Like the proposals from the Governor and the House, the Senate Ways and Means (SWM) Committee budget for Fiscal Year 2018 (which begins July 1) would generally maintain existing service levels while making small targeted new investments in several areas, particularly in education.
This budget also joins the House in addressing a major fiscal challenge identified by the Governor: the increases in MassHealth costs related to declines in employer-provided health care and increases in private-sector employees receiving their health coverage through MassHealth. The Governor had proposed a $2,000 per-employee assessment on employers who failed to meet certain benchmarks for providing coverage to their employees. While this amount is significantly less than the $5,000 or more it would generally cost employers to provide coverage for their employees directly, the assessment has been criticized by some in the business community. The Senate Ways and Means Committee, like the House, authorizes the administration to develop a plan that addresses concerns raised by the business community and generates $180 million in revenue (the Governor's original plan would have generated $300 million in FY 2018). In the House and SWM proposals, the assessment would also expire after two years. By creating only a temporary revenue source for what is likely to be an ongoing expense, the legislature would increase the budget's reliance on temporary revenue, which will make it more difficult to produce a balanced budget in future years.
The SWM budget proposes increased investment in early education and care, local public schools, and higher education. It proposes an increase of almost $15 million for the Commonwealth Preschool Partnership Initiative, which will expand access to early education, particularly for three-year-olds. The SWM budget also proposes an increase of $129 million in Chapter 70 local aid for education, modestly more than the Governor and House. Unlike those budgets, it recommends substantial increases in higher education funding ($42 million over current funding levels).
Like proposals from the Governor and House, this budget does not propose significant new funding to make progress on some of the big challenges our Commonwealth faces, such as significantly expanding early education; making sure that our schools have the resources they need to provide high quality education for all children in the Commonwealth; or fixing our existing transportation infrastructure while constructing the infrastructure for future growth.
While tax revenue in FY 2017 has been coming in below projections, the SWM budget, like those of the Governor and the House, continues to use the consensus revenue estimate previously agreed to by the House, Senate and Governor. There is some uncertainty about what the FY 2017 tax revenue numbers will mean for FY 2018. Revenue connected with people filing and paying their 2016 taxes in April was down substantially, which reflects economic conditions in the prior year. On the other hand, the most recent data on withholding taxes - which track current economic performance - were strong (although sales tax receipts, which also reflect current conditions, have not been strong). In other words, while the decline is cause for concern, it is not clear how it will affect the trend going forward. State finance law directs the Governor to make that determination and update his budget accordingly:
"If the governor determines ... that the tax revenues or non-tax revenues supporting the general appropriation bill have materially decreased... the governor shall submit to the general court by message recommended corrective amendments to the governor's original budget submission to ensure that total appropriations recommended in the general appropriation bill do not exceed total revenues supporting said bill. Such message shall be submitted to the general court within 15 days from the date of such determination."
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