Governor Baker Unveils School Finance Proposal to Fully Fund the Foundation Budget Recommendations with FY20 Budget

Governor Baker Unveils School Finance Proposal to Fully Fund the Foundation Budget Recommendations with FY20 Budget

BOSTON – The Baker-Polito Administration today announced a multi-year school finance reform initiative to increase funding for school districts to invest in a quality education and fully implement the recommendations of the Foundation Budget Review Commission. An Act to Promote Equity and Excellence in Education will be filed alongside the proposed Fiscal Year 2020 (FY20) state budget, which includes a significant increase in state education aid to fund the first year of the reform plan.

The reform bill filed today updates the Foundation Budget formula to provide more support for school districts to meet the rising cost of health care and special education costs, as well as educating English language learners and low-income students, and will provide a significant influx of funding for communities with the highest need. The proposal will also target additional support for the lowest-performing schools to offer programs that give every student greater opportunities to learn.

The initiative also gives the Commissioner of Elementary and Secondary Education the ability to support persistently underperforming schools, in part by utilizing a limited amount of Chapter 70 funds, if necessary, to implement needed reforms and investments with the district.

This proposal represents the most significant expansion of the Foundation Budget since the formula was adopted in 1993, and is funded using available revenue.

The Administration’s budget for FY20 includes an increase of $200.3 million in Chapter 70 funds to implement the first year of the reforms, for a total of $5.1 billion in school aid next year.

“Our proposal updates the school funding formula to provide a quality public education for all students, particularly in school districts with the highest needs, across the Commonwealth,” said Governor Charlie Baker. “This initiative will fully fund the Foundation Budget Review Commission recommendations and will make targeted investments for low-income students, minority students, and English Language Learners to help close the achievement gap and support underperforming schools. We look forward to working with the Legislature to update the Commonwealth’s school finance policies, building on the nearly half a billion dollar increase in funding our administration has invested in public education.”

Building on the Administration’s previous investments to implement the Commission’s recommendations, when the school finance reform initiative is fully implemented the Foundation Budget will increase by more than $1 billion (in current dollars), resulting in an increase of an estimated $3.3 billion by 2026.

This is the third consecutive year that the Administration’s budget proposal has included increases for school districts to address rising health care costs, one of the deficiencies identified by the Foundation Budget Review Commission. Over the past two years, Governor Baker signed budgets that increased funds to school districts for health care by nearly $60 million. The Administration also supported an increase of $24.5 million for districts educating English Language Learners in FY19. These increased investments have allowed communities to put more money back into classrooms, with the greatest impact on low-income communities.

The major components of the school finance reform initiative with an impact on the FY20 budget include:

·       Full funding of foundation and base aid requirements, reflecting current rate of inflation ($129.9 million increase)

·       Further increase in Foundation Budget formula for health care, including benefits for retirees ($30.6 million increase)

·       Additional increase in the factor for educating English language learners ($13.6 million increase)

·       Increased support to districts serving highest concentration of economically-disadvantaged students ($12.8 million increase)

·       Minimum aid level of $20 per pupil for all districts ($7.9 million increase)

·       Increase in funding to help districts meet rising out-of-district special education costs ($4.3 million increase)

·       Introduction of a new enrollment category for students in Early College and Career Pathways ($1.2 million in FY20)

Starting in Fiscal Year 2021, the plan will phase in an expansion of the factor in the foundation budget for counseling and psychological services, which will ultimately add about $75 million (in current dollars) to the statewide Foundation Budget. The Administration’s budget proposal also creates a $30 million trust fund for school safety initiatives.

“By updating the school funding formula to provide more support to enroll students in Early College and Career Pathways programs, we will help high school students gain more work experience and access to college level courses before they graduate,” said Lieutenant Governor Karyn Polito. “This budget will build on the investments our Administration has already made to improve school safety by supporting grants for districts for security and communications upgrades and training for school and public safety officials, among other initiatives.”

The Administration’s school finance reform proposal includes opportunities for struggling schools to partner with the Department of Elementary and Secondary Education to invest in proven strategies that help students learn, such as acceleration academies, after-school enrichment, as well as more professional development and leadership programs for teachers. The budget proposal also includes a new trust fund of $50 million, to be used by the Commissioner of Elementary and Secondary Education to help accelerate improvements in low-performing schools. In addition to this trust fund, the Governor’s budget proposes $26.5 million in targeted assistance funds to help schools improve.

“While this increased investment is incredibly important, how we spend it is equally important to ensure we are using strategies and providing programs that accelerate learning for all students and close achievement gaps,” said Secretary of Education James Peyser. “We are asking the lowest-performing schools to partner with the Department of Elementary and Secondary Education to make reforms that will help our neediest students achieve their potential academically.”

