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BOSTON (State House News Service) - Top House Democrats think newly available money from a tax on the state's highest earners should be used to make school meals free for all students, invest in clean energy updates to aging schools and fix crumbling infrastructure on the MBTA.
A quarter of the projected $1 billion that the state expects to bring in from the voter-approved surtax on Massachusetts residents who make over $1 million in a year would go toward MBTA capital investments in the House Ways and Means Committee budget plan that moved forward on a 31-0 vote Wednesday.
House leadership's budget bill would dedicate $70 million more to MBTA infrastructure than Gov. Maura Healey proposed in March.
Like Healey's budget, the committee recommends creating a separate fund for surtax revenue called the Education and Transportation Fund. Money in this fund would be required to be spent on education and transportation initiatives, the goal of a constitutional amendment approved by voters in November.
House Ways and Means Chair Aaron Michlewitz told reporters that 100 percent of the surtax funds in the committee's plan would supplement existing budget allocations, rather than replacing some current spending to free up other spending space in the budget.
Michlewitz and other House leaders proposed splitting the $1 billion 50/50 into education and transportation investments.
Education Spending
On the education side, House Democrats are recommending $161 million for universal free school meals -- something that legislative leaders and Healey have identified as a priority -- though the House diverges from Healey's plan by funding the program through surtax funds, while the governor recommended the spending through a supplemental budget.
The committee's plan to make this program permanent and funded through the surtax would dedicate about 16 percent of the estimated $1 billion expected in surtax revenue this year to free school meals for all students in the state. Healey did not include the program in her budget, but instead requested $171 million in a supplemental budget to extend universal school meals only through the 2023-2024 school year and directed the Executive Office of Education to report on ways to extend it in the future.
The fiscal year 2023 state budget included $110 million to keep the popular pandemic-era program in place after federal waivers expired, but it was not enough, and lawmakers approved a Healey supplemental budget last month to add $65 million in spending to cover the program for the rest of the school year.
Universal free student meals supporters say over 80,000 students have eaten lunch daily in Massachusetts schools since the program started, and that providing the free lunches for every student decreases stigma -- encouraging more use of the program -- and saves households up to $1,200 per child per year.
House leadership's plan to make the program permanent would make Massachusetts the fifth state in the country to do so. In addition to financing the program through surtax revenue, they are also recommending establishing a commission to study school meal nutrition and that the Department of Elementary and Secondary Education study and make recommendations to minimize school food waste.
The committee is also proposing a new Green School Works grant program run by the Department of Elementary and Secondary Education for public schools to apply for projects related to clean energy infrastructure, a $100 million program in their recommended budget.
Public schools represent the most public buildings in Massachusetts, covering 186 million square feet. Members of the Zero Carbon Renovation Fund Coalition were on Beacon Hill last month advocating for the state to invest in retrofitting old buildings to maximize energy efficiency and on-site renewable energy, which they say contribute to nearly one-third of Massachusetts' emissions.
Carving out $261 million to these two programs crowds out some education programs that Healey included in her surtax investment plan. House leaders did not include Healey's recommended $59 million to keep tuition the same for all four years of students' undergraduate education at state-funded universities, nor does it include $140 million for capital projects at higher education institutions.
While Healey's budget focused on early and higher education -- dedicating half of the expected $1 billion in surtax revenue there -- the House Ways and Means budget directs greater shares to K-12 public schools.
The governor allocated $140 million of surtax funds to early education; $360 for higher education and $10 million for K-12 schools. House Ways and Means dedicates the majority of income surtax education funding to K-12 with $261 million in investments, with $174 earmarked for higher education and $65 million for early education, according to a breakdown by the Massachusetts Taxpayers Foundation.
After years of focus on the state's elementary and public schools, culminating in the passage of the $1.5 billion Student Opportunity Act, higher and early education advocates have argued over the past several months that this year could be an opportunity for the state to invest in their education sectors with more money flowing in from the surtax.
House leaders agreed to fund the governor's last-dollar free community college program, MassReconnect, at the same $20 million that Healey recommended. The new initiative would provide last-dollar financial support to cover tuition, fees, books and supplies for residents over 25 without a college degree to go back to school through the state's community college system, covering costs not covered by federal and other state financial aid.
House Ways and Means is also recommending $84 million for MassGrant Plus scholarships, compared to Healey's $93 million, and increasing investments in the High Demand Scholarship Program from $2 million to $50 million.
