FY17 Budget Settled (7 Responses)

The legislature passed the Fiscal 2017 budget just in time – on June 30. The fiscal year begins on July 1 and the Governor has 10 days to review the budget before signing it, so, in a sense, it is a little late, but I’m relieved that it is done.

After the House and Senate each pass their own versions of the budget in April and May, three representatives and three senators meet in a conference committee to resolve the differences between the two versions. This year, the conferees had a special challenge because there was a sharp drop in revenue estimates while they were in the middle of their work.

The soft stock market has led to a reduction in capital gains tax revenue from stock transactions. Current year revenues in April, May and June have come in below expectations, and, especially given the new uncertainties in Europe, it seems entirely likely that revenues for next year will also come in lower than expected.

The Baker administration pegged the necessary downward revision of expectations as likely between $650 and $950 million. The conferees chose to work with a revision of $750 million. To put that in perspective, that is about 2% of the state’s budget.

Many of us expected that the need for a downward revision would prolong the conference well into July. We passed a “one-twelfth” budget just to prepare for that contingency. However, the pressure seems to have actually simplified decision-making – in most cases, the conferees tilted towards the lower of the House and Senate budget numbers.

Local aid remains a top priority, even in a difficult budget. The conference budget uses the higher Senate numbers for Chapter 70 and meets expectations on other local aid programs.

The conferees also preserved legislators’ local priority items. I was able to work with my colleagues serving Watertown, Belmont and Boston to fund a number of local priorities.

Two years ago, we overspent in the budget and in a subsequent “economic development” bill. The result was that Governor Baker had to make cuts when he came in. That was a chastening experience for me, because it made me realize that our legislative budget team was capable of financial planning errors.

The Governor gets to make cuts unilaterally when he determines that revenues are not meeting expectations or that spending has risen too high. In practice, that means that, if the legislature is not conservative in its budgeting, it loses control over the process and the Governor gets to set the priorities.

This time around, I think everyone is facing up to the gap and there seems to be a consensus on revenue levels. The economists seem to agree that while capital gains are down and an adjustment is necessary, the Massachusetts economy is still very strong. Certainly, all involved recognize that we will need to keep a lid on additional spending in the biennial economic development bill and supplemental budgets.

The bottom line is $39.146 billion – a 1.7% increase in total. Unrestricted government aid to localities is up 4.3% and Chapter 70 education aid is up by 2.6%. On average, state agencies are seeing increases below the rate of increase in local aid.

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    Will Brownsberger
    State Senator
    2d Suffolk and Middlesex District