Gov. Charlie Baker and Lt. Gov. Karyn Polito announce the filing of the Baker-Polito Administration’s FY23 budget proposal at a State House press conference on Jan. 26. (Photo courtesy Joshua Qualls/Governor’s Press Office)

This afternoon, Gov. Charlie Baker submitted a $48.5 billion fiscal 2023 state budget plan with the Legislature, along with a $693 million tax relief bill.

The budget bill, called House 2, includes a $31.5 million increase in the Unrestricted General Government Aid account, a 2.7% increase over fiscal 2022.

“As we stated during our Annual Meeting this past weekend, a 2.7% increase is too low,” said MMA Executive Director and CEO Geoff Beckwith, “and we will be working with local leaders and lawmakers to advocate for an increase that reflects the actual growth in revenues that the state is receiving. With capped property taxes and inflation running higher than 2.7%, cities and towns need a much higher level of UGGA aid to maintain essential services.”

The administration is calculating revenue growth using a methodology that omits a large portion of the record-setting revenue the state has collected during the past year, a method of benchmarking growth that “works to the disadvantage of cities and towns, and minimizes revenue sharing amounts,” Beckwith said.

Fiscal 2023 state tax collections are forecasted to be $2.5 billion higher (7.3%) than the tax base that was used to pass the fiscal 2022 budget last July, and $6.8 billion higher (22%) than the original fiscal 2022 projection from a year ago. House 2 uses a recently upgraded revenue estimate for fiscal 2022, rather than the one in the budget as enacted, leading to an artificially low growth projection.

See Division of Local Services preliminary fiscal 2023 Cherry Sheet aid amounts for individual cities or towns
See Division of Local Services preliminary fiscal 2023 Cherry Sheet aid amounts for regional school districts

Chapter 70 school aid
The governor’s budget recommendation would continue implementation of the funding schedules in the 2019 Student Opportunity Act that were delayed in fiscal 2021 and then funded at a rate of one-sixth, rather than one-seventh, in fiscal 2022 to stay on track with the law’s intended implementation schedule. House 2 represents funding the Student Opportunity Act at a rate of two-sixths.

Fulfilling commitments in the Student Opportunity Act, House 2 would bring Chapter 70 school aid up to $5.98 billion, a $485 million increase. The majority of the funds would implement the improvements to the foundation budget, adding weight for low-income students, English Language Learners, special education costs, and school employee health benefits.

An initial examination of the budget, however, indicates that 136 of 318 operating districts (43%) would receive only the minimum $30 per-student increase in the Student Opportunity Act. These 136 districts would receive a combined increase of $9.3 million, and the remaining districts would receive $475.8 million more.

The MMA will continue to strongly advocate for minimum aid of $100 per student to ensure that all districts can at least keep pace with inflation and maintain their school services.

See DESE’s calculation of fiscal 2023 Chapter 70 aid and Net School Spending requirements for individual cities, towns and regional school districts based on House 2

(This page will include preliminary fiscal 2023 charter school assessments and reimbursements when available.)

Charter school reimbursements
The governor’s budget would increase the charter school reimbursement account up to $219 million, intended to meet the commitment in the Student Opportunity Act to fund 90% of the state’s statutory obligation to mitigate Chapter 70 losses to charter schools. A portion of this $64.8 million increase would simply be a pass-through to charter schools by funding an increase in the per-student facilities amount that charter schools receive.

The Student Opportunity Act pledges to phase in full funding of the statutory charter school reimbursement formula over three years.

“While the governor’s plan may continue to meet that requirement, it would not fix the serious flaws in the charter school finance system,” Beckwith said. “Charter schools will continue to divert a high percentage of Chapter 70 funds away from many municipally operated school districts, and place greater strain on the districts that serve the vast majority of public school children. Major problems will continue unless a true resolution of the charter school funding problem is achieved, which is a top MMA priority.”

Special education circuit breaker
The governor’s budget would add $41.2 million to fund the Special Education Circuit Breaker program at $414 million, an increase of 11%. The Student Opportunity Act expanded the special education circuit breaker by including out-of-district transportation, an important enhancement for cities and towns.

Regional school transportation
House 2 would reduce funding for regional transportation reimbursements from $82.1 million in the current fiscal year to $77.8 million, which would create a hardship for virtually all communities in regional districts. Reimbursements for transportation of out-of-district vocational students remains significantly underfunded at $250,000. Increasing these accounts is a priority for cities and towns and the MMA.

McKinney-Vento transportation
The governor’s budget would increase reimbursements for the transportation of homeless students under the federal McKinney-Vento Act from $14.4 million this year to $22.9 million in fiscal 2023. The impact of this funding level will vary from community-to-community, depending on the number of homeless families that remain sheltered in local hotels and motels.

The administration has been successful in reducing the number of homeless students who are dislocated from their original district, but those communities that continue to provide transportation to many students rely on this account.

The governor’s budget would level-fund payments-in-lieu-of-taxes at $35 million, which would create a significant hardship for many smaller, rural communities with large amounts of state-owned land. This is a key account due to the major impact that PILOT payments have on budgets in very small communities, and level-funding this account would fall short of the Legislature’s goal of phasing in full funding by fiscal 2024.

Tax cuts
The governor’s budget bill proposes a series of tax cuts, many targeted for struggling residents and others targeted toward wealthier individuals. These provisions would permanently reduce state revenues, and the Legislature is expected to examine them closely before making commitments.

The following are the main tax cuts (with very preliminary cost estimates):
• Doubling tax credits for dependent care ($167 million)
• Increasing the cap on the income tax deduction for rent from $3,000 to $5,000 ($77 million)
• Doubling the maximum Senior Property Tax Circuit Breaker tax credit ($60 million)
• Reducing the estate tax ($277 million)
• Reducing the short-term capital gains tax rate to 5% ($117 million)
• Increasing the no-tax threshold for lower-wage taxpayers ($41 million)

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