaker, their budget plan provides $277.3 million for the program, a $5.56 million increase over fiscal 2016 but $4.4 million less than what is needed to fully fund the account. The governor’s budget proposal would have level-funded the program at $273.8 million. The MMA will work with the Legislature and administration to close the gap during the coming year.
Kindergarten Development Grant Program
The Legislature’s final budget eliminates $18.6 million in funding for the Kindergarten Development Grant program, creating a budget gap for kindergarten programs in 164 communities and school districts. This account has been under review by state officials for the past two years, but the elimination of funding in one year will present immediate challenges.
Charter school reimbursements
Under state law, cities and towns that host or send students to charter schools are entitled to be reimbursed for a portion of their lost Chapter 70 aid. The state fully funded the reimbursement program in fiscal 2013 and 2014, but is underfunding reimbursements by approximately $46.5 million in fiscal 2016.
The Legislature’s fiscal 2017 budget level-funds charter school reimbursements at $80.5 million, a lower amount than was included in any of the budgets offered by the governor, House and Senate. Because of charter school expansions, this is not enough to keep pace, and communities will see even greater shortfalls in fiscal 2017 as a result. This issue continues to be a major priority for the MMA.
In a related development, the Legislature decided not to make a formula change in the reimbursement schedule, and thus the $80.5 million will be used to fund the per-pupil capital need component and then as much of the first-year 100 percent reimbursement as possible. The remaining years (two through six) will likely remain unfunded, unless the governor and Legislature pass a supplemental appropriation later in the year.
Regional school transportation, payments-in-lieu-of-taxes (PILOT), library aid accounts, METCO, McKinney-Vento, and Shannon anti-gang grants
The Legislature’s final budget:
• Provides $61 million for regional school transportation reimbursements, a $2 million increase
• Level-funds PILOT payments at $26.77 million
• Funds library grant programs at $18.9 million, $84,000 below fiscal 2016 levels
• Level-funds McKinney-Vento reimbursements at $8.35 million
• Funds Shannon anti-gang grants at $6 million, $1 million below fiscal 2016
• Funds METCO at $20.6 million, a $500,000 increase
Retiree health insurance contributions
In outside Section 45, the Legislature’s budget includes language passed by the Senate that would interfere with the decision-making authority of local officials to act on behalf of their taxpayers on the basic issue of setting contribution levels for retiree health insurance. The MMA maintains that this provision would effectively penalize all cities and towns that have used the 2011 municipal health insurance reform law to reduce the cost and financial burden of health insurance for employees, retirees and taxpayers.
Section 45 strips these cities and towns of their legal authority to decide whether to adjust contribution percentages for retiree health insurance, by unilaterally extending a freeze on contribution ratios until 2018. The MMA will be asking Gov. Baker to veto this section as an unacceptable intrusion on local authority.
Cities and towns are facing a staggering $30 billion unfunded OPEB liability, and Section 45 would remove one of the few tools that communities can use to reduce the burden on local taxpayers.
Summary
In the local aid accounts cited above, the Legislature’s budget would provide a total of $12 million more than the budget proposal filed by Gov. Baker in January, in spite of the loss of an estimated $750 million in state tax revenues. While many communities will be impacted by the elimination of funding for Kindergarten Development Grants and the underfunding of Charter School Reimbursements, it is clear that the Legislature worked hard to prioritize and protect local aid and education funding from the reductions that will have an impact on other parts of the state budget.
The MMA will continue to advocate for restored funding throughout the year, and will keep local officials informed throughout the process.