House approves nearly $50B state budget for FY23

On Wednesday evening, the House of Representatives approved a $49.7 billion state spending plan for fiscal 2023 that, for municipal and school aid accounts, had few changes from the recommendation released by the House Ways and Means Committee on April 13.

The budget matches the governor’s proposed 2.7% increase for Unrestricted General Government Aid, but includes House Ways and Means proposals to significantly increase Chapter 70 school aid, charter school reimbursements, and the Special Education Circuit Breaker.

After consolidating more than 1,500 amendments into seven categories, House members voted to increase spending by $130 million over the Ways and Means proposal, bringing the total to $1.2 billion above the budget plan filed by the governor in January.

The House did not adopt amendments to increase UGGA, regional school transportation, out-of-district vocational transportation or payments-in-lieu-of-taxes (PILOT) for state-owned land, but did approve an amendment to increase funding for the METCO program by $1.5 million, by $250,000, bringing the account to $28.75 million.

Chapter 70
The House budget meets the state’s commitment to fund the Student Opportunity Act at two-sixths of the implementation schedule, providing a total of $5.98 billion for Chapter 70 aid. An additional $9.6 million line item in the House plan would raise the minimum new aid amount from $30 per student to $60 per student.

Charter schools
The House budget includes $243 million for Charter School Mitigation Payments, which represents an increase of $89.2 million over the current fiscal year and is $24.4 million more than the governor proposed. The House’s increase would fund 100% of the state’s statutory obligation for charter school mitigation payments as outlined in the Student Opportunity Act, phasing in full funding a year earlier than would be accomplished by the governor’s plan.

Special Education Circuit Breaker
The House budget bill includes $440 million for the Special Education Circuit Breaker account, a $67 million increase over fiscal 2022.

The Student Opportunity Act expanded the circuit breaker by including out-of-district transportation, to be phased in over three years. The House total reflects years two and three of the schedule in the Student Opportunity Act, achieving full funding a year earlier than the governor’s plan would.

UGGA
The House’s and governor’s budgets would increase Unrestricted General Government Aid by $31.5 million, or 2.7%, to $1.19 billion.

The governor’s budget tied the UGGA increase to the projected rate of growth in state tax revenues, but the administration used a revised estimate for fiscal 2022 as its base. The MMA has argued that the proposed increase does not reflect the actual — and far higher — increase in state tax collections.

The MMA will continue to advocate for a higher UGGA increase as the budget process continues.

School transportation
In line with the governor’s recommendation, the House budget would reduce regional school transportation aid from $82 million this year to $77 million. The budget would increase funding for the transportation of homeless students under the federal McKinney-Vento program by $8.5 million, to $22.9 million. The House budget does not have a line item for out-of-district vocational transportation, which was funded at $250,000 for fiscal 2022.

PILOT
The House budget would level-fund payments-in-lieu-of-taxes (PILOT) for state-owned land, at $35 million.

Local-option COLA for retirees
During debate, the House adopted an amendment that would allow (but not mandate) retirement boards that have accepted Section 103 of Chapter 32 to award a cost-of-living adjustment of up to 5% to retirees, rather than the current limit of up to 3%. The ability to award this higher COLA would only be authorized for fiscal 2023.

The MMA is encouraging local officials to consult with their financial teams to determine how this would impact each community’s unfunded pension liability. The impact would vary between retirement systems due to differences in the COLA base, and the actuarial parameters used to calculate the unfunded pension liability. Local officials with concerns about this section should discuss this with their senators as soon as possible.

Next steps
During the budget process and the remainder of the legislative session, the MMA will work to build on the House bill by advocating for a greater increase in Unrestricted General Government Aid and higher funding for regional school transportation, PILOT, and other key accounts.

The state budget process now moves to the Senate, where the Ways and Means Committee is expected to release its recommendation in mid-May.