Mass. House passes $730 million bill

Rather than tap additional tax dollars, the bill drafted in the House Ways and Means Committee would change the distribution of excess capital gains tax revenue for the 2024 fiscal year to cover unmet costs.

The formula for excess capital gains income is that 90% goes to the state’s rainy day fund, 5% goes to post-retirement benefits for former state employees and 5% goes to pensions. The stabilization fund is at record levels, recently surpassing the $9 billion mark.

The House of Representatives voted Thursday to divert some of the excess capital gains revenue brought in during the 2024 fiscal year before reaching the rainy day fund to fill gaps in the budget.

They would send 47% of excess revenue to the General Fund, 43% to the stabilization fund, 5% to the pension benefit trust fund and 5% to pension liabilities.

“We’ll have to see what the Senate does, but I would consider this a victory,” said Seth Gadbois, staff attorney at the Conservation Law Foundation, which signed the letter to lawmakers. “The will of the people of Massachusetts in passing the Fair Share Amendment was to proactively fund education and transportation initiatives, so we are pleased to see that this cannot be used for improper rainy day purposes and we hope that the Senate will follow suit and maintain the public’s confidence.”

Pete Wilson of Transportation for Massachusetts also said he felt the House had listened to their concerns.

“It’s not that we don’t think the accounts that are being replenished are not very important, for child care resources and free school meals, but spending those dollars, as we stated in our letter, would increase the ability in the future to investing in transit and roads and bridges and pedestrian and bicycle infrastructure,” Wilson said. “We are happy that they have chosen a different path.”

Healey had also proposed reducing the amount of capital gains revenue flowing into the stabilization fund, but instead of using it to fill the gaps in the 2024 fiscal year, she instead recommended using that money to create a to revive another trust fund.

She called for a distribution of 45% of capital gains funds going to the rainy day account, 5% to retirement benefits, 5% to pensions and 45% to a temporary escrow fund – to “rebuild” that account.

Former Gov. Charlie Baker created the temporary escrow account in 2021 to store about $1.5 billion in excess dollars due to an influx of COVID-related dollars, and the account is now on the verge of running out as the state moves toward uses to cover unexpected expenses, including a spike in emergency shelter expenses.

The House did not join Healey’s idea to revive the secondary savings account on top of the rainy day fund.

However, they agreed to put the additional tax dollars into an early childhood education trust fund.

The fiscal year 2025 budget relies on $100 million in revenue from online lottery sales to pay for early childhood education and care subsidies, but regulators now say the online platform won’t be operational until spring 2026.

Healey proposed putting $150 million in additional taxpayer money into the Early Education and Care Affordability Fund to cover the shortfall – the only step in additional taxpayer money agreed to by the House to support the popular Commonwealth Cares for Children (C3) grant program to continue financing.

The House version of the bill also removed key policy components of Healey’s bill after they came under debate.

The House bill was released by the House Ways and Means Committee about 45 minutes after House and Senate negotiators announced a compromise on a climate bill that had been held up in negotiations since July. When the departments failed to reach a compromise on the climate bill at the end of the formal sessions, Healey used similar language in the closing in an attempt to renew the action.

The House Ways and Means closeout budget does not include any language related to establishing clean energy and allowing reforms — the heart of the climate bill that the departments are now filing as separate legislation with their Thursday morning compromise.

House Ways and Means stuck with Healey’s dollar amount for the largest expense item, MassHealth’s deficiencies: $565.4 million. However, the net state cost of this amount is nothing because federal reimbursement is available for services provided in fiscal year 2024, according to Healey.

Other proposals include $46 million for a reserve to cover sheriff’s office costs, $14 million for substance and alcohol use disorder treatment, $7.3 million for the Residential Assistance to Families in Transition program, $5.1 million dollars to support public health hospitals and $2.5 million for the costs of launching the program. online lottery program approved in the state budget – all also included in Healey’s budget.

It also includes $20 million for celebrations related to the 250th anniversary of the American Revolution in Massachusetts.

The closeout budget would fund a series of collective bargaining agreements with government employees.

The House did not include Healey’s proposal to immediately establish an $11 million Disaster Relief Trust Fund. Earlier this year, the governor proposed redirecting some of the excess capital gains tax revenue to a proposed fund, which could be tapped to help various sectors of the economy respond to incidents such as severe flooding and severe storms. The legislature did not adopt the administration’s proposed financing mechanism, instead spending $14 million from a consolidated year-end net surplus. Healey tried to increase that fund to $25 million with the closeout budget, but the House of Representatives did not agree to the idea.

The House budget bill would also launch a “Dolly Parton’s Imagination Library” program in Massachusetts, subject to appropriation.

The program, started by the country music star, funds up to 50% of the cost of sending one age-appropriate book monthly to each registered child from birth to age 5, to encourage “a love of reading and learning.” encourage, according to the bill text.