Update on Massachusetts FY'23 Budget

Overall Spending

The House proposal totals $49.6 billion in spending. The chamber seeks to add roughly $2 billion in new spending (a 4.23% increase over FY ’22), approximately $1.4 billion more than governor Baker’s proposal. The large expense items are:

  • $6 billion in chapter 70 educational aid
  • $18.75 billion to MassHealth
  • $638.4 million for workforce development
  • $912 for early education and childcare

The primary new spending increases are directed towards:

  • $100 million towards early childhood educator salaries
  • $100 million to extend the free school meals program

 

Tax Provisions in the Outside Sections

Section 24-Personal Income Conformity – This proposal conforms the Massachusetts personal income tax code to the Internal Revenue Code in effect for 2022. The state currently conforms to the 2005 version. The conformity would be static, meaning the state would remain tied to the 2022 version and not atomically adjust in future years.

Section 25- Federal Business Income Deduction -This section would decouple the Massachusetts income tax code for the 199A deduction for pass through entities.

 

Other Outside Sections of Note

  • A new Hospital Improvement Trust Fund
  • A new Population Health Investment Trust Fund
  • Elimination of several probation and parole surcharges
  • The Commonwealth will no longer charge for phone calls for prisoners

 

Issues NOT Included

Governor Baker’s Tax Relief Package-The package included: a reduction of the capital gains tax, reforming the estate tax floor up $2 million and several other tax credits aimed at renters, seniors and families paying for child care.

 

Same Day Sale’s Tax Remittance-Included in the Governor’s budget was a requirement that credit card and debit card processes would have to remit sales tax daily. AIM opposed this provision and it was not included in the House Ways and Means proposal.

 

Research Tax Credits for Financial Institutions-Included in the Governor’s budget was language extending the research tax credit to financial institutions. This provision was not included in the house budget.

 

Temporary Gas Cost Relief-There have been several recent proposals including a temporary suspension of the state gas tax floated in the legislature. None were included in the FY ’23 budget.

 

Long-term Fiscal Outlook 

  • The rainy day fun is expected to reach $6.55 billion by the end of the fiscal year
  • Revenue continues to outpace monthly expectations and that state should close the year with surplus of over $ 1.5 billion
  • The state also has over $2 billion in American Rescue Plan Act discretionary aid

Amendments to the budget must be filed by Friday April 15 at 5pm. If you plan on advocating for or against specific amendments please contact me and we can coordinate lobbying efforts.