The proposal strengthens the Commissioner of Elementary and Secondary Education’s ability to support schools that are consistently underperforming by giving him authority to work with schools to use a limited amount of a district’s school aid to implement needed reforms and investments.

“While Massachusetts public schools offer many children a strong education, that success has not reached all students,” Elementary and Secondary Education Commissioner Jeffrey C. Riley said. “The measures included in the governor’s proposal will help us ensure that the Commonwealth’s most struggling schools are on the right track to offering their students a strong program and engaging instruction.”

The 1993 Education Reform Act created the school funding formula that determines how much each school district must spend, based on the specific makeup of its student body, to ensure every child receives a solid education. Every school district’s Foundation Budget is different, and calculated specifically for that district. The Commonwealth’s progressive funding formula finds the right balance between state and local contributions to fund districts’ Foundation Budgets. School districts with higher populations of low-income students and English Language Learners have the highest Foundation Budgets. Districts with small populations of students who make up those high-need categories have smaller Foundation Budgets. The law requires communities to pay a share of their Foundation Budget, determined by their local tax base.

Charter School Reimbursement

In addition, the proposal will revamp charter school reimbursements to a three year schedule, with 100 percent tuition reimbursements to districts the first year, 60 percent the second, and 40 percent the third. By revising the reimbursement formula to a three year schedule, the Commonwealth will be a better partner to local communities that experience increasing enrollments in charter schools.   This realignment will also ensure that communities spending greater than 9 percent of their total school spending on charter school tuition payments will benefit from a new minimum tuition reimbursement amount.

In addition, the Administration’s plan increases the facilities stipend for charter schools. Currently charter schools get a facilities stipend of $893 for each student, which hasn't changed in 10 years.  This proposal increases that amount by 5% to $938, and then indexes it for inflation going forward.

College Affordability

Along with new investments in K-12 education, the House 1 budget proposal includes a historic $100 million investment to help more students afford college.

The Administration’s reform proposal creates more opportunities for all students to gain skills, knowledge and experience by revising the school funding formula to incentivize high schools that enroll students in Early College and Career Pathway programs.  The proposal creates a dependable revenue stream as part of the Foundation Budget formula to support these programs, so more students can earn college credits or professional certificates at no cost to them while they are still in high school.

The House 1 proposal includes a new $100 million trust fund that will enable students entering Massachusetts public and private colleges and universities next year to significantly reduce college costs and have greater opportunities for paid internships and cooperative education. Seeded with revenue from the Administration’s sales tax modernization proposal described in more detail below, the trust fund would set aside $25 million for Commonwealth Commitment, the college affordability program for students transferring from a community college to a public college or university. The trust fund would commit another $25 million to scholarships for students who are participating in proven college success programs at both public and private four-year colleges; $25 million for matching grants to provide work experiences to students attending two and four-year public colleges and universities; and $15 million to expand Early College programs. The trust fund would also set aside $10 million to pilot financial aid strategies that have proven successful in other states to help students complete their degrees.

As part of this expansion, the Baker-Polito Administration will ask public colleges and universities to develop long-term plans to reduce student charges, while still ensuring institutional fiscal sustainability.

“This is a breakthrough budget proposal for students and families who look to Massachusetts’ public colleges and universities to deliver both opportunity and affordability,” said Commissioner of Higher Education Carlos E. Santiago. “This proposed investment could have dramatic impact on both individual lives and the state as a whole – because a highly-educated workforce is the key to economic growth.”

Details on the full FY20 budget proposal, known as House 1, follow here.

HOUSE 1 PROPOSAL FOR FISCAL YEAR 2020

Including the increased investment for the Administration’s school finance reform proposal, the Administration’s FY20 budget proposes $42.7 billion in overall spending, including investments in substance misuse, mental health, workforce development, climate change preparedness, transportation and public safety.

The FY20 budget proposal relies on total tax growth of 3.6%. That includes a consensus tax revenue estimate of $29.299 billion, or 2.7% growth over the revised FY19 tax benchmark, in addition to $133 million in projected revenue from recreational marijuana sales and $28 million from room occupancy tax modernization scheduled to take effect on July 1, 2019. House 1 increases gross spending by 1.5% over FY19 projected spending, and uses only $28.5 million in one-time revenue for ongoing expenses. It anticipates a deposit of $297 million into the Stabilization Fund, which would bring total reserves to $2.8 billion, after an expected deposit at the end of Fiscal Year 2019.

