Baker trims $162 million from budget

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By Michael Norton and Andy Metzger

STATE HOUSE, BOSTON, JULY 17, 2015….Gov. Charlie Baker on Friday signed an annual budget bill that invests in local aid, transportation and substance abuse treatment while slowing spending growth to 3 percent, triggering an MBTA fiscal control board, and preserving a business tax deduction that was on the chopping block all week.

Baker vetoed $162 million from the $38.1 billion spending plan, drawing serious concerns from the Senate’s top Democrat. The vetoes included $5.25 million in University of Massachusetts funding, $200,000 for a state climatologist and $17.6 million in kindergarten expansion grants.

Coming 17 days into the new fiscal year, the budget sets state government out on a path to accomplish scores of new directives, but Baker’s vetoes and budget amendments as well as a new fiscal 2015 mini-budget represent near-term considerations for the Legislature.

The House, which initiates action on veto overrides and budget amendments, will take time to review Baker’s budget moves. The next formal House session is currently scheduled for Wednesday, July 29.

Gov. Baker addresses media after signing budget [Photo: Antonio Caban/SHNS]
Baker’s vetoes included $38 million in spending earmarks authored by lawmakers, setting up a series of potential clashes with legislators who believe they are most attuned to local spending priorities.

[Veto details:]

The budget contains no new taxes, Baker said at a press conference, while limiting spending growth to 3 percent and assuming an income tax cut from 5.15 percent to 5.1 percent on Jan. 1. The budget delivers tax relief to low-income workers by expanding the state’s earned income tax credit and a Baker amendment preserves, but delays a business tax deduction that lawmakers last week chose to eliminate.

It uses $600 million in one-time solutions but for the first time in four cycles does not draw from the state’s rainy day fund, which state officials are trying to build back up after years of withdrawals.

Baker on Friday signed off on a budget rider creating an MBTA Fiscal and Management Control Board, which he said will meet on Tuesday. Baker named Meridiam Infrastructure partner Joe Aiello to chair the new volunteer board and appointed Lisa Calise, Brian Lang, Steve Poftak and Monica Tibbits-Nutt to the board.

The governor approved language allowing the University of Massachusetts to retain tuition payments, a reform that’s been discussed for years but broke through in this year’s budget talks.

Baker said that by delaying the implementation by several years a corporate tax deduction known as FAS-109 rather than eliminating it, the state would avoid a “bad faith break,” which risked sending a bad message to the business community.

Lepore said businesses that qualify for the deduction will receive the full total $535 million spelled out in a 2008 law, though it will be spread over 30 years starting in about a half a decade. If the law had been repealed rather than delayed, companies would have had to write off their expected future savings all at once, Lepore said.

House Speaker Robert DeLeo and Senate President Stanley Rosenberg, who sent Baker a budget that would have repealed that tax deduction, agreed with the governor on his alternative proposal.

Baker’s chief budget writer said the spending bill enacted by the Legislature required about $300 million in solutions, a problem lessened considerably by the State Lottery revenues coming in over projections. Lepore said the state budget previously had been over-optimistic about non-tax revenue, under-estimated the needs for programs that will need additional spending, and said the Legislature’s budget was $83 million larger than Baker’s plan.

Lepore said the governor was able to veto about $69 million based on revised spending projections and programs that had not yet been initiated were also targeted for budget cuts.

The budget sent to the governor included 487 earmarks and Baker vetoed 189 of them, Lepore said.

Legislative leaders said the bottom line on their budget was $38.1 billion, and even after cutting $162 million, the Baker administration says its budget is also $38.1 billion. A Baker administration official said the Legislature’s budget funded retired employees’ health care with money leftover at the end of the year and tasked the secretary of administration and finance with finding $30 million in savings, deflating the bottom line on its budget bill.

Given the budget deficits that led to major cuts in fiscal 2015, Lepore said the administration was estimating numbers conservatively.

“We have serious concerns about many of the Governor’s vetoes, particularly related to education, where he has cut programs ranging from early childhood to colleges and universities,” Rosenberg said in a statement Friday afternoon. “Given the increasing importance of education in closing the income gap and giving kids a decent chance in a highly competitive economy, cuts to these programs are short-sighted at best. The Senate will take a hard look at these and other cuts as we consider these vetoes.”

An early retirement program is expected to net $126 million in savings, which is less than the $172 million policymakers initially expected in net payroll savings. Lepore said she would find the rest of the savings through a hiring freeze, offering cash incentives to encourage retirement and hiring fewer people to make up for the retired workers.

No layoffs will be needed as a result of the early retirement program, though there are planned layoffs throughout state government including in the Office of Public Safety and Security where there are 20 layoffs in the works, Lepore said. She said because of declining caseloads there is a reorganization at the Parole Board.

Fiscal 2015 came in about $389 million above benchmark, and the administration is sending $50 million of that to reserves and spending $140 million to close out debt due in fiscal 2016. Baker is also filing a $357 million bill to close out spending in fiscal 2015 and fund opioid treatment.

Baker vetoed $17.6 million from the popular kindergarten expansion program, leaving it with $1 million. Lepore said about 90 percent of the state has expanded kindergarten, and now the program merely subsidizes already expanded kindergarten programs. She said the $1 million would fund future expansions.

The advocacy group Early Education for All said Baker had reduced funding for early education and care programs by $5 million and quickly circulated an email form that supporters of those funds could fill out and send to lawmakers with the goal of restoring the money.

Lepore said a $2 million veto, zeroing out a line item for homeless youth, was made because the Unaccompanied Homeless Youth Commission had not yet finalized its recommendations.