House Democrats on Wednesday introduced a workmanlike $42.7 billion spending plan for the coming fiscal year that shies away from major changes in Massachusetts's tax policies but sets the stage for a reckoning later this year over how to increase funding for education and transportation.
1. Baker's Proposed Tax Increases Rejected For Now.
Democratic House Speaker Robert DeLeo's had little appetite for several new taxes (relatively modest) proposed by Republican Gov. Charlie Baker.
Baker had called for new levies on e-cigarettes and opiate pharmaceuticals and included revenue from a 50 percent increase in the real estate transaction tax to balance his budget. DeLeo and Ways and Means Chair Aaron Michlewitz passed on this new revenue, saying it wasn't necessary at the moment.
2. Will Weigh Possible Tax Increases After Budget Is Adopted.
While dismissing Baker's tax plans in the short-term, those revenue schemes will almost certainly find a place in the smorgasbord of potential taxes and fees the House is husbanding as it tries to figure out how to pay for the state's long-term needs
Marie-Frances Rivera, president of the tax-inclined budget watch group MassBudget, said the by-the-books Michlewitz budget "would make it nearly impossible for lawmakers to support our Commonwealth's priorities in any meaningful way in the coming fiscal year."
"But moving the needle on current priorities — from education and transportation, to affordable housing and other services — means giving serious consideration to sustainable, adequate, and progressive revenue options," Rivera said.
DeLeo is aware that he won't satisfy school districts on the verge of suing the state for inadequate funding, not to mention MBTA riders and other frustrated commuters, without his "everything on the table" tax-and-spend philosophy bringing in the big bucks.
Specific to Chapter 70 education funding, DeLeo acknowledges that the $16.5 million the House budget plan puts aside for low income students is just a "down payment" before lawmakers agree to enact recommendations to overhaul the funding formula.
"Whatever those recommendations are, they're going to require additional funding and I think this is an effort to show that the House is aware that there will be a need for additional revenue," DeLeo said.
3. House And Senate Seem To Be On The Same Page.
By passing a "clean" FY2020 budget plan that doesn't spark controversy, and committing to revisit the revenue issue after the budget is in place, the House and Senate could avoid the strife that delayed last year's fiscal negotiations. An end-of-the-session logjam ultimately contributed to a number of Democratic priorities failing to pass when lawmakers recessed for the year last August.
This year, it appears the Senate agrees.
"We're just not going to pull taxes out of thin air and increase them. We really need a holistic approach at taxes, at our tax code. There won't be any major changes to the tax code in the budget. We just don't have time," Senate Ways and Means Chairman Michael Rodrigues told the State House News Service this week.
4. Early Education Remains A DeLeo Priority.
Early Childhood Education has been a focus for the Speaker. He continued his investment in early ed teacher training this year. The budget include $65 million more than last year to support EEC programs, training programs and subsidies to bring teacher pay up to market rates.
5. Taking A Stab At Charter School Reimbursements.
Inadequate Chapter 70 funding isn't the only thing local school districts gripe about. When charter schools open in a community and enroll students, the per-pupil funding follows the student. But state law says the local district should be reimbursed the first few years.
The House proposal shakes up when districts are paid. Instead of being reimbursed 100 percent of a charter student's fees the first year and 25 percent each of the next five years, the House's proposal would pay back 100 percent the first year, then 60 percent in year two and 40 percent in year three. The new system would limit the longevity of the state's commitment to reimbursing for charter students, but grant significantly more aid up front when districts are adjusting to losing students to charters.
6. Collecting Online Sales Tax.
Baked into the House's budget plan is $42 million in new revenue from sales tax collections of goods sold online. Many major online retailers already charge customers the state's 6.25 percent sales tax and pay into it state coffers, but many smaller outlets do not. A longtime goal of local retailers, forcing sale tax collections on all online purchases was made legal by the Supreme Court's decision to allow states to get their share in South Dakota v. Wayfair.