COSTS & REFORMS — THE UPCOMING LEGISLATIVE SESSION

 

DeLeo

^ Speaker DeLeo and Governor Baker do not look happy, as well they might, given the budget obstacles that loom in 2019

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The 2019 legislative session here in Massachusetts looks much less easy than was the 2018 version. This year, the legislature enacted all manner of detail reforms, on all kinds of topics from criminal justice to minimum wage, and from gun regulation to workforce housing and transportation funding. Much of the 2018 work was agreed to unanimously, or almost. I doubt anything like these successes will be done in 2019 without major effort.

First of all, the budget number itself is sure to cramp reform’s style. A recent article in Commonwealth Magazine, by Robert L. Reynolds and Christopher Anderson    — Reynolds is a major fundraiser for Governor Baker — asserts that the state’s financial stability ranks near the bottom of the 50. We face major unfunded state worker pension liabilities and a shortfall in retiree benefits; the “rainy day fund,” it is claimed, has nowhere near the billions of reserve dollars it needs if the state falls into recession; and, so the article cries, health care cost increases show no signs of leveling off. What will the legislature do about these ? Hard to say, given that “no new taxes” is Speaker DeLeo’s litmus test. Governor Baker’s, too.

With respect to health care costs, note that the transfer of opioid addiction responses from criminal justice to health care treatment has certainly raised them. I doubt that the costs of incarceration exceed, or equal, the cost of hospitalization and treatment that we now provide to addicts in recovery — provisions that will increase as the state completes addiction’s  transfer from criminal to health issue. Nor can we turn back. Treatment is the only useful response to addiction. We all recognize that. But the effect upon health care costs will NOT be to decrease this budget item.

Even without accounting for addiction treatment, health care costs in Massachusetts are rising much faster than state revenues. Universal health care, as “Medicare for All,” may be a goal of Federal legislators, but in Massachusetts it’s what we do — and have done since 2006. The state’s population is growing, too, quite rapidly; thus too our health care “universe.” Meanwhile, the Trump administration has cut back the contribution that Federal dollars had been making to Massachusetts’ health care funds. Little wonder that Governor baker, back in 2016, told me that health care cost increases worried him mightily on a long term basis.

They will increase, and the 2019 legislature will really have no choice but to account the increases. In 2018 it and Governor baker were able to allocate to businesses about $ 800 million of health care employee contributions as part of the “Grand Bargain” that included many employee pay and benefit increases (and one large give-back). Will Massachusetts businesses be equally ready to take on additional employee (and retiree) health care costs ? Maybe, if there’s yet another give-back. We’ll see.

Second, several measures of reform that could not get done in 2018 remain, even more urgently than during last year. Education funding probably comes first. The legislature failed to complete its chapter 70 funding formula reform — the bill died before a joint committee could finalize the bill — and Governor Baker has committed to prioritizing education money. As Carrie Healy reported last August, Baker said “there’s more work to do there.” Baker said if he is re-elected, he will file a budget next January that puts more money into the schools that were the subject of concern during the debate.

Baker’s commitment includes chapter 70 reform, and for good reason. The current formula does not prioritize school districts most in need. Boston schools always fall far short of what they assert is needed. That the Boston Schools budget tolerates millions of dollars of inefficiency and special interests is no excuse for the State not contributing properly. Will chapter 70 reform overcome the “equal protection” hurdle that now bars the allocation from favoring one sort of school district over another ? We’ll see.

There will be plenty of outcry for substantial new housing funding. Carrie Healy’s article mentions zoning reform, a huge issue in every community, given the passions that in every community, including Boston,  govern what sorts of housing can be built where. It’s one thing to allocate construction money and land acquisition funds; it’s quite another to win local approval of developments within present zoning law. In Boston, zoning variances are the rule these days, partly because Boston’s exceptional zoning regulations (Boston’s zoning follows a different path than the State’s chapter 90) make construction and renovation very difficult without a variance, and partly because almost every Boston proposal upsets extremely delicate balances of various land-use interests. That said, the State should and probably will increase its housing budget: because if the money is there, those involved will find a way to spend it; and the need for housing is there, given that metro Boston is likely to gain 500,000 new residents, if not more, by 2030.

Thirdly, what about if there’s a recession ? Right now, state revenue well exceeds expectations and thus supports a bullish budget. In recession, those revenues recede too. This is where the “rainy day fund” serves. Today it has something north of $ 1,600,000,000 dollars. Reynolds’s article says it should total closer to three billion. Windfall revenue receipts in FY 2018 added $ 2909,00,000 to the fund: The deposit will push the state’s rainy day fund balance above $1.6 billion, which Baker administration officials said represents an increase of about $500 million since the governor took office in 2015.

If Evan Horowitz’s October article in the Boston Globe is to be credited, the rainy day fund actually totals $ 1,800,000,000. Horowitz says that’ still not enough. If the 2109 budget comes in at about $ 42.5 billion, $ 1.8 billion represents barely two weeks funding. He recommends a fund large enough to fund six weeks of budget — some $ 5.4 billion. We’re nowhere near that. Reynolds and Anderson concur with Horowitz’s $ 5.4 billion figure. How do we get there ? Especially how do we get there in a budget session that demands more money than ever for health care expenses, education funding, and transportation’s “state of good repair” needs ?

There will be one new source of state revenue : marijuana sales in state-licensed marijuana stores. The 2019 prediction is $ 60,000,000 of revenue. sales boomed in this first week. Let’s say that actual marijuana revenue doubles that $ 60 million. It’s still way short of the $ 3.6 billion rainy day fund gap that Reynolds, Anderson, and Horowitz say is needed.

Next month Baker will deliver his “state of the state” speech. It will feature his budget objectives. Soon thereafter DeLeo will appoint a budget chief — his 20-18 chief, Jeffrey Sanchez, was defeated in a primary. T>he new budget chief will have to get accustomed to the task. We might not see the House’s proposed 2019 budget until June. Baker’s, we’ll see before that. They’ll then have only till the end of July to agree on numbers and pass the budget. I remain hopeful that it will address the challenges I have outlined. Hopeful, but not by any means certain. There will be no new taxes — that, all parties agree on. Thus the money just isn’t likely to be there.

—- Mike Freedberg / Here and Sphere

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