A Message from the Governor


Title: Massachusetts State Seal - Description: A Latin inscription reads:  ENSE PEITT PLACIDAM SUB LIBERTATE QUIETEM
OFFICE OF THE GOVERNOR
COMMONWEALTH OF MASSACHUSETTS
STATE HOUSE ▪ BOSTON, MA 02133
(617) 725-4000
CHARLES D. BAKER
GOVERNOR
KARYN E. POLITO
LIEUTENANT GOVERNOR

 

January 23, 2019

To the Honorable Senate and House of Representatives,

We are pleased to present our Fiscal Year 2020 (FY20) House 1 budget recommendation, the fifth budget of our Administration. This fiscally-responsible proposal builds on our collaborative and productive relationship with the Legislature over the past four years to keep state spending in line with revenue growth and to reduce our reliance on non-recurring sources of revenue. A growing economy and continuing commitment to fiscal discipline have enabled investments in key priorities including education, substance misuse services and treatment, housing, climate change adaptation and resiliency, transportation, economic development, and our local communities.

Our FY20 House 1 proposal anticipates a $297 million deposit into the Stabilization Fund which, in addition to the anticipated year-end deposit in Fiscal Year 2019, would bring the Commonwealth’s reserves to nearly $2.8 billion, an increase of 150% since the Baker-Polito Administration took office. We are proud to partner with the Legislature on this shared commitment to building our reserves and protecting the Commonwealth against recession or other disruption in the economy.

House 1 proposes $42.7 billion in gross spending, an increase of 1.5% over Fiscal Year 2019 projected spending, excluding transfers to the Medical Assistance Trust Fund.

Through separate legislation being filed alongside the budget today the Administration is proposing a major, multi-year school finance reform initiative, which includes an overhaul of the school funding formula. This proposal is accompanied by an increase of $200 million in Chapter 70 education aid in the FY20 budget. The reforms will assist districts in managing the rising cost of health care and of educating English language learners and students with special education needs, and will provide an influx of new funding support for school districts with higher concentrations of poverty. The initiative is funded with existing revenues, and is implemented gradually to ensure it can be sustained over time.

Along with increased investments in Chapter 70 aid for education House 1 proposes additional funding for schools, including a proposed new formula for reimbursing school districts for charter school tuition and an increase of $16 million for those reimbursements in FY20. House 1 also includes a sales tax modernization proposal that will generate significant one-time revenues. This money will be used to seed education investments, including $100 million for college scholarships, $50 million for a new trust fund to help drive quality improvements in low-performing schools, $30 million to help local school districts address their school safety needs, and $20 million to help districts eliminate lead from their school drinking water.

Continuing our strong partnership with the Commonwealth’s cities and towns and consistent with immediate past budget years, House 1 increases unrestricted local aid by 2.7%, equal to 100% of the consensus revenue tax growth estimate percentage. This investment will provide cities and towns with $1.129 billion in unrestricted general government aid in FY20. The budget also includes $6.8 million to support Community Compact-related programs, which have provided all 351 cities and towns with access to important grant funding and have led to the adoption of more than 800 best practices to help enhance the delivery of local services.

As part of the continuing effort to manage MassHealth costs House 1 proposes significant MassHealth pharmacy reforms to reduce the high cost of prescription drugs, a major driver of program costs. We project $80 million in gross savings from these reforms.

The budget supports $266 million in funding across several state agencies for substance misuse treatment and services. To address the significant and growing state costs associated with opioid misuse, House 1 proposes a tax on gross receipts of manufacturers of opioids from the sale of their opioid products. The budget also ensures consistency with state tax policy as it applies to tobacco and marijuana, by proposing a retail tax on electronic cigarettes and an excise tax on vapor products.

The FY20 budget proposal also supports a total of $23.9 million in funding to increase opportunities in education, job training, and business development consistent with recommendations of the Administration’s Black Advisory Commission (BAC) and Latino Advisory Commission (LAC).

The broader budget package includes a separate legislative proposal to amend the state gaming law to allow legal sports wagering at Category 1 and Category 2 gaming facilities in Massachusetts. The proposal would also allow those facilities and other duly-licensed online vendors to offer on-line sports wagering. This proposed legislative change is projected to generate $35 million in FY20.

To save taxpayers from having to cover the cost of excessive sick time payouts to workers who retire from state service House 1 once again includes a proposal to cap accrued sick time for Executive Branch and Higher Education employees, bringing the Commonwealth in line with other states and private sector employers.

Finally, House 1 anticipates a reduction in the state income tax rate from 5.05% to 5% on January 1, 2020, in accordance with state law, returning $88 million to taxpayers in FY20 — and representing the final milestone on a two-decade journey to achieve a 5% income tax rate.

We are proud of the partnership we have built with the House and Senate to develop responsible budgets that reflect the needs of Massachusetts residents. We look forward to working with you on this proposal in the coming months.

Sincerely,

Signature of Charles Baker   Signature of Karyn E Polito
Charles D. Baker
Governor
  Karyn E. Polito
Lieutenant Governor

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