Gov. Healey files FY24 state budget proposal

Gov. Maura Healey has filed her $55.5 billion state budget plan for fiscal 2024, which includes funding for local accounts that she announced last week.

Healey’s proposal, known as House 1, would increase the main discretionary local aid account by 2% over fiscal 2023, while increasing Chapter 70 school aid by $586 million, which would fund commitments made in the 2019 Student Opportunity Act. The governor also proposed increases for regional school transportation, vocational school transportation, special education reimbursements, payments-in-lieu-of-taxes (PILOT), transportation of students in temporary housing, library aid, and rural school aid.

• See Division of Local Services preliminary fiscal 2024 Cherry Sheet aid amounts for individual cities and towns
• See Division of Local Services preliminary fiscal 2024 Cherry Sheet aid amounts for regional school districts

“Local officials look forward to working with the Healey-Driscoll administration and the Legislature to build on this proposal to secure vital investments in our schools and essential municipal services, and continue a strong state-local partnership,” said MMA Executive Director and CEO Geoff Beckwith.

“In particular, the MMA will be seeking a higher increase for Unrestricted General Government Aid, higher minimum aid levels for Chapter 70 school aid, and a solution to spiking special education costs, among other key priorities,” he said.

House 1 would establish a new Education and Transportation Fund that would receive all revenues from a 4% surtax on incomes above $1 million that was approved by voters last November. The new revenue generated from the tax is to be dedicated to education and transportation.

House 1 would not tap into the state’s Stabilization Fund, which has grown to a record $6.94 billion and is projected to reach $8.96 billion by the close of fiscal 2024.

As companion legislation, the governor also filed a $859 million tax relief package intended to provide savings for families, renters, seniors, farmers, and commuters.

The governor’s budget proposal is the first step in a months-long process to determine a final state budget. The House and Senate Ways and Means committees are expected to host a budget hearing in mid-March on municipal and school aid for fiscal 2024, and the House will debate its budget bill in April, with the Senate deliberating its own bill in May. The Legislature will work to get a final budget bill to the governor by the beginning of the fiscal year on July 1.

Unrestricted General Government Aid
Healey is proposing a $24.6 million increase (2%) in the Unrestricted General Government Aid account, slightly higher than the 1.6% consensus forecast for state tax revenue growth announced in January. The MMA will be working closely with lawmakers to build on this proposal and secure a higher level of UGGA aid to maintain essential municipal services.

“With inflation running far higher than 2%, communities will need a larger increase just to maintain existing programs and services,” Beckwith said.

Chapter 70
House 1 would continue implementation of the funding schedules in the Student Opportunity Act, bringing Chapter 70 school aid up to $6.58 billion. The majority of the funds would implement 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 indicates, however, that 119 of 318 operating districts (37%) would receive only the minimum $30 per-student increase in the Student Opportunity Act. This translates into an average aid increase of just 0.7% for these districts, which serve 257,000 students.

The Legislature set minimum aid at $60 per student in the fiscal 2023 budget, and 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.

Healey’s budget also proposes a special $10 million reserve fund to provide relief to districts whose municipalities have been disproportionately impacted by increases in required local contributions under the Chapter 70 formula.

• See the Department of Elementary and Secondary Education’s calculation of fiscal 2024 Chapter 70 aid and net school spending requirements for individual cities, towns and regional school districts based on House 1 (including preliminary fiscal 2024 charter school assessments and reimbursements)

Charter school reimbursements
House 1 would level-fund charter school reimbursements at $243 million, intended to meet the state’s statutory obligation to mitigate Chapter 70 losses to charter schools as outlined in the Student Opportunity Act.

While the proposed budget may meet the requirement, the MMA maintains that it does not solve the serious flaws in the overall charter school finance system.

“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 schoolchildren,” Beckwith noted. “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
House 1 would add $63 million to fund the Special Education Circuit Breaker program at $503 million. The Student Opportunity Act expanded the special education circuit breaker by including out-of-district transportation, an important enhancement for cities and towns. With concerns rising about a 14% rate increase for out-of-district special education providers coming on July 1, administration officials say they are examining funding options to assist local school districts, and the MMA will continue to work with the Executive Office for Administration and Finance and with lawmakers to address this challenge.

