Gov. Baker Signs Fiscal Year 2022 State Budget Into Law

Gov. Charlie Baker has signed the Fiscal Year 2022 (FY22) budget into law, a $47.6 billion plan designed to support the Commonwealth’s communities, schools, families, small businesses, and workers as Massachusetts emerges from the COVID-19 pandemic. The budget fully funds the implementation of the landmark Student Opportunity Act, strengthens local communities, and supports key priorities like job training and assistance for small businesses. The budget is in balance, does not rely on new taxes, and forecasts a $1.2 billion deposit in the Commonwealth’s Stabilization Fund, bringing the total balance of the fund to $5.8 billion, an increase of $4.7 billion since the beginning of the Baker-Polito Administration.

The funding in this budget would complement the Administration’s recently filed legislation to immediately put to use $2.915 billion in federal American Rescue Plan Act (ARPA) discretionary funding to help jump-start the Commonwealth’s economic recovery and support residents hardest-hit by COVID-19, such as lower-wage workers and communities of color. This $2.915 billion would include investments in housing and homeownership, economic development and local downtowns, job training and workforce development, health care, and infrastructure. Additionally, with state revenues continuing to exceed benchmarks, the Administration’s proposal for a two-month Sales Tax Holiday would provide further relief for small businesses and residents, especially lower-wage workers who are most impacted by the sales tax.

“The FY22 budget makes historic investments in our communities, schools, economy, and workers as Massachusetts emerges from the pandemic,” said Gov. Baker. “As we continue in our economic recovery, we are focused on supporting those communities that have been hardest hit by COVID-19, and this budget will complement our $2.9 billion proposal to invest a portion of Massachusetts’ federal funds in urgent priorities that support communities of color and lower-wage workers. By working with our legislative partners to carefully manage the Commonwealth’s finances and by reopening our economy, we now expect to make a $1.2 billion deposit in the Stabilization Fund through this budget, bringing the balance to $5.8 billion, an increase of over 400 percent since we took office. We are able to responsibly grow our reserves without raising taxes, while continuing to make historic investments in our schools, job training programs and downtown economies.”

Fiscal Overview

•This FY22 budget incorporates an upgraded $34.3 billion tax revenue forecast. This represents an increase of $4.2 billion over the FY22 consensus tax revenue estimate announced in January, based off better-than-expected actual tax collections in recent months. The budget includes a total of $47.6 billion in gross spending, excluding the Medical Assistance Trust Fund transfer, which reflects approximately 3.6% growth in authorized spending over Fiscal Year 2021 (FY21).

•The budget as enacted is in structural balance, with no planned Stabilization Fund withdrawal. Instead, the revised capital gains tax collections are expected to result in a $1.2 billion deposit in the Stabilization Fund during FY22, bringing the fund to an all-time high balance of $5.8 billion. This represents an increase of $4.7 billion or 421 percent since 2015, a significant achievement thanks to the collective fiscal discipline of the Administration and the Legislature that will help protect essential government services in the event of future economic uncertainty or downturns.

Investing in Massachusetts’ Future

•The FY22 budget supports historic investments in local schools: The budget fully funds the Student Opportunity Act as it includes a $219.6 million increase in the annual Chapter 70 investment. It also provides an additional $28.2 million for special education circuit breaker reimbursement for local cities and towns, as well as $34.3 million in additional funding for charter school reimbursement. This funding complements substantial federal resources including $2.9 billion in Elementary and Secondary School Emergency Relief (ESSER) funding and $3.4 billion in ARPA direct aid for local governments throughout Massachusetts.

•As the impacts of the pandemic have fallen disproportionately on communities of color, the FY22 budget provides over $35 million to continue implementing the recommendations of the Black Advisory Commission (BAC) and the Latino Advisory Commission (LAC). This includes funding across a range of initiatives and programs including Adult Basic Education, YouthWorks Summer Jobs, early college, teacher diversity, small business development, financial literacy, and workforce training. The FY22 budget also fully funds the newly elevated Supplier Diversity Office, which is responsible for ensuring accountability and compliance with diversity goals, overseeing agency diversity spending, and auditing and reviewing spending data.

