On May 7th, the Senate Ways and Means (SWM) Committee released its proposed budget for the fiscal year that starts in July (FY 2025). Like last month’s House budget proposal, the SWM proposal would make important new investments in education and transportation, made possible through the Fair Share surtax.
The SWM proposal was reportedly written before last week’s announcement of dramatically higher April tax collections. While SWM budget writers restricted themselves to a similar amount of available revenue as the House, the turnaround in tax collections suggests that additional revenue may be available for investments through later supplemental spending bills. Faced with limits to available revenue to date, SWM makes some different choices than the House. On some key elements, however, they agree.
Greater Public Investments Made Possible
Like the House, the SWM proposal makes additional revenue available for public investment without new taxes (and without reversing last year’s tax cuts for the wealthiest). Both the SWM proposal and the House make up to $375 million available to the budget by forgoing a portion of the deposit to the rainy day fund that would otherwise automatically occur due to high collections (also called “above threshold”) of capital gains. Redirecting these funds to budget investments does not draw down on the rainy day fund itself. It only limits additional growth of the fund at a time when it has become unprecedentedly large.
As both chambers recognize, the Commonwealth can prudently support additional FY 2025 expenditures through forgoing deposits. These above-threshold deposits were estimated at a total of $513 million in the previous revenue projection, and would presumably be greater now that capital gains collections are exceeding projected amounts.
Higher Education
The SWM proposal advances affordable higher education for students more boldly than the prior budget proposals. Notably, the proposal creates a new $117.5 million proposal to cover tuition and fees for all students at community colleges. This builds on FY 2024 investments in new scholarships. This expanded program would also provide targeted stipends of $1,200 to help low and moderate income students cover books and materials. The addition of an income-based grant to support college costs will likely increase the share of new funding that goes to lower-income students.
The SWM proposal builds on other grants and scholarships drawing from Fair Share surtax revenue, including increasing the higher education wide Financial Aid Expansion program to $105 million, up from $84 million in FY 2024.
Early Education
The SWM proposal provides level funding – the same $475 million as in FY 2024 – for operational grants for child care providers, known as C3 grants. The proposal draws funding from the General Fund, the High-Quality Early Education and Care Affordability Fund, and the Education and Transportation Fund. Like the Governor’s budget, the SWM proposal includes stipulations that operational grants from Fair Share surtax dollars can only be distributed to providers that have at least half of their spots filled by children receiving subsidies. This approach to satisfying the requirement that surtax investments must be public in nature was not included in the House budget last month. The proposal also restricts the total C3 grant amounts for certain for-profit multisite providers, similar to the House budget.
The SWM budget proposal includes language (already passed as standalone legislation earlier this year by the full Senate) that would increase eligibility for subsidized child care, support affordability for families, and enhance career opportunities for early educators. Including these plans in the FY 2025 final budget would help move the Commonwealth toward much needed long-term expansion of early education and care.
Another early education initiative funded at $2.5 million in the SWM proposal was a pilot program to provide state matching funds for employers that invest in affordable child care for their employees. This pilot, which was similarly proposed in the Senate’s standalone legislation, includes several provisions to ensure equitable distribution and access to these child care resources.
K-12 Education
The SWM proposal, in line with the House budget, provides an additional $308 million in new Chapter 70 aid (and reserves) to support K-12 schools across the state. This includes $37 million in additional minimum aid (up to a total of $104 per student) for districts that would not otherwise receive more support.
The proposal keeps the Commonwealth on track to fulfill the landmark 2019 Student Opportunity Act (SOA) over the intended 6-year timeline. The SOA, however, did not anticipate the high levels of inflation of recent years. The adjustments, capped at 4.5 percent each year, have not kept up with actual costs. As a result, insufficient adjustment for inflation during the prior two fiscal years (when inflation exceeded 4.5 percent) depressed the value of school aid in those years and going forward. To fully fund the SOA to keep up with inflation, the Legislature would need to provide an additional $465 million for FY 2025. The gap could also be settled over multiple years. Currently, this fix to inflation is not funded in the SWM proposal.
Housing
The SWM proposal took a largely similar approach to housing investments as the House budget. This includes a 22 percent increase to $219 million for the Massachusetts Rental Voucher Program (MRVP) to support housing access for families with low-incomes.
While the increase to MRVP will help some families move into stable and affordable housing, more substantial funding is needed to meet the scale of the current housing problem. This is more critical as the state has approved a nine month time limit for Emergency Assistance (EA) family shelter. Increased housing assistance would help move families out of shelter into stable housing and create space for others that are currently facing a waitlist to get into EA family shelter. Overall, the SWM budget allocates $325 million for EA family shelter, in line with the House for FY 2025. This provision for EA family shelter will work in concert with a recent FY 2024 supplemental budget which provides $426 million to address the ongoing shelter crisis through EA family shelter and related programs for the rest of this year and into FY 2025.
One key omission from the SWM proposal is $2.5 million that the House budget included for a right to counsel pilot to provide legal representation to tenants and owner-occupants with low-incomes during eviction proceedings. This pilot could provide a major equity improvement to how evictions are processed and help level the playing field.
Transportation
Another bold investment made possible through Fair Share funds would improve service and eliminate fares across the Commonwealth’s 15 regional transit authorities (RTAs). These RTAs provide critical bus service outside the MBTA area. The investment of $214 million to RTAs would be a major increase over the $184 million proposed by the House. It is made possible by proposing to use $120 million in Fair Share revenue, $40 million of which would go to eliminating RTA fares.
Fare-free service in the Worcester and Lawrence areas in recent years has spurred significant increases in ridership. Fare-free service also improves service by speeding up passenger pick up times, allowing riders to enter through any door, and making it easier to recruit bus drivers who prefer to focus on driving and greeting passengers rather than enforcing fare policies.
Cash Grant Increases, One Year Later
The SWM proposal would provide 10 percent increases (in April 2025) to cash assistance grants for individuals and families living in deep poverty through the Transitional Aid to Families with Dependent Children (TAFDC) and Emergency Aid to the Elderly, Disabled and Children (EAEDC) programs. Originally planned for April 2024, these increases had been eliminated by the Governor through 9C cuts in January when it appeared that FY 2024 tax collections were falling far behind projections. Unlike SWM, the House did not include the grant increase for EAEDC in their final proposal, though the TAFDC grant increase was included.
Looking Ahead
Amendments to the SWM proposal will be due by 2pm on Friday, May 10th. Senate debate on amendments will begin on Tuesday, May 21st and will likely wrap up a few days later.