“Our Administration is pleased to file another fiscally-responsible budget proposal that is balanced with available tax revenue, limits the use of one-time revenue, and anticipates another deposit in the Rainy Day Fund, bringing the balance to $2.8 billion by the end of next fiscal year,” said Secretary of Administration and Finance Michael J. Heffernan. “Through fiscal discipline and a targeted approach to spending, this budget continues to make the key investments that enable us to meet the needs of all Massachusetts residents.”

The budget includes several reform initiatives, including a proposed change in eligibility for low-income seniors to save money on their prescription drugs by expanding benefits and eligibility for the Medicare Savings Program, and new authority for MassHealth to negotiate drug prices. House 1 also proposes changes to modernize sales tax collection for the state’s largest vendors by shortening the time between collection and remittance.

Sales tax modernization

House 1 proposes shortening the length of time between collection and remittance of sales tax for the state’s largest vendors, those that have remitted at least $100,000 in sales tax in the prior year. The budget proposes to dedicate the one-time revenue generated by this proposal in FY20 to support various one-time needs related to education, including investments in college scholarships, school safety, and to assist districts in eliminating lead from their school drinking water.

The budget also proposes a requirement that online marketplace facilitators collect and remit tax on sales to Massachusetts customers on behalf of vendors who sell products on their marketplace platforms, streamlining the revenue collection process and leveling the playing field for “Main Street” retailers across Massachusetts.

Energy and Environment

In addition to the House 1 proposal, the Administration today is also filing legislation to launch a major new climate change adaptation initiative, funded through a modest increase in the deeds excise paid on real estate transactions. This investment will amount to $75 million in FY20, and $137 million on an annualized basis to support the Commonwealth’s communities in upgrading their infrastructure and planning for the impacts of climate change.

House 1 also recommends an increase of $5.5 million over the Department of Public Utilities’ FY19 budget to support and enhance the pipeline safety division’s critical testing, investigations, and oversight responsibilities to ensure that natural gas distribution companies are in compliance with safety regulations.

Substance Misuse

The budget supports a total of $266 million in funding across several state agencies for substance misuse treatment and services. This includes $49.4 million to expand MassHealth treatment services for individuals with addiction made available through a federal waiver that allows Massachusetts to increase Medicaid funding for these services, and $16.7 million in new funding to fulfill the requirements of the CARE Act, including medication-assisted treatment within correctional facilities. Including this budget proposal, the Baker-Polito Administration will have increased annual funding to treat the opioid epidemic by $147 million, an increase of 123%.

The budget also includes $5 million for a regional, multi-agency approach to fentanyl interdiction, to give local police departments the resources to coordinate with each other across their districts to crack down on fentanyl trafficking and reduce the displacement of drug dealers into neighboring communities. This initiative would provide funding to police departments to conduct a prolonged and coordinated approach to addressing the fentanyl problem.

The budget also proposes a tax on gross receipts of opioid manufacturers from the sale of their opioid products to address the growing cost to the state of providing treatment and services for substance misuse. The proposal is projected to generate $14 million in FY20.

MassHealth reforms

MassHealth is funded at $16.539 billion gross, $6.586 billion net, representing growth of 0.1% gross (4.3% net) over estimated FY19 spending. The budget proposal includes new drug pricing authority for MassHealth to engage in direct price negotiations with drug manufacturers, subjecting high-cost prescription drugs to a public rate-setting process, similar to the process used to set rates for most other MassHealth services, if negotiations do not produce an agreement on a target price. House 1 also proposes a requirement that Pharmacy Benefits Managers be transparent about pricing spreads and rebates in their contracts with MassHealth Managed Care Organizations and Accountable Care Organizations, and limits their margins in those contracts. Together the reforms would deliver $80 million in gross MassHealth savings.

           

Assistance for seniors

House 1 proposes expanding benefits and eligibility for the Medicare Savings Program to provide assistance to approximately 40,000 low-income seniors in managing their prescription drug costs, delivering potential savings of thousands of dollars per year. A state investment of $7 million annually ($4 million in FY20) will leverage more than $100 million in Medicare prescription drug subsidies accruing directly to older consumers.

Black Advisory Commission/Latino Advisory Commission

House 1 supports a total of $23.9 million in funding across several agencies reflecting the priorities of Administration’s Black Advisory Commission and Latino Advisory Commission, from public schools to workforce training to economic development and housing.