•Recognizing the significant needs around workforce training identified in the Administration’s recently published Future of Work Report, the Administration is focused on connecting workers with career pathways in high-demand fields. The FY22 budget includes a total investment of $17.9 million across state agencies for transforming vocational high schools into Career Technical Institutes and training 20,000 new workers in skilled trades and technical fields over four years. This initiative will increase student demand, involve businesses in program development and credentials, reduce barriers to licensure, and create incentives for completion and post-graduate employment.

•The budget also supports Massachusetts’ small businesses and downtown economies as the Commonwealth’s economic recovery moves forward. The FY22 budget includes $7 million for the Small Business Technical Assistance Grant Program for entrepreneurs and small businesses, especially those owned by women, immigrants, veterans, and people of color. It also provides $6 million for regional economic development grants.

•To continue supporting local communities throughout Massachusetts, the FY22 budget increases the Unrestricted General Government Aid (UGGA) investment by $39.5 million compared to the FY21 budget. This translates to a total UGGA investment of $1.168 billion to cities and towns. Under the Baker-Polito Administration, total annual UGGA has increased by $222.4 million (23.5 percent).

•The budget provides $3.6 million in funding for Community Compact-related programs including best practices and regionalization and efficiency grants. Additionally, the budget includes $4.8 million for the Public Safety Staffing Grant Program managed by the Executive Office of Public Safety and Security, as well as $3 million for local technical assistance.

•The Governor’s Council to Address Sexual Assault and Domestic Violence, chaired by Lieutenant Governor Polito, continues to work closely with community partners and local stakeholders to ensure that survivors and their families have access to services and supports necessary in times of crisis. The FY22 budget continues these efforts with a $103.8 million investment to address sexual assault and domestic violence, a 61-percent increase over Fiscal Year 2015 (FY15) spending.

•The COVID-19 pandemic has exacerbated substance misuse issues across Massachusetts. The FY22 budget continues to provide substantial resources toward this critical priority with a total investment of $408 million across a variety of state agencies.  This translates to an increase of $72.8 million above the FY21 budget, and an increase of $288.8 million (242 percent) since FY15.

•The public health emergency has also intensified the housing crisis and disproportionately impacted vulnerable communities. The budget continues promoting access to sustainable and affordable housing through numerous programs and initiatives including $197 million for the Emergency Assistance family shelter system, $151 million for the Massachusetts Rental Voucher Program, $85 million for local housing authorities, and $12.5 million in rental subsidies through the Department of Mental Health.

Outside Sections and Earmarks

The Governor also signed several outside sections attached to the FY22 budget. •One such section was filed by the Administration and creates a Disability Employment Tax Credit to support businesses that hire individuals with disabilities. For qualifying employees who work a minimum of 12 consecutive months, this credit will be $5,000 per employee for the first year of employment and $2,000 for subsequent years, furthering the Administration’s commitment to improving employment opportunities and economic security for individuals with disabilities.

•Another section originally proposed by the Administration makes permanent the Massachusetts Education Financing Authority’s College Savings Tax Deduction Program, which was scheduled to sunset at the end of 2021. Nearly 30,000 tax filers across Massachusetts benefit from this program each year and save a total of approximately $2.3 million.

•The Governor vetoed $7.9 million in gross spending. Of 149 outside sections, the Governor signed 122, vetoed 2, and returned 25 to the Legislature with proposed amendments.

•Given the Commonwealth’s fiscal position, Governor Baker vetoed an outside section which would have delayed the implementation of the charitable tax deduction. This deduction was approved by voters 20 years ago and slated to go into effect when state finances allow, and the combination of strong state revenues and serious needs facing non-profits and charitable organizations necessitate this tax deduction’s going into place.

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