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MTA's analysis of the FY11 budget

The final $27.6 billion FY 2011 state budget was approved by the Legislature on June 24 and now goes to the governor for his signature. It includes millions of dollars in cuts to preK-12 education and public higher education, but leaves municipal health insurance unchanged. The Conference Committee budget, which reconciled differences between the House and Senate versions, had to cut $687 million more than originally expected because the U.S. Senate has failed to extend a form of stimulus funding called the Federal Medical Assistance Program – FMAP.

Below is a summary of the budget, with emphasis on the impacts on education. It is taken primarily from the Massachusetts Budget and Policy Center. For MassBudget’s full report go to: http://www.massbudget.org/documentsearch/findDocument?doc_id=730&dse_id=1236 

Budget Spreadsheet

Preliminary Analysis: The Fiscal Year 2011 Conference Committee Budget


Thursday, June 24, 2010
Introduction

Responding to the danger that Congress will fail to provide state fiscal relief that had been preliminarily approved by both the US House and Senate, the Conference Committee budget implements a new round of cuts to health care, education grants, public higher education, early childhood education and child care for working parents, elder home-care services, human services, and other areas of the state budget.

Economists have found that providing state fiscal relief is among the most effective things that the federal government can do to stimulate the economy and create jobs. Aiming to avoid new state budget cuts that would harm both the national economy and the capacity of state governments to provide services that people depend on, the President supported, and both houses of Congress initially approved, $24 billion in additional aid to the states in the form of increased federal reimbursements for state Medicaid expenses (called FMAP). This would have generated close to $700 million for Massachusetts. Massachusetts, like 29 other states, incorporated this revenue in preparing its budget.

The jobs legislation that contained this aid and also continued unemployment benefits for the long term unemployed has stalled in the US Senate. Opponents argue that the legislation is a problem because it adds to the federal deficit. The federal deficit is a serious long term problem and will require serious long term solutions. The solution to our long term deficit problems is not, however, to eliminate temporary spending that is needed to create jobs and protect our nation’s economic recovery. In fact, there is a danger that if needed stimulus is not provided and the economic recovery stalls, that could increase the deficit as increased unemployment leads to reduced revenue and additional costs.

In addition to imposing over $300 million in additional cuts to address the loss of support from the federal government, the Conference Committee budget also makes use of additional temporary revenue and makes more aggressive assumptions about the amount of revenue that will be generated by the state lottery and several other non-tax sources. The Conference Committee also specified to which line items federal money would be allocated if it does become available.

In this preliminary analysis we provide information on a number of items in the conference committee budget, describing the proposed funding levels, how they compare to current spending and to the House and Senate proposals. We also describe when those line items could receive additional funding if federal assistance is provided.

Education

The Conference Committee funds public education at $6.5 billion, reflecting cuts of $179.8 million (2.7 percent) from funding levels in the FY 2010 budget. This cut is similar to the cut proposed in the House and more severe than the cut proposed in the Senate. If FMAP is fully extended, education will still be cut, but by $114.3 million (1.7 percent) instead of $179.8 million (2.7 percent).

By and large, the Conference Committee report adopts the lower funding level when choosing between the House and Senate recommendations.

Chapter 70

The Conference Committee provides $3.9 billion for Chapter 70 aid to municipal and regional school districts, which is $116 million less (3 percent) than FY 2010 and is identical to both the House and Senate FY 2011 proposals. An FMAP extension would not impact Chapter 70 aid.

In FY 2009 and FY 2010, ARRA funding was used in combination with state funds in order to offset potential cuts to Chapter 70 aid. In FY 2011, however, ARRA funds are significantly reduced, requiring the state to contribute more of its own funds toward Chapter 70 aid. The Conference Committee budget uses only $75.3 million in FY 2011, whereas in FY 2010 $172 million of ARRA funding was used for Chapter 70.

Although the overall cut to the Chapter 70 appropriation is 3 percent, the proposal actually calls for a cut of up to 4 percent. This means that the cut impacts districts differently. If the full 4 percent cut would bring districts below their foundation level, the cut would be reduced in order to maintain all districts at the foundation budget amounts, as calculated by the House and Senate. Thus, some districts would receive a smaller reduction while others would receive the full 4 percent cut, resulting in a net reduction of 3 percent.

Elementary and Secondary Education

In addition to Chapter 70 funding, the Conference Committee funds other elementary and secondary education programs at $423.4 million, reflecting cuts of $8.1 million from FY 2010, which are more severe than both the House and Senate proposals. If FMAP is fully extended, these programs together increase above FY 2010 levels by $17.9 million (4.2 percent).

Additionally, the Conference Report cuts the following K-12 public education programs:

  • Extended Learning Time Grants are funded at $13.9 million, reflecting a cut of $1.8 million (11.2 percent) from FY 2010. This cut will be almost completely restored if FMAP is fully extended. This funding amount is $1 million less than the House proposal. The Senate proposed level funding.
  • Adult Basic Education is funded at $27.7 million, reflecting a cut of $382,988 (1.4 percent) from FY 2010. This funding will be almost completely restored if FMAP is fully extended. This cut is more severe than the $255,000 cut proposed by both the House and Senate.
  • Kindergarten Expansion Grants are funded at $22.9 million, reflecting a cut of $3 million (11.6 percent) from FY 2010. This cut will be fully restored if FMAP is fully extended. Both the House and Senate had proposed appropriations very close to level funding.
  • School-To-Work Program Matching Grants are eliminated. This program received $1.6 million in FY 2010 and it will receive $450,000 if FMAP is fully extended. The Senate proposed complete elimination, whereas the House proposed funding of $450,000.
  • METCO is funded at $17.6 million, reflecting a cut of $849,000 from FY 2010, which is identical to the cut proposed in the House. METCO will not see restored funding if FMAP is fully extended. The Senate proposed level funding.

