Baker signs $ 47.6 billion annual budget, showdown looms

Governor Charlie Baker enacted a $ 47.6 billion budget for this fiscal year on Friday, slapping $ 7.9 million in spending on the bill lawmakers sent him a week ago and also putting his veto a section that further delays the implementation of a voter-approved charitable donation tax deduction in 2000.

In a message to lawmakers, Baker said the bill increased spending by about 3.6% from last year, excluding some remittances. The final budget contains $ 2.9 billion more than the spending plan Baker tabled in January, but is also based on estimates of tax collection significantly higher than those that were in place over the winter. .

More than half of that increase, or $ 1.4 billion, relates to MassHealth, “where the expansion of the federal public health emergency results in higher enrollment projections, but also a higher federal reimbursement that offsets increased spending, ”Baker wrote.

“In the six months since I tabled the first draft of this budget, the reopening of the economy has allowed our residents to begin to re-engage in the routines of public life,” he said. . “Meanwhile, to an almost unprecedented degree, federal fiscal and monetary policies have supported household, business and government spending. As a result of this economic activity, tax revenues this spring have greatly exceeded expectations. “

The increase in tax revenue led legislative negotiators to raise revenue expectations and preserve savings by reversing a planned $ 1.5 billion withdrawal from the state’s rainy days fund.

In a warning, Baker wrote that the state must “remain alert to the risk that economic activity is bolstered by ultimately unsustainable levels of federal spending, and that the currently high growth in our tax revenues may slow as we move forward. federal emergency spending is gradually phasing out “.

“Reflecting this mixture of confidence and prudence, the Legislature proposed that we set aside $ 600 million in this budget for future education and retirement costs ($ 350 million and $ 250 million respectively),” he wrote. “We applaud the instinct to use unforeseen income for future liabilities, but respectfully suggest that we could achieve the same result, with less risk, by making these transfers from the fiscal year 2021 surplus (FY21 ) rather than an expected future surplus. “

The governor returned 25 policy sections to lawmakers with proposed amendments, including sections transferring $ 250 million to the Commonwealth Pension Liability Fund and $ 350 million to a new Student Opportunity Act Investment Fund.

“Both transfers have merit,” Baker wrote, before warning that the state’s fiscal position could change and proposing language that would instead transfer the same amounts of money from excess funds in fiscal 2021.

Baker said he had vetoed “$ 7.9 million in spending which I consider problematic for reasons specific to the relevant budget items” and approved about $ 90 million earmarked for one-off local projects, a decision that will go well to lawmakers who inserted these expenses. guidelines.

Of the 149 outer sections, Baker also vetoed two and signed 122.

One of the rejected articles called for a study on the impacts of the COVID-19 pandemic on children’s behavioral health and related services, and the other postponed the implementation of a tax deduction to increase donations charities and non-profit organizations.

Voters approved the charitable deduction in 2000, but its implementation has been frozen and delayed over the years. Baker said he hit the proposed last deadline because “the combination of high state revenues and serious needs faced by nonprofits and charities necessitates the implementation of this tax deduction.”

The Massachusetts Nonprofit Network, which supports the veto, estimated that more than 627,000 low- and middle-income donors would use the deduction each year.

“Now is the right time to restore the state charitable deduction,” Jim Klocke, CEO of the network, said in a statement. “This will encourage charitable giving and benefit Massachusetts donors, most of whom are low and middle income residents.” Government revenues are increasing rapidly and we can now reinstate the deduction. “

Lawmakers described their budget as having a net profit of $ 48.1 billion. The smaller total of $ 47.6 billion that the administration uses excludes a trust fund transfer for medical assistance.

The new budget does not include any blanket tax increases, and it increases Chapter 70 funding to local school districts by $ 219.6 million, for a total of about $ 5.5 billion.

It makes the state tax credit for film production permanent by removing an expiration date for 2022 and imposes stricter eligibility conditions around the program.

The Massachusetts Production Coalition said making the incentive permanent leaves Massachusetts “in a position to capture much of the jobs and income created by new productions planned in the post-pandemic entertainment industry.”

Hailing a “watershed moment” for members of its film division, Teamsters Local 25 said preserving credit would help film production workers thrive in Massachusetts.

The budget includes $ 571 million for the University of Massachusetts system.

“This support, combined with the federal investments advocated by our delegation to Congress and the innovative management of our campuses, has positioned the university to serve as a central pillar in the post-pandemic Commonwealth economic recovery,” said the UMass president Marty Meehan in a statement. declaration.

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