THE BAKER-POLITO ADMINISTRATION’S FY20 BUDGET HIGHLIGHTS BY THE NUMBERS

Fiscal Overview

·       $42.7 billion in gross spending, a 1.5% increase over projected FY19 spending

·       Anticipates a deposit of $297 million into the Stabilization Fund, for a projected balance of $2.8 billion, 150% above the balance when the Administration took office

·       Assumes a reduction in the income tax rate to 5% on Jan. 1, 2020, returning $88 million to taxpayers in FY20

Transportation and the MBTA

·       $741.6 million for the Massachusetts Department of Transportation overall, including MassDOT operations, the Registry of Motor Vehicles, and other transportation agencies

·       A $1.130 billion sales tax transfer, in addition to $127 million in operating budget support and $60 million in capital funding that will be included in the FY20 capital budget

·       $86 million for regional transit authorities (RTAs), inclusive of $4 million in discretionary funding to improve ridership and performance, and authority for the Secretary of Transportation to establish performance metrics and reporting requirements for RTAs

Workforce and Economic Development

·       $2.9 million in new funding for the Registered Apprenticeship program

·       $2.5 million for the advanced manufacturing training program, and $2 million for Small Business Technical Assistance grants

·       $2 million in Urban Agenda grants, $1.5 million in new funding to expand targeted workforce development programs to Black and Latino young adults

·       $500,000 to fund a new downtown district coordination grant program, to promote cooperation among cities and towns as they implement downtown revitalization efforts

·       $10 million transfer of any consolidated net surplus to the Community Preservation Trust Fund, and $10 million to the Massachusetts Life Sciences Center

Housing Choice

·       $8 million in FY20, an increase of $3 million over FY19, through a combination of operating and capital funds for the Administration’s Housing Choice initiative, which provides grant awards and technical assistance to cities and towns that have met housing production goals over the past five years, providing them with an incentive to plan for and build diverse housing stock

Combating the Opioid Epidemic

·       Total of $266 million in funding across several state agencies for substance misuse treatment and services

·       $49.4 million to expand MassHealth treatment services for individuals with addiction made available through a federal waiver that allows Massachusetts to increase Medicaid funding for individuals with addiction

·       $16.7 million in new funding to fulfill the requirements of the CARE Act, including medication-assisted treatment within correctional facilities

·       Tax on gross receipts of opioid manufacturers from the sale of their opioid products, generating $14 million to address the growing cost to the state of providing treatment and services for substance misuse.

Mental Health

·       $887 million for the Department of Mental Health, a $10.8 million increase over last year

·       This investment builds on the $84 million the Baker-Polito Administration invested last year for the redesign of community-based services for adults with serious mental illness.

Supporting our Community Partners

·       $1.129 billion in unrestricted general government aid (UGGA), a 2.7% or $30 million increase over FY19, equal to the consensus tax revenue growth rate

·       $6.8 million in Community Compact-related programming

Black and Latino Advisory Commissions’ Recommendations

House 1 supports a total of $23.9 million for implementing these recommendations across agencies. This funding includes:

$12.4 M for education programs, including:

·       $5.9 million in funding to expand adult basic education programs, including post-secondary vocation programs, and English for Speakers of Other Language (ESOL) education programs

·       Funding to develop and expand college and career pathways for high school students through Early College and STEM Pipeline programs

$8.9 M for workforce development programs, including:

·       $2.3 million new funding to Youth Works employment program

·       $2.9 million increase for Registered Apprenticeships Program to tech, health care, and advanced manufacturing sectors

·       $2 million for Workforce Competitiveness Trust Fund to increase employer-based ESOL programs and career pathways

·       Expansion of “Learn to Earn” career pathway initiative to more regions

$2 M for economic development programs, including:

·       $1.5 million expansion for the Urban Agenda program

·       $440,000 for targeted outreach and assistance to Black-owned and Latino-owned businesses

Sexual Assault and Domestic Violence Prevention

·       $75 million across several agencies, an 18% increase in funding over the past four years

·       $1 million for DPH to expand the Healthy Relationships program, to address teen dating violence among teens in high-risk communities

Other Health and Human Services

·       $10 million, $1.9 million increase for the Safe and Successful Youth Initiative

·       Fully funds the Department of Developmental Services’ Turning 22 program

Criminal Justice and Public Safety

·       $19.5 million in FY20 to implement various criminal justice reforms, including:

o   $11.7 million for costs within the Department of Correction including additional correctional officers and other staff to meet requirements associated with recently-enacted criminal justice reforms

o   An increase of $2.3 million over FY19 spending for the Parole Board to support a higher caseload expected to be newly released into supervision

o   $1.9 million for the State Police Crime Lab to increase staffing to meet the new 30-day testing requirement for Sexual Assault Evidence Kits (SAEKs)

·       $9.4 million in funding for a new class of 150 officers at the Department of Correction

·       $8 million in funding for the Shannon Grant program to fund anti-gang and youth violence prevention efforts

·       $4.5 million for a new State Police class of 100 recruits