Mass. Senate Includes Tax Relief Reserve in $55.8B Budget

Tax relief has been a subject of continuing debate since last summer, when the House and Senate scrapped their approved targeted tax relief plans due to affordability concerns.

Massachusetts State House 2017
NBC10 Boston/NECN

Massachusetts Senate Democrats rolled out a $55.8 billion state budget bill Tuesday, leaving room for about $575 million in future investments in tax relief, which the Senate budget chief said will be hitting the chamber floor for debate soon.

The Senate Ways and Means Committee's fiscal 2024 spending plan weighs in at about $3.4 billion, or 6.5%, larger than the fiscal 2023 state budget signed by Gov. Charlie Baker last summer. The plan is $300 million over what Gov. Maura Healey proposed, and $400 million under the House's budget.

The Senate Ways and Means Committee voted 16-0 to recommend the spending plan, an indication that the proposal will likely sail to passage when it hits the Senate floor later this month.

Both the House and Healey's budgets had factored in a companion tax relief bill, which the governor estimated could have a $1 billion impact to state revenue next fiscal year. The House factored in $587 million next fiscal year for tax relief and up to $1.1 billion after a two-year phase-in period.

Senate leaders have been quiet on whether they would pursue tax relief at all, after state revenue numbers for April released last week showed the amount the state is bringing in plummeted by $2.163 billion from the same month last year. On Tuesday Rodrigues confirmed that the body would be pursuing a tax relief plan and put a hold on the balance sheet to factor in revenue collection impacts from a Senate relief proposal "in the same ballpark as the House."

Rodrigues did not share any details about the Senate's tax plan when asked, and did not say that the delay in rolling it out with the budget -- a divergence from the tactics used by House and Healey -- had to do with April shortfall in tax collections.

"We only got the tax bill from the House, what, two weeks ago? And we just haven't had time to, we've been focusing on putting together the operating budget," Rodrigues said.

The House tax relief plan, approved on April 13, landed in Rodrigues' committee three weeks ago, and tax relief has been a subject of continuing debate since last summer, when the House and Senate scrapped their approved targeted tax relief plans due to affordability concerns.

Despite April revenue numbers dipping, state tax collection has surged over the last two fiscal years by nearly 40%, accommodating a nearly 11% increase in spending in the current budget, although April's collections appears to have pushed this year's budget into a revenue deficit.

The Senate committee's budget plan, which will hit the floor for debate on May 23, moves to spend $1 billion in revenue from a new surtax on high earners, following the House in an even 50-50 split between education and transportation investments.

Senate President Karen Spilka highlighted one of the budget's biggest policy changes that would allow all high school students in Massachusetts, regardless of immigration status, to qualify for in-state tuition rates at public colleges and universities.

"There's really no cost to this," Rodrigues said. "The reports I've seen, it's actually income generating. We know that enrollment at community colleges has declined precipitously, especially since the pandemic. Enrollments in all higher ed have declined. So this will provide increased enrollment at higher educational institutions."

However, the Senate plan does not include either a House education proposal or a Healey education proposal that have both been popular with supporters.

It does not include funding for free school meals -- a priority for the House. Rodrigues said on Tuesday that senators agree with Healey that this policy should be addressed in future supplemental budgets.

It also doesn't include money for a "tuition lock" at state universities, as was included in the governor's plan. The $59 million initiative included in Healey's budget would have locked in tuition for each class of UMass or state university students at the price they paid during their first year, though it could be increased for each incoming class of students.

Without the proposal appearing in either of the branches' spending plans, tuition lock likely won't be making its way back to Healey's desk via the budget.

The Senate budget does, however, increase the annual cap on grants awarded by the state School Building Authority by $400 million, raising the total cap to $1.2 billion, according to a Massachusetts Taxpayers Foundation (MTF) analysis.

"This is an issue that I've heard from many, many of my colleagues on. There are currently 30 school construction projects around the commonwealth that have entered into arrangements with the Mass School Building Authority for their support grants. Since then, with what we call 'COVID-related supply side inflation,' the inflation costs of these projects have topped over $300 million. So we are proposing to partner with our local communities and ensuring that these schools can be built," the budget chief said.

