Senate OK’s FY18 budget, bills go to conference committee

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The House and Senate have each approved state budget bills for next year, with some important differences in local government accounts and on policy issues that will have to be resolved in the coming weeks by a six-member House-Senate conference committee.
The policy differences affecting cities and towns include updates in the Senate bill to the state and local room occupancy excise statute and the Community Preservation Act fee schedule. The House budget includes language, strongly supported by the MMA, that would ban the practice by some insurance companies of sending payment for municipal ambulance services to the patient rather than the city or town that provided the service.
The Senate wrapped up its budget debate on May 25 after working through more than 1,000 proposed amendments over three days.
The House version of the budget was approved on April 25, and the Legislature’s goal is to get a final spending plan to the governor before the fiscal year begins on July 1.
The House and Senate both voted to fund the main municipal aid account (Unrestricted General Government Aid) at $1.06 billion, the same amount recommended by the governor in his budget plan filed January. The consistency of the UGGA account through the budget process has helped cities and towns minimize revenue uncertainty and finalize local spending plans on time. Lottery and other gaming revenues cover most of the proposed distribution, which still lags behind the pre-recession funding levels of 10 years ago.
The House and Senate head to a conference committee with some differences in calculating Chapter 70 local contribution and school aid amounts. In both branches, the Chapter 70 appropriation would cover the basics of the law by ensuring that all districts are able to reach the current “foundation” level of spending and providing minimum new aid of $30 per student. Most districts are minimum aid districts.
Link to Division of Local Services website to view local aid and preliminary Cherry Sheet numbers based on Senate Ways and Means budget bill
Beyond the basics, both branches would begin to implement the recommendations of the Foundation Budget Review Commission to update the “foundation budget” spending standard supported by the MMA and school groups.  The House and Senate take slightly different approaches to how to account for school employee benefits (mainly health insurance) and special education costs. The commission report from 2015 found that the spending standards used by the state significantly underestimated these factors. The governor also proposed to start updating the “foundation budget” in his budget plan.
House and Senate negotiators will also have to sort out – much like last year – different approaches taken to addressing the concerns of cities and towns about the new method of counting low-income students.
Overall, the House and Senate budget bills would appropriate roughly the same amount of state spending, just over $40 billion. Both budgets include revenue plans based on the “consensus” revenue projection adopted earlier this year, which may have to be revisited by the budget conference committee based on tax collections for May and June as the current fiscal year comes to a close. Through April, fiscal 2017 tax collections have fallen substantially below the forecast, raising the prospect of last-minute revenue and spending revisions for the upcoming year.
The Senate budget plan would provide $294 million to fully fund the special education “circuit breaker” program, a $16 million increase above fiscal 2017, which is expected to fully fund the state’s statutory share of funding for high-cost special education services. This is a vital program that every city, town and school district relies on to fund state-mandated services. The House appropriated $281 million.
The Senate would increase funding for the state’s statutory commitment under charter school law to temporarily reimburse local school districts for a portion of assessments used to pay tuition to charter schools. The state last fully funded these transition payments in fiscal 2014, but is underfunding reimbursements by approximately $55 million this year. The Senate would increase funding for charter school reimbursements to $83.5 million, a $3 million boost. The House proposed level-funding. Full funding for fiscal 2018 would require an estimated $157 million.
Both the House and Senate rejected amendments supported by the MMA that would reduce assessments imposed on municipalities and school districts to pay tuition to charter schools in any year that the state fails to fully fund reimbursements. Assessments are expected to reach almost $600 million next year.
For most other local government accounts, the House and Senate appropriated the same or similar amounts, including level-funding for Cherry Sheet PILOT payments at $26.8 million and level-funding for McKinney-Vento student transportation reimbursements at $8.4 million.
The Senate budget includes language supported by the MMA to modernize the law governing short-term rentals and the room occupancy excise, including the local excise. The Senate plan would extend the excise to rentals booked through web-based operators, such as Airbnb, which are not now subject to the excise and may not be subject to state or local regulation. The MMA and others argue that this reform would provide a level of consistency and fairness across most types of short-term rentals and provide new revenues for state and local government.
The Senate budget also includes a provision, supported by the MMA, that would adjust the fee schedule that funds Community Preservation Act matching payments made to cities and towns that have adopted the CPA. The adjustment is intended to supplement the CPA Trust Fund in order to maintain payments at a sustainable level as new cities and towns join the program.
The House budget includes language, long supported by the MMA, that would ban the practice of “pay the patient” for emergency medical services, a tactic reportedly used by some insurance companies to coerce cities and towns to sign contracts related to the charges. The House language would also make clear that cities and towns have the authority to set ambulances fees. The Senate did not take up a similar amendment during budget debate. The MMA is part of a coalition working to protect municipal finances as legislators work toward an agreement on this thorny subject.