MBPC: An Early Take on the Governor's FY 2017 Budget

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An Early Take on the Governor's FY 2017 Budget  Today the Governor released his Fiscal Year 2017 budget proposal, kicking off an important process of determining what we as a Commonwealth hope to do together through our government this year, and detailing how we will pay for those things. While it includes some positive elements -- like strengthening the Department of Children and Families -- this proposal continues a pattern that has been in place since the state cut taxes by over $3 billion between 1998 and 2002: deep budget cuts in bad times and very little progress in good times. We continue to put off making the kinds of long-term investments in our people and our transportation systems that would make life better for Massachusetts families and improve the long-term strength of our state economy (for more context, read our FY 2017 Budget Preview). Keep an eye out later next week for our full Budget Monitor, which will analyze the Governor's proposals in much greater depth. For now, here are a few highlights. The Governor proposes: Scaling-back the Film Tax Credit, which has proven to be an inefficient strategy for creating jobs. Department of Revenue research has shown that the cost for each job created by this tax credit exceeds $100,000 a year (more detail HERE). With revenue from this change, the Governor would fund the following two initiatives (although these likely total more than the projected savings from the FTC): Expanding a corporate tax break called Single Sales Factor, costing over $60 million once fully phased-in (more detail HERE). Massachusetts has been providing this tax break to manufacturing companies, defense contractors, and mutual fund companies since the 1990s. There is no evidence that it has had a positive effect on job creation or the strength of our state economy. The Governor proposes extending this tax break to all multi-state corporations. Expanding the Low-Income Housing Tax Credit, costing $25 million annually once phased-in over five years. The administration projects that this initiative would support an additional 1,500 affordable rental units. Supporting a multi-faceted approach to the opioid addiction epidemic, including targeted funding for prevention and treatment, as well as funding for law enforcement. The budget proposal directs close to $9 million more to public health programs targeting substance abuse treatment and recovery programs, and funding for an additional 150 adult residential recovery opioid treatment beds. The budget also directs funding to law enforcement agencies especially in the so-called Gateway Cities, such as Brockton, Chelsea, Chicopee, Fitchburg, and Lynn, in order to help police disrupt the trafficking and distribution of heroin. Reducing funding for the state Department of Revenue's Office of Tax Administration by more than 15 percent. This is likely related to staff reductions connected to last year's early retirement initiative. The danger of reducing the capacity of this office is that it could significantly harm the state's ability to combat tax evasion, particularly by those with the resources to engage in complex efforts to avoid paying the taxes they owe. Increased tax evasion could reduce the revenue available to fund education, local aid, and other core government services. Supporting additional social workers in the Department of Children and Families. To decrease the caseloads of social workers so they can better meet the needs of children and families, the Governor's budget increases funding for the social workers account by $19.6 million (9.6 percent). The budget also continues the operational reforms in the area offices and increases funding for oversight and supervision. Increasing General Local Aid by 4.3 percent, tracking the rate of growth of state revenue. Even after this modest increase, local aid funding will still be about 40 percent lower than it was in FY 2001, adjusted for inflation. Changing the Charter School Reimbursement formula and providing an increase of $20.5 million. Under the Governor's redesigned formula, all sending districts would receive 100 percent tuition reimbursement in the first year of a charter tuition increase. In the second and third years after an increase in total tuition, aid would predominantly go to urban districts sending higher proportions of students to charter schools. Unlike under the current formula, no districts would receive any reimbursements in years 4 through 6. Increasing Chapter 70 Education Aid by 1.6 percent, or $72.1 million. This proposal largely runs the existing formula using updated enrollment and inflation numbers. It includes a new method of estimating the number of low-income students in each district, driven by changes to the national school meals program (more detail HERE). The Massachusetts Budget and Policy Center (MassBudget) produces policy research, analysis, and data-driven recommendations focused on improving the lives of low- and middle-income children and adults, strengthening our state's economy, and enhancing the quality of life in Massachusetts. MASSACHUSETTS BUDGET AND POLICY CENTER 15 COURT SQUARE, SUITE 700 BOSTON, MA 02108

Massachusetts Budget and Policy Center, 15 Court Square,Suite 700, Boston, MA 02108