Lawmakers grapple with tight state budgets for FY17 and FY18

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Despite a delay in public hearings on the fiscal 2018 state budget bill that was filed by Gov. Charlie Baker in January, legislators have been busy taking stock of the governor’s proposal and working on their own priorities.
The MMA has weighed in with House and Senate leaders on municipal budget priorities based on the budget and finance resolution approved by local leaders at the MMA Annual Business Meeting on Jan. 21. The priorities include the increase in general municipal aid under the governor’s revenue-sharing plan and higher levels of education aid than recommended by the governor.
The MMA asked the Legislature to move more quickly than the governor did on the recommendations of the Foundation Budget Review Commission to update the Chapter 70 school finance law, to fully fund the account to mitigate the fiscal impact of charter schools on local public schools, and to improve funding for other accounts.
The House Ways and Means Committee’s budget recommendation is expected in mid-April, as has been the practice for the past decade. The Senate budget committee’s recommendation is expected in mid-May.
While the governor and legislative leaders had reached agreement on a tax collections forecast for next year, the governor’s budget is balanced using other tax and non-tax revenues that the House and Senate will have to take a look at.
The governor included $300 million in non-tax revenue from an assessment on employers that do not offer health insurance or have low participation in the company program. The funds would be used to help fund the MassHealth program.
The governor also budgeted new revenue from improving sales tax collections from out-of-state online retailers and from extending the state’s room occupancy tax to non-traditional renters such as Airbnb.
Work on the fiscal 2018 revenue and spending plan is underway even as worries continue about the fiscal 2017 budget. After a disappointing start to the year that led to a reduction in the revenue forecast and Section 9C spending cuts by the governor, the budget may be a concern right through to the end of the year.
Tax collections through January grew by only 2.7 percent and fell slightly below the new lower target. Budget watchers await results from April and June, the largest months for tax collections each year.
On Feb. 17, the governor filed a $259 million supplemental budget to cover mainly unavoidable shortfalls, including $20 million for unbudgeted state snow and ice costs and $62 million for representation of indigent defendants.