By Sam Larson
Vice President, Government Affairs

The Massachusetts House Ways and Means Committee last week unveiled its proposed $57.9 billion budget for Fiscal Year 2025. The budget would increase spending by $1.9 billion or 3.3% compared to the final budget signed last July. It contains no tax increases and does not draw from the commonwealth’s $9 billion Rainy Day Fund.

Revenue collections are predicted to be almost flat compared to the previous year. In order to fund the 3.3 percent increase the House budget uses $1.3 billion in new, one-time, or recurring revenues, including legalization of Online Lottery sales. It also redirects money that would otherwise be automatically directed to savings accounts.

The current fiscal-year budget represented a 7.1% increase over the year before.

AIM applauds the House for releasing a prudent budget in the face of several difficult financial issues like declining revenue and the continuing costs of the state shelter system. House leadership had to make difficult decisions and still managed to make critical investments in essential initiatives like the MBTA and early childhood education.

Tax Policies

• Tax Amnesty Program – The budget contains a one-time tax amnesty program that would create a two-month period for both individuals and corporate filers to submit old tax returns. The scope of the program – and months when the program is available – will be determined by the commissioner of the Department of Revenue. The Healey Administration believes this program could generate roughly $75 million in revenue.
• Code Conformity – Updates the state’s personal income-tax laws to conform with the IRS code, effective January 1, 2024.
• Consistent Filing Requirements – Exempts low-income taxpayers who would not otherwise have to file a personal income tax return from the recently enacted “consistent filing requirement,” which requires married couples to file a joint return for state purposes in any year in which they file jointly at the federal level.
• Repeal Deduction of Interest from Savings in Massachusetts Banks – Repeals the deduction of interest from saving in banks in the commonwealth, effective for the taxable years beginning on January 1, 2024.
• Publications of Tax-Exempt Organizations – Repeals the sales-tax exemption for publications of tax-exempt organizations. Effective 60 days after the passage of the budget.

Spending

• $6.893 billion in Chapter 70 Funding, fully funding year four of six of the requirement set by the Student Opportunity Act
• $1.2 billion in Unrestricted Local Aid, an increase of $12.7 million or 1 percent
• $1.15 billion in Housing Initiatives
• $30 billion in healthcare spending – $20.3 for MassHealth ($505 million increase over FY’ 24) and $475 million to make permanent the Commonwealth Cares for Children, or C3, grant program that supports child-care providers

Question 1 Revenue/Spending

Though the budget does not call for new taxes, it allocates the roughly $1.3 billion in new revenue that the state anticipates collecting from the Question 1 income surtax that voters adopted in 2022. This is a roughly $300 million increase over last year’s spending

$695 Million for Education 

• Provides $190M for universal school meals
• Provides $175M for C3 Operational Grants
• Provides $80M for MassGrant+ financial aid expansions
• Provides $65M for Department of Early Education and Care Childcare Provider Rate Increases
• Provides $37M for a Chapter 70 Minimum Supplement
• Provides $30M for Early Education and Care’s income-eligible waitlist
• Provides $30M for Early Literacy
• Provides $24M for MassReconnect
• Provides $20M for endowment matching grants
• Provides $14M to expand the SUCCESS program to State Universities
• Provides $10M for Higher Education Capital Funding
• Provides $10M to continue the Target Scholarships program
• Provides $10M to continue the Green SchoolWorks program

$605M for Transportation 

• Provides $250M for a transfer to the Commonwealth Transportation fund to increase bonding capacity
• Provides $90M for Regional Transit Authorities
• Provides $75M MBTA Capital Investments
• Provides $65M for MBTA workforce safety reserve
• Provides $40M for the MBTA Academy
• Provides $35M for MBTA Resilient Rides
• Provides $25M for Chapter 90 Roads and Bridges Supplemental Aid
• Provides $20M for MBTA Means–Tested Fares
• Provides $5M for water transportation services

Outside Policy Sections

• Excess Capital Gains Transfers – The House budget mirrors the administration’s push to make up to $375 million in excess capital gains tax revenue available for spending. Capital gains revenue above a certain threshold gets automatically is traditionally deposited into savings, but some will be diverted to the general fund.
• Hospital and Payor Assessments -The budget adopts several changes suggested by the governor to the hospital assessment formula.
• Online Lottery- The budget proposal allows for online lottery games with the revenue generated going towards grants to support early childhood education.
• Vaccine Purchase Fund – To support a universal purchase system for routine childhood immunization.
• MCI Concord – The administration plans to close the state prison MCI Concord and the budget enables the sale or lease of the land.
• Disaster Relief Resiliency Fund – This fund would provide funds to a list of eligible entities, businesses included, for emergency natural-disaster relief.

Shelter Spending

• Makes $500 million available to cover costs associated with the state’s shelter system for homeless families – $175 million of which would come from a savings account known as the Transitional Escrow Fund. This would cover roughly half of what the Healey Administration estimates to spend on the system in FY 25

The House will debate the budget during the week of April 24.

Please reach out to me at slarson@aimnet.org with questions or concerns.