Rural school aid
House 1 includes $7.5 million for Rural School Aid for eligible towns and regional school districts. The grant program helps districts facing the challenge of declining enrollment to identify ways to form regional school districts or regionalize certain school services to create efficiencies.

The MMA sees this as a promising step for rural school aid, and will continue to advocate to build on this progress.

Regional school transportation
House 1 would increase funding for regional transportation reimbursements by $14.9 million, or about 18%, to $97 million for fiscal 2024, which would reimburse districts for approximately 90% of local costs.

Out-of-district vocational school transportation
Reimbursements for transportation of out-of-district vocational students would see a significant boost, with the governor proposing $5.2 million. The same account in fiscal 2023 was funded at only $250,000. The governor’s proposal would reimburse districts for approximately 90% of local costs.

McKinney-Vento
House 1 would fully fund reimbursements for the transportation of homeless students under the federal McKinney-Vento Act, increasing the account to $28.7 million in fiscal 2024. The impact of this funding level would vary from community to community, depending on the number of homeless families that remain sheltered in local hotels and motels.

PILOT
House 1 would increase payments-in-lieu-of-taxes by 14%, to $51.5 million, which would benefit communities with large amounts of state-owned land. This increase is intended to ensure that no municipality sees a decrease in its overall PILOT payments due to recent valuation changes.

Public libraries
Local aid accounts for public libraries and regional libraries would each receive a 10% increase under House 1, bringing public libraries to $17.6 million and regional libraries to $15.9 million.

Shannon grants
House 1 includes $12.3 million for the Shannon Community Safety Initiative grant program, which provides funding for cities and towns to respond to and suppress gang-related activities.

Regionalization efficiencies reserve
House 1 includes $20.5 million for a Municipal Regionalization Efficiencies Incentive Reserve, which would double the funding for the Community Compact Program. Part of the reserve would be used to support emergency public safety staffing grants ($5 million), the District Local Technical Assistance Fund ($3 million), the Efficiency and Regionalization competitive grant program ($2 million), and the Local Finance Commonwealth Fellowship Program ($500,000).

Municipal transportation grants
In response to calls from municipalities for state support with the design and development of key transportation-related projects, House 1 proposes $100 million for a new Massachusetts Department of Transportation Municipal Partnership grant program. The grants would help communities prepare for or apply for state and federal grant programs, fulfill local match requirements, begin construction, or leverage outside funding sources.

The grant account would be funded with a portion of the $1 billion in new revenue generated by the surtax on incomes above $1 million.

Tax relief
The governor’s fiscal 2024 spending plan includes a $859 million set aside for tax relief. The governor’s proposal would fund several categories of tax credits, resulting in the following budget impacts for fiscal 2024:
• Child and family tax credit: $458 million
• Estate tax: $167 million
• Renter deduction: $40 million
• Senior circuit breaker credit: $60 million
• Short-term capital gains: $117 million
• Additional targeted credits: $17 million

Fair Share
In House 1, the governor said she is recommending a mechanism to ensure that revenue from the surtax on incomes above $1 million is “used in a manner that is sustainable and protected against future downturns and fluctuations in the revenue stream.”

The proposal recommends the establishment of a required minimum fund balance that would be used only in the event of significant revenue decline to preserve base programs funded from Fair Share tax revenue. This balance would grow annually to account for inflation.

To ensure predictability, a cap would be established on recurring spending, with revenue collected above the cap used to support one-time investments in pilot programs, start-up grants, studies, one-time capital investments such as bridges, railroad right-of-way improvements, and other non-recurring projects.

In House 1, Healey recommends using $1 billion in investments from Fair Share revenue in fiscal 2024 — $510 million for education and $490 million for transportation.

The proposal includes $140 million for early education and care, $10 million for K-12 education (specifically for Early College and Innovation Pathways), and $360 million for higher education programs, as well as $100 million for the new MassDOT municipal grant program, $186 million for the MBTA, $164 million for MassDOT Highway, and $40 million for MassDOT Transit and Rail.