From the Beacon, May 2018
The state’s fiscal 2019 budget season is in full bloom. Between now and June 30, the Legislature and the governor will put the finishing touches on their $41 billion spending plan.
Of course, there is a lot of work to be done in the next two months to complete the blueprint, but we know that a final budget will be hammered out, with overall spending balanced to match expected revenues.
As the next eight weeks unfold, local officials and the MMA will be working hard to enhance education and transportation funding. The House has added more than $40 million in local school-related accounts (Chapter 70, special education and charter school reimbursements). This is very much appreciated, and we hope to build on this growth in the Senate, and again when the two branches reconcile and create their final consensus plan.
In spite of this real progress, however, the reality is that adequate and full funding of these essential K-12 education programs is still far away.
In terms of Chapter 70, the foundation budget framework is outdated. We know this because cities and towns are voluntarily spending $2 billion more than the required local contribution amount, because the formula that was written in the 1990s dramatically undercounts essential costs. Communities are responding by diverting resources from municipal services and increasing the local reliance on the property tax.
The real answer, as MMA members have made clear, is to fully fund the Foundation Budget Review Commission recommendations, which would require hundreds of millions of dollars in immediate relief, and then phase in a 50-50 local-state cost-sharing framework, rather than the current ratio of 62 percent local and 38 percent state. The state’s overall contribution would need to increase by hundreds of millions of dollars to achieve this key education funding partnership.
In addition, even the $90 million that the House budget proposes for charter school reimbursements next year would still leave a shortfall of at least $75 million. And the boost to $300 million for the special education circuit breaker would be $10 million to $15 million short.
The bottom line is that we need to shift away from a status-quo funding approach for public education and recognize that the performance of our schools and our economy demand a more aggressive commitment and an improved education funding partnership.
The problem is that if this is done within the context of current state tax revenues, then we are reduced to zero-sum choices, pitting education against health care or human services or public safety. This is why the Legislature has placed the “Fair Share Amendment,” also known as the “millionaire’s tax,” on the November 2018 ballot. Their hope is that a 4 percent surtax on incomes above $1 million would generate $2 billion for education and transportation. (This would be an opportunity to finally return to at least $300 million annually for Chapter 90, too.)
The Supreme Judicial Court is reviewing a legal challenge to the question by business groups, so there is a possibility that it will not go before the voters. If it does, however, and voters say yes, then this should be a paradigm shift for K-12 schools, and for Chapter 90.
But the ballot news is not all upside.
The state trade association for retailers is threatening to place a question on the ballot to cut the sales tax from 6.25 percent to 5 percent. If adopted, the proposal would slash $1.3 billion from state tax collections. Indeed, it would blow a $650 million hole in the fiscal 2019 budget because it would go into effect on January 1, 2019, thereby lowering sales tax collections for the final six months of the fiscal year.
The MMA membership voted overwhelmingly to oppose the sales tax cut at our Annual Meeting in January. That’s because the sales tax is dedicated, in part, to school building projects and public transportation, and the remainder is spent on core programs, including municipal aid. We remember that Unrestricted General Government Aid is now tied to the percentage growth in state tax revenues. If tax collections decrease by $1.3 billion, UGGA would take a proportional hit. This would deepen budget problems for every city and town.
To weave these threads together, the major idea is that the fiscal 2019 budget that becomes law on July 1 (or thereabouts) will be impacted by four possible scenarios:
1. If the Fair Share ballot question passes, and the sales tax cut is defeated, state revenues would increase by $2 billion, and education and transportation programs would benefit greatly going forward.
2. If the Fair Share ballot question passes, and the sales tax cut passes, state revenues would increase by about $700 million, and education and transportation programs might see a modest increase, but it is likely that lasting shortfalls would remain.
3. If both questions are defeated, we would be stuck with an unacceptable status quo, because the longer schools and transportation are underfunded, the harder it will be for communities to deliver on their mission.
4. If the Fair Share question is defeated (or kept off the ballot) and the sales tax cut passes, then the state would be catapulted into an immediate fiscal crisis, and essential resources for education, transportation, and much more will be in jeopardy.
So, as we work to enhance key municipal and school priorities in the state budget, every Massachusetts local official and resident should recognize that the full parameters of the fiscal 2019 spending plan won’t be set until Nov. 6. The range of possibilities, from fiscal crisis to new opportunity, is breathtaking. In 2018, our ballots and budgets are inexorably linked.
As it turns out, the “final” budget that the state agrees on in July will not be the end of the process. It will be just the beginning.
This election year, our ballots and budgets are closely linked
From the Beacon, May 2018