"High Demand target scholarships is a program that currently exists that we are putting $50 million into and also tweaking a little bit of the requirements," Michlewitz said. "It is providing financial assistance to students in Massachusetts that are pursuing in-demand professions defined by Labor and Workforce Development study on the labor market conditions. It's requiring students to study at our community colleges, state colleges or universities. The big tweak here is that we're changing the commitment to a five-year commitment of working in an in-demand industry in Massachusetts after graduation ... with the hope that we will have Massachusetts students working in in-demand industries and staying here in Massachusetts after they graduate."
Healey did not recommend any money for this initiative in her fiscal 2024 budget.
Transportation Spending
As for transportation, House Ways and Means directs more money to the MBTA, and less toward Department of Transportation highways and municipal assistance.
The committee dedicates half of state surtax transportation spending to MBTA capital investments, after a fraught year of infrastructure issues on the T. Their $250 million is 38 percent higher than Healey's recommended appropriation of $181 million.
The panel also earmarks $65 million for a "safety reserve" and to boost the MBTA's workforce, as safety and service issues at the T have been blamed on workforce shortages.
Both the governor and House Ways and Means included $5 million to explore the feasibility of implementing a means-tested fare program at the T.
Transit advocates have been pushing for years for the MBTA to roll out a widely available low-income fare option, and the idea has picked up momentum on several occasions but never gotten to the point of implementation.
The Legislature sought to mandate implementation of MBTA low-income fares in 2020, but Gov. Charlie Baker vetoed the measure in the dying hours of the two-year term, and the branches could not get on the same page last session.
In February 2022, MBTA staff projected that a system-wide means-tested fare program with eligibility set at 200 percent of the federal poverty level would cost $52 million to $85 million per year at existing service levels, or $72 million to $112 million when accounting for the likely increase in demand the option would generate.
House leadership recommended $100 million for highway bridge preservation, as Healey did, but didn't include the governor's $50 million for federal matching funds for highway improvements and $14 million for roadside maintenance and beautification. They also did not include the governor's recommended $100 million for "one-time expenses for the Massachusetts Department of Transportation to support municipalities in the design and development of local transportation projects through new or existing technical assistance programs."
The lawmakers suggest $70 million toward regional transit funding and rail electrification grants, while Healey put forward $25 million and another $12.5 million for rail projects in Palmer and Pittsfield.
Fund Mechanics
As this will be the first state budget with funds from the surtax, Beacon Hill leaders are also drawing the maps of how money will flow in the new system.
House Ways and Means recommends three trust funds. Surtax money would start in a catch-all Education and Transportation Fund. The state would spend out of that fund based on spending amounts set jointly by the Secretary of Administration and Finance, and the chairs of House and Senate Ways and Means. Excess money every year would flow into two other funds: 15 percent going into a stabilization fund, with a balance capped at 33 percent of surtax spending from the previous fiscal year; and 85 percent of excess revenue going to a fund dedicated to one-time spending, available for use in any subsequent spending bill.
The governor also recommended putting surtax revenue in an Education and Transportation Fund, available for spending through budget appropriation. Her proposal would also create two additional spending pots, one for one-time investments and one put some away for a rainy day, from which the state could spend up to 33 percent of what they spent in the previous fiscal year. The main difference between Healey and the committee's proposals is that the governor is not recommending pre-determining how the excess money is split between these two reserves.
The Healey administration is anticipating revenues from fiscal year 2023 to go toward this minimum fund balance (the "rainy day" fund), and that prior to making appropriations for fiscal year 2025 the state would fill remaining revenue gaps to bring this fund to 33 percent of the annual spending limit. From there, lawmakers would maintain that 33 percent before making one-time investments from excess revenue.
Though the governor, House and Senate are all basing their surtax spending projections on an estimate of $1 billion, Department of Revenue Commissioner Geoffrey Snyder testified in January that the tax would generate between $1.445 billion to $1.766 billion in fiscal year 2024, so there may be a chance this year to see how excess revenue is divided.
Michlewitz said that while the House Ways and Means Committee was not recommending statutorily requiring equal division of the surtax revenue equally between transportation and education, he thinks it is good practice while they are in the early years of the revenue source.
"The intent is to try to do that for now and see how this develops over time," he said.
Written By Sam Drysdale/SHNS
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