Higher Education

The Conference Committee provides $952.4 million for higher education, representing a $124.2 million (11.5 percent) cut from FY 2010. Of this total, $848.9 million is for state colleges, community colleges, and UMASS. This funding level is $7.3 million (0.8 percent) higher than the House proposal and $76.1 million (7.4 percent) lower than the Senate’s. If FMAP is fully extended, higher education will instead receive $983.1 million, reflecting a smaller cut of $93.6 million (8.7 percent).

The Committee’s $952.4 million funding level depends on $20.8 million in ARRA funding and includes a provision allowing state colleges, community colleges, and UMASS to retain tuition from out-of-state students starting in FY 2012. (Technical edit made on June 25, 2010).

Additionally:
The Massachusetts State Scholarship program is funded at $86.5 million, reflecting a cut of $2.3 million (2.6 percent) from FY 2010. This program will be restored just above level funding if FMAP is fully extended. While the House and Senate both proposed cuts, the Conference Committee’s cut is more severe.

School Building

The School Modernization and Reconstruction Trust (SMART) is funded at $644.3 million, reflecting an increase of $64.2 million (11.1 percent) from FY 2010. Because the Commonwealth is required to contribute to this trust an amount equal to one penny of the state sales tax, SMART funding is not subject to change based upon the pending FMAP extension. Based upon sales tax revenue projections, both the House and Senate proposed similar increases to this fund.

Early Education and Care

The FY 2011 Conference Committee budget proposes the following:

  • $228.5 million in child care funding for income-eligible families. This proposal is below both the House and Senate proposals of $233.6 and $233.5 million respectively, and is also $33.4 million, or 13 percent, below current FY 2010 budget levels. If additional FMAP funding becomes available, this appropriation could increase by up to $5 million.
  • $85.7 million in child care funding for children with active cases at the Department of Children and Families (DCF). Although this falls below the House proposal of $89.8 million, it matches the Senate proposal. The Conference Committee proposal is $7.9 million, or 10 percent, above current FY 2010 budget levels. If additional FMAP funding becomes available, this appropriation could increase by up to $2.4 million.
  • $127.4 million in child care funding for families served by or transitioning from Transitional Aid to Families with Dependent Children (TAFDC), matching the amount proposed in both the House and Senate budget proposals. The Conference Committee proposal is $11.1 million, or 10 percent, above current FY 2010 budget levels. This appropriation would not be affected by the availability of additional FMAP funds.
  • $7.5 million in funding for Head Start state grants. This proposal is below both the House and Senate proposals of $8 million, and is also $500,000 below current FY 2010 budget levels. If additional FMAP funding becomes available, this appropriation could be increase by up to $500,000.
  • $7.5 million in funding for the Universal Pre-Kindergarten Program. This falls below both the House and Senate proposals of $8 million, and is also $500,000 below current FY 2010 budget levels. If additional FMAP funding becomes available, this appropriation could increase by up to $500,000.
  • $750,000 for Early Childhood Mental Health grants. This falls below the House proposal of $1 million but matches the Senate proposal. Compared to current FY 2010 levels, the Conference Committee proposal represents a $250,000, or 25 percent, reduction for this program. If additional FMAP funding becomes available, this appropriation could increase by up to $250,000.

EDUCATION POLICY and MEMBER BENEFITS
Below is information on “outside” sections of the budget that affects both education policy and member benefits.

Pre-K-12 Education

SPED Appeals Process
These sections together set up an independent bureau of SPED appeals, located in DESE, but not under its control (this was a reorganization proposal of the Governor, who has been working with school officials and SPED advocates on this reorganization).

Charter Schools
Requires that in the event of charter school closings or grade eliminations, school districts shall retain chapter 70 allotments for students who attended the previous year.

Haitian Students
Plan for assistance for local school districts to address increased costs due to earthquake in Haiti.

Higher Education

Out-of-state Tuition Retention
Higher Education institutions allowed to retain out-of-state tuition and fees.

Section 162 – Study In-state tuition retention
Special Commission to study in-state tuition retention.

Employee Benefits and Rights

Pension Cap
Tightens the cap on earnings for purposes of pension contributions and benefits to 64 percent of the federal limit ($245,000 in 2009) effective for those hired on or after January 1, 2011. The cap is pegged to inflation.

Return of Accumulated Pension Deductions
Retirement system members with less than 10 years of service, who withdraw their pension contributions, will receive refunds reflecting the inclusion of three percent in interest earnings.

Pension Appeals (DALA)
Provides for a full evidentiary hearing at the Division of Administrative Law Appeals at the election of either party. A reasonable administrative fee may be imposed for the initiation of a claim for the purposes of assisting in the employment of magistrates.

Prorating Retiree Health Insurance
Contributions for retiree health insurance will be charged to employing jurisdictions based on the portion of the employee’s service in each jurisdiction.