Legislative Update

Mark Molloy, Esq., Cascade Strategies LLC

Governor Baker Files Supplemental Budget Based on Surplus Revenue

Governor Charlie Baker filed a fiscal year 2022 (FY22) $2.4 billion Supplemental Budget in mid-February that uses $1.6 billion of the State’s anticipated revenue surplus and several federal revenue sources to maintain and expand several COVID-19 related programs, cover ongoing public costs, and increase funding for municipal infrastructure assistance programs. Of the $2.4 billion in spending proposed by the Administration, more than two-thirds is directly related to COVID-19 response and recovery efforts. Other spending proposals include $450 million for local infrastructure products and $109.9 million to fund recently negotiated collective bargaining agreements. The Governor’s proposal does not use any of the state’s remaining discretionary $2.3 billion America’s Rescue Plan Act (ARPA) funding.

In particular, the Governor’s Supplemental Funding Bill proposes an investment to stabilize child care providers, special education schools, and human service providers to ensure that the critical services that they provide remain available to all who need them, despite enrollment and utilization fluctuations caused by the pandemic. The legislation includes $450 million to extend Commonwealth Cares for Children (C3) stabilization grants for child care providers through fiscal year 2023 (FY23). It also includes $140 million for special education schools to continue support through FY23 that will help address direct care and clinical staffing needs and ensure that these schools are able to safely provide residential and day education services to approximately 7,000 children between the ages of 3 and 21. The bill further proposes $401 million to extend rate enhancements for human service providers and support other investments in Home & Community Based Services; $346 million of this spending is supported by federal funding provided through non-discretionary ARPA funding, for a total of $55 million in net State cost.

The Administration’s supplemental spending proposal also includes 65 policy sections. A large number of these sections (38) make technical corrections to the $4 billion ARPA spending bill and other recent legislation. Of note to UCANE, the Governor’s supplemental budget proposes to make job order contracting for state agency maintenance and repair projects costing $150,000 or less permanent. As well, the proposal contains a number of climate resiliency projects related to water infrastructure under a $150 million appropriation to line-item 20001014.

According to an analysis by the Massachusetts Taxpayers Foundation, through January, tax revenues exceed the original FY22 estimate by $2.3 billion. A significant portion of this increase is likely due to capital gains collections, which will automatically be transferred to the State’s Stabilization Fund and other reserves and, therefore, is not available for operational spending. However, even after accounting for this transfer, the revenue surplus available for the budget is significant – particularly in light of three of the largest tax collection months (April, March, and June) upcoming. Given the size of the surplus to date and the fact that collections in April largely reflect economic activity from the prior year, a sizable revenue surplus in FY22 is highly likely.

To review the Governor’s filing, please visit: https://malegislature.gov/Bills/192/H4479. To review the Massachusetts Taxpayers Foundation (MTF) review of the same filing, please visit: https://www. masstaxpayers.org/governor-bakers-fy-2022-supplemental-budget.

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