Section 5 Surtax Implementation 1
Chapter 29 of the General Laws is hereby amended by inserting after section 2AAAAAA, as inserted by section 42 of chapter 268 of the acts of 2022, the following section:-
Section 2BBBBBB. (a) There shall be established and set up on the books of the commonwealth a separate fund known as the Education and Transportation Fund. The fund shall be credited with: (i) income tax revenues from the additional 4 per cent income tax levied pursuant to Article XLIV of the Articles of amendment of the Constitution, as added by CXXI of the Articles of Amendment; (ii) appropriations or other money authorized or transferred by the general court and specifically designated to be credited to the fund; (iii) funds from public and private sources, including, but not limited to gifts, grants and donations; and (iv) any interest earned on the assets of the fund. Amounts credited to the fund shall be expended, subject to appropriation, for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges and public transportation. The fund shall not be subject to section 5C.
(b) Income tax revenues collected and deposited into this fund shall not be subject to the allowable state tax revenue limitations established by chapter 62F. The commissioner of revenue shall estimate on or before September 1, for the preceding fiscal year, the amount of revenue to exclude from the chapter 62F calculation and include that estimate in the report submitted to the state auditor pursuant to subsection (a) of section 5 of said chapter 62F; this estimate shall be final.
(c) Income tax revenues collected and deposited into this fund shall not be considered to be tax revenues collected from capital gains income for purposes of section 5G. The commissioner of revenue shall estimate, in the fiscal fourth quarter capital gains tax certification, the amount of revenue to exclude from the 5G calculation; this estimate shall be final.
(d) Expenditures from this fund shall be designated in each item as recurring or one-time expenses in the appropriations act in which the spending is authorized.
(e)(1) Annual expenditures on recurring expenses from this fund shall not exceed a spending limit, which shall be equal to (i) $1,000,000,000 in fiscal year 2024; and (ii) $1,030,000,000 in fiscal year 2025.
(2) For fiscal year 2026, as part of the general appropriations act, the governor shall propose, and the general court shall enact, a spending limit that represents an amount of revenue that can reliably be expected to recur in future years based on experience to date.
(3) For fiscal years 2027 and all those thereafter, the cap shall be equal to the prior year spending cap, plus an adjustment factor equal to the ten-year rolling rate of growth of income subject to the additional 4 per cent tax, as certified by the commissioner of revenue. For years in which the additional 4 per cent tax was not in effect, the commissioner shall calculate the amount of income that would have been subject to the taxes, adjusted for increases in the cost of living in the same manner as described in said Article XLIV and set forth pursuant to paragraph (d) of section 4 of chapter 62.
(f) Expenditures not designated as recurring expenses may only be in support of one-time investments, which may include pay-go capital or other one-time projects. One-time investments must be completed within a period of 5 years from the date on which the expenditure is authorized.
(g) Any expenditures authorized from the fund shall be subject to sections 9B and 9C, without respect to whether such purposes would otherwise be subject to allotment. For any fiscal year after 2024, no funds shall be expended from the fund that would cause the balance of the fund to drop below 33 per cent of the annual spending limit except by two-thirds vote of each branch of the general court.
(h) (1) Annually, in consultation with the secretary of administration and finance, as part of the annual statutory basis financial report required pursuant to paragraph (2) of subsection (a) of section 12 of chapter 7A, the comptroller shall certify the amount of funds expended in the prior fiscal year on: (i) recurring education expenditures; (ii) recurring transportation expenditures; (iii) one time education expenditures; and (iv) one-time transportation expenditures. The comptroller shall rely on the designations in items as one-time or recurring, consistent with subsection (d), and shall determine the designation as transportation or education on the basis of the department through which the expenditures were authorized.
(2) The comptroller shall also certify the amount authorized for expenditure from the fund but not yet spent, as well as the balance of the fund at the end of the fiscal year.
Summary
This section, along with five others, formally incorporates the 4% surtax into the Massachusetts General Laws and establishes the Education and Transportation Fund for deposit of surtax revenues.