MassBudget’s Look at the Fiscal Year 2025 House Ways and Means Budget Proposal

Today the House Ways and Means (HWM) Committee released its proposed budget to invest in our Commonwealth for the Fiscal Year (FY) 2025, which starts in July. The proposal reflects both an increase in anticipated collections from the Fair Share “millionaire” tax and flat growth in other tax collections this fiscal year. The overall slowdown in available revenue is due in part to tax cuts enacted at the end of 2023 expected to reduce collections by $858 million. It is also largely due to the tailing off of federal pandemic aid, including $820 million less for MassHealth due to lower federal reimbursement rates to the state. The budget proposal would support growing investments in many areas while imposing cuts or failing to keep up with inflation in several others.

A variety of important investments are made possible because budget writers anticipate an increase of $309 million in Fair Share revenue in FY 2025 above the $1 billion annual amount budgeted in FY 2024. For instance, the Committee proposes to use $190 million in Fair Share surtax funds to fully fund free breakfast and lunch programs for students in public schools across the Commonwealth. This amount, $20 million more than proposed by the Governor, would support the nutritional health of all students across the state. The HWM budget proposes to use $605 million of the available $1.3 billion in Fair Share funds for transportation, with $250 million set aside to pay future bonds for capital investments, $235 million proposed for the MBTA, $90 million toward regional transit authorities, and the remainder for ferries and municipal roadways.

The Committee recommends an increase of $309 million to Chapter 70 aid to municipalities for K-12 education, using Fair Share funds to provide $37 million more than the minimum towards fulfilling the six-year stipulations of the historic 2019 Student Opportunity Act (SOA). That legislation, however, failed to anticipate the high levels of inflation of recent years, limiting annual inflation adjustments to 4.5 percent. As a result, the prior two fiscal years in which inflation exceeded 4.5 percent depressed the value of school aid in those years and going forward. To fully fund SOA in a way that would keep up with inflation, the legislature would need to instead provide an additional $465 million for FY 2025. Alternatively, the gap could be settled over multiple years.

The HWM Committee proposes some notable housing measures. The proposal would increase spending on the Massachusetts Rental Voucher Program (MRVP) to support low-income individuals and families with rental assistance from $180 million in FY 2024 to $219 million in FY 2025. At a time when the emergency assistance family shelter system is greatly overloaded and families will likely be subject to new time limits, housing vouchers will play an important role in helping families secure long-term, affordable housing and to make space for supporting families via shelter. The HWM proposal would support approximately 810 new housing vouchers, totaling 10,490 leased housing vouchers (with 4,221 tied to particular rental units). It would be a meaningful funding increase, but still far short of what would be needed to fund all eligible individuals and families. Another proposal by HWM would dedicate $2.5 million to provide legal counsel for low-income tenants and homeowners facing eviction proceedings. People facing eviction are often at a serious disadvantage in these proceedings because, unlike those evicting them, they typically lack legal representation.

For early education and care providers, the proposal recommends $475 million for Commonwealth Care for Children (C3) grants. This is level with FY 2024 appropriations and the same amount proposed by the Governor. The HWM Committee draws on three sources of funds to provide these grants, including a newly-created Early Education and Care Operational Grant Fund that would receive revenue from proposed online and mobile lottery proceeds that the Legislature has not yet approved. The Committee also draws on $175 million of Fair Share revenue for these grants. Other Fair Share appropriations for early education and care include $30 million to decrease the waitlist for income-based child care financial assistance (CCFA) and $65 million to annualize and increase reimbursement rates for providers accepting CCFA. The HWM Committee also took up significant policy changes in the outside sections of the budget, including adjustments to the C3 grant program and increased support for the early education and care workforce.

The HWM Committee proposes to essentially restore a cut that was made in January to cash assistance grants for Transitional Aid to families with Dependent Children (TAFDC). The HWM proposal includes a 10 percent increase for cash assistance grants for TAFDC beginning April 2025, but would not increase grants to bring them above the deep poverty level and does nothing to restore similar cuts that were made at the same time forestalling grant increases for Emergency Aid to Elderly, Disabled and Children (EAEDC).

The budget also relies on several other maneuvers to make additional revenue available for investment. The HWM Committee proposes redirecting into the budget $375 million in taxes on capital gains that would otherwise be transferred to further swell the Commonwealth’s largest-in-history rainy day fund. This would not be withdrawn from the rainy day fund itself and almost $100 million in expected capital gains taxes would still be added to the current $8.3 billion total. The proposal also relies on $185 million in revenue from smaller initiatives, such as a tax amnesty program, adding some audit staff at the Department of Revenue, and requiring withholding on non-resident sales of Massachusetts property.

The House will fine-tune this proposal before the Senate crafts its own version next month. House members have until the end of the day on Friday to file amendments and can cosponsor others’ amendments until April 24th when amendments will get packaged together and voted on through the end of that week. After the House finalizes its budget proposal, the process moves to the Senate with Senate Ways and Means releasing its own budget proposal early May.

MassBudget’s online Budget Browser tracks spending proposals for the coming fiscal year and the historical amount of each “line item” in the Commonwealth’s budget since 2001. The tool also enables comparisons of spending value adjusted for inflation. In the coming days, the Budget Browser will be updated to show the HWM Committee’s proposed spending for each item.

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