Despite Rodrigues's description of the budget as "policy light," the Senate Ways and Means budget includes 75 outside policy sections, 46 more than proposed by the governor and 18 less than what was included in their proposal last year, according to MTF.

In addition to in-state tuition for undocumented residents, other policy changes include exempting new surtax revenues from counting toward an annual limit on the state's tax collection, making permanent the COVID-19 eviction diversion program, and offering no-cost communications to incarcerated people and their families -- all of which the House has also supported, giving them full legislative support.

Senate leaders would omit all surtax revenue -- projected to be $1 billion next year -- from pushing the state's tax haul closer to the threshold that automatically triggered about $3 billion in mandatory taxpayer rebates last year under a law known as Chapter 62F.

The same proposal in the House was met with Republican resistance, but a House GOP amendment to leave the voter-approved tax cap untouched was rejected.

"These are new revenues that the voters of Massachusetts created, it was actually, you know, amending the constitution, that these revenues were dedicated to be invested in education and transportation and we want to make sure every dollar that is invested in education and transportation," Rodrigues said. "We go to a lot of effort to ensure that it's open, it's transparent, it's accounted for and every resident can see exactly what these fair share dollars are invested."

The eviction diversion program is a COVID era renter-protection effort that slows down the court process in eviction proceedings when the tenant has a pending rental assistance application.

House and Senate leaders both passed no-cost calls for incarcerated people and families last summer, but the policy died when Baker tied it to one of his own criminal justice priorities that legislative leaders were not willing to move forward. There's $20 million contained in the Senate leaders' budget for the initiative, which mirrors the policy lawmakers passed last year.

With legislative support for these policy priorities in both chambers, attention will soon turn to where Healey lands on the policies.

Among the differences between the House and Senate's budgets is the exclusion of online Lottery in the Senate Ways and Means budget released on Tuesday.

The House's budget would authorize the online sale of Massachusetts Lottery products, expanding gambling onto another front in the era of mobile and in-person sports betting, to generate $200 million in revenue for Commonwealth Cares for Children (C3) grants to stabilize the early education and care sector.

Senate leaders, who have been willing but more wary of creating new gaming and betting markets, would not grant the Lottery this authorization and instead fund increased investments in C3 grants through $245 million available in an Early Education and Care Trust Fund that the Legislature previously put aside.

The committee's spending plan would direct $475 million for C3 grants, $15 million less than the House's allocation for the program, which would take $250 million from the General Fund, $40 million from surtax revenues and $200 million from iLottery.

"We think it needs more time to be vetted," Rodrigues said of authorizing online Lottery. "The Lottery system has ... consistently set records throughout the country of revenues that it generates. We've also heard very clearly from our current Lottery agents, all of the convenience stores that currently are servicing that, that they have issues with online Lottery. So we don't feel that that's a proposal, and we don't think that it will generate the type of revenue that they're proposing to generate. We wanted to ensure that our early education and care -- it's a priority of the Senate, EEC -- so, we wanted to put real money at it."

The largest chunk of the budget, MassHealth, would be funded at $19.93 billion, a decrease of about $1.77 billion or about 8.2% from this fiscal year. This represents a slightly higher investment than the House and Healey made into the health insurance program, who both earmarked $19.8 billion, due to updated information on the process of redetermining MassHealth eligibility for the first time since COVID-19 began to significantly reduce enrollment in the state's Medicaid and Children's Health Insurance Program.

Both the governor and Legislature are expecting a big drop in the number of residents who will qualify, saving the state billions of dollars. Rodrigues said on Tuesday that they are basing their MassHealth investment off the estimate that over 400,000 Massachusetts residents will fall off of the plan, but that it continues to be a moving target as the redetermination process happens over the next year.

Unlike the House, the Senate committee is also proposing a $5.1 million investment for a communications plan to help disenrolled members transition to alternative health care coverage options.

The Senate leaders' budget would put $470.5 million toward state agencies and programs dealing with climate change and the environment -- about .85% of their total spending plan. House officials say 1.25% of their budget would go toward state environmental agencies, and Healey's plan dedicated 1% of the state budget to the Executive Office of Energy and Environmental Affairs.

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