Commentary On The Senate Ways And Means Committee FY2025 Budget 

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Commentary On The Senate Ways And Means Committee FY2025 Budget 

The Senate Ways and Means Committee (SWM) released its FY2025 budget on May 7th.  This spending plan totals $57.9 billion, an increase of $1.8 billion over the FY2024 General Appropriations Act (GAA).  Like the Governor’s and House’s versions of the budget, the SWM budget is based on the consensus revenue estimate of $41.5 billion in tax revenue – a decrease of $208 million from last year’s consensus figure.  Given the volatility of revenue collections for the current fiscal year – shortfalls for the first nine months and then more than a $1.5 surplus over anticipated revenues in April – there is a lot of uncertainty around the revenues upon which FY2025 budget proposals are based and this uncertainty warrants a cautious approach to spending.

The Senate, going last in the budget process, has the advantage of reliance on more current revenue numbers when formulating its annual operating budget.  Perhaps, the latest revenue collections made them cautiously optimistic, even while acknowledging the tightening fiscal environment, allowing them to spend more freely on priority areas than they otherwise would.

The budget’s executive summary states that the SWM Committee adhered to a disciplined and responsible fiscal stewardship.  As proof, it indicates that the budget does not include tax increases, or withdrawals from the Stabilization Fund (the state’s reserves) or the Transitional Escrow Account (federal money that has not been appropriated yet). SWM deserves high praise for both of these strategies, but that is not the entire fiscal picture.

Where the SWM budget goes astray is in its use of more than $1 billion in one-time revenues to fund both new and ongoing expenses.  The Senate is not alone in the practice, nor is it the worst offender, as the House relies on $1.19 billion in one-time and new revenue sources and the Governor proposed $1.25 billion in new taxes and one-time revenue sources.  In fact, the following sources of one-time revenue are common to all three versions of the budget:

  • $225 million the Student Opportunity Act Implementation Trust Fund. 
  • $265 million is withdrawn from a fund to pay for early education and care investments.
  • $100 million from a tax amnesty program.
  • $375 million is capital gains tax revenue being diverted from the Stabilization Fund. 

While one can argue that the trust fund resources were dedicated for the purposes for which they are being used, and therefore, a reasonable use of funds, that money will be unavailable next year and thus is not a sustainable way to pay for operating expenses. 

The Senate budget differs from the Governor’s and House’s budgets in two noteworthy ways. The Senate does not propose tax law changes (elimination of various deductions) or additional sources of one-time revenue, (such as using Gaming Funds, allowing online lottery sales, or providing a tax amnesty period) to support this increased spending like its budget counterparts. While Pioneer Institute supports this no new tax approach, it also recognizes that these sizable new investments introduced by the Senate will grow the bottom line of the state budget without any revenue offsets at a time of slow revenue growth.

Examples of noteworthy new investments or increases include:

  • $1.58 billion in the early education and care sector that includes making the Commonwealth Cares for Children (C3) grants permanent and expands eligibility for childcare subsidies; significantly more than the Governor or House. 
  • $2 billion in investments to expand access to public higher education for all; including a $117.5 million appropriation for free, universal community college.
  • $40 million for systemwide implementation of fare-free transit service at the regional transit authorities.

These spending items will either require new taxes in subsequent years or budget cuts elsewhere to sustain these program expansions over time. 

Pioneer Institute appreciates the ebbs and flows of tax revenue collections and the need to smooth out spending cuts over time, but the reliance on one-time revenues seems unnecessary given duplicative or overly generous spending in several key areas.  A sampling of these items include:

  • Universal free lunch program that provides lunches without charge irrespective of need or ability to pay to students in wealthy towns like Cohasset, Weston and Wellesley.
  • A vast expansion of workforce development programs in all executive agencies while also making community colleges universally free resulting in significant programmatic overlap.
  • Backfilling of $820 million in net enhanced federal reimbursements to providers tied to the federal Public Health Emergency now that the pandemic is over.
  • $27 million for four separate re-entry programs to support those released from prison rather than a consolidated, coordinated effort.