Governor’s budget would boost general aid by 3.9%, Ch. 70 by 2%

Gov. Charlie Baker today filed a $40.5 billion fiscal 2018 state budget plan that would increase unrestricted municipal aid by 3.9 percent and Chapter 70 education aid by 2 percent.
 
The budget plan would increase overall state expenditures by 4.3 percent, as the administration seeks to close an ongoing structural budget deficit by restraining spending and placing an estimated $98 million into the state’s rainy day fund. The budget relies on $95 million in one-time revenues, considerably less than in recent years.
 
As Gov. Baker pledged to local officials on Jan. 21 at the MMA’s Annual Meeting, his budget includes a $39.9 million increase for Unrestricted General Government Aid and $91.4 million more for Chapter 70 education aid.
 
• Link to governor’s budget website for UGGA and Chapter 70 amounts, listed by community
• Link to Division of Local Services website for preliminary fiscal 2018 Cherry Sheet aid amounts for each community, based on governor’s proposed budget (insert name of community and “2018” in the fiscal year field)
 
Most other municipal and education aid accounts in the governor’s budget proposal would remain at fiscal 2017 levels. (See details below.)
 
The $1.06 billion UGGA appropriation fulfills one of Gov. Baker’s major campaign promises, to increase direct municipal aid by the same rate as expected growth in state tax collections. Every city and town would see its UGGA funding increase by this 3.9 percent growth rate under the governor’s budget.
 
The governor’s Chapter 70 proposal includes a minimum aid increase of $20 per student, full funding of the foundation budget requirements, and continued implementation of the “target share” equity provisions. The foundation budget calculation would partially implement the Foundation Budget Review Commission’s recommendation to use a more realistic factor for the cost of employee health insurance in school systems.
 
• Link to DESE website for calculation of fiscal 2018 Chapter 70 aid and Net School Spending requirements for each city, town and regional school district, based on governor’s proposed budget
 
The governor would level-fund charter school reimbursements at $80.5 million, well below the amount necessary to fully fund the statutory formula, which is designed to offset a portion of the amount that communities are required to transfer to charter schools. The fiscal 2017 funding level is an estimated $54 million below what is necessary to fund the reimbursement formula that is written into state law, so it is clear that the shortfall would grow significantly in fiscal 2018 under the governor’s plan.
 
Even though the reimbursement formula would be level-funded, the governor’s budget proposal would increase charter school assessments by $60 million. The MMA argues that this would lead to the continued and growing diversion of Chapter 70 funds away from municipally operated school districts, placing greater strain on the districts that serve 96 percent of public schoolchildren. The MMA maintains that solving the charter school funding problem must be a major priority during the budget debate.
 
The governor’s budget, known as House 1, would make the “first down payment” on one of the Foundation Budget Review Commission’s key recommendations, which is updating the foundation budget to reflect the cost of health insurance for current school employees and retirees. This adjustment in the foundation budget is not enough to increase aid to many districts, however. Three-quarters of all operating districts (237 cities and towns) would receive only an increase of $20 per student under the budget proposal. The MMA argues that this below-inflation increase could force many communities to reduce school programs or further shift funds from the municipal side of the budget.
 
The MMA will continue to advocate for minimum aid of at least $100 per student. The association also strongly supports implementation of all of the recommendations of the Foundation Budget Review Commission to update the Chapter 70 “foundation budget” minimum spending standards for special education and health insurance, and to add to the spending standard a measure of recognition for the cost of services for low-income, English Language Learner (ELL) and other students who would benefit from more intensive services. The commission recommended phasing in the changes over a four-year period, a position the MMA supports as well.
 
House 1 would use the same methodology that was used in the fiscal 2017 budget to estimate the number of low-income students used in the foundation budget calculation.
 
Other municipal and education aid accounts
Special education circuit breaker: The governor’s budget would level-fund the special education circuit breaker program at $277 million. Because special education costs are expected to rise in fiscal 2018, this means that House 1 likely underfunds reimbursements by as much as $10 million. This is a vital account that every city, town and school district relies on to fund state-mandated services. The Legislature has intended to fully fund the program for the past five years, and the MMA will again be asking lawmakers to ensure full funding in fiscal 2018.
 
Regional school transportation: House 1 would level-fund regional transportation reimbursements at $61 million, which would be a hardship for virtually all communities in regional districts. Reimbursements for transportation of out-of-district vocational students remains significantly underfunded at $250,000. Increasing these accounts is a priority for cities and towns.
 
McKinney-Vento: House 1 would level-fund reimbursements for the transportation of homeless students at $8.35 million. The impact of this funding level will vary from community to community, depending on the number of homeless families that remain in local hotels and motels. The administration has been successful in reducing the number of homeless students who are dislocated from their original district, but those communities that continue to provide transportation to many students may continue to see shortfalls.
 
PILOT, Shannon grants and library aid: The governor’s budget would level-fund the payments-in-lieu-of-taxes account at $26.77 million and Shannon anti-gang grants at $6 million, and increase library grant programs by $189,000 to $19.07 million.
 
Hotel-motel tax for short-term rentals
House 1 includes an outside section that would subject Airbnb and other short-term rentals to the local room occupancy excise tax. This would only apply, however, in cases where the property is rented for 150 days or more in a calendar year. The MMA strongly supports extending the room occupancy excise to all short-term rentals. The 150-day threshold would continue to shield almost all seasonal and short-term rentals from taxation, and would not close the existing loophole.
 
DEP oversight of MS4 permits
The governor’s budget proposes $1.4 million to begin the process of having the Department of Environmental Protection assume “delegated authority” from the U.S. Environmental Protection Agency to oversee the NPDES Stormwater Permit process (also referred to as MS4 permits). The MMA supports having the DEP as the lead agency for stormwater permits. The $1.4 million would fund 12 DEP staff positions to begin the transition to becoming the lead agency. Full funding would take approximately $4.7 million. The governor will be filing separate legislation to allow DEP to petition the EPA for this authority.
 
Next steps
Budget deliberations now head to the Legislature, where the House is expected to pass its plan in April and the Senate in May, with the goal of having a final bill on the governor’s desk in time for the July 1 start of the fiscal year.