A GROUP OF NEARLY 30 advocacy organizations urged House and Senate leaders to reject a budget-balancing maneuver put forward by Gov. Maura Healey that uses funds raised by the millionaire tax to help balance the fiscal 2024 budget.
Money raised by the millionaire tax was supposed to go for new transportation and education programs and not simply displace existing state funding that could then be used for other government programs. The challenge to Healey’s approach represents one of the first tests of how millionaire tax revenues are being spent, and whether the will of the voters is being honored.
At the end of fiscal 2024 on June 30, the Healey administration faced a dilemma. Revenues from the millionaire tax totaled $2.2 billion, $1.2 billion more than had been budgeted. At the same time, general tax revenues came in $233 million below projections, leaving a small deficit to cover.
In a closeout spending bill, Healey has proposed using $225 million in excess funds from the millionaire tax to pay for child care grants, universal school meals, and Massachusetts Department of Transportation operations. All three had been funded in the fiscal 2024 budget using a combination of millionaire tax revenues and general tax revenues. Using millionaire tax revenues to cover a larger share of those costs freed up general tax revenues that could then be used to balance the fiscal 2024 budget.
The governor justified the cost shifting by noting that the child care grants and universal school meals were Covid-era federal programs that are being continued post-Covid using money from the millionaire tax. In a letter to the Legislature, Healey noted the surplus millionaire tax money is going to cover programs that “align with the approach already taken by our administration and the Legislature in the fiscal 2025 budget.”
The advocacy groups said in a letter to top Beacon Hill officials on Tuesday that Healey’s approach should be rejected. The letter said millionaire tax revenues, sometimes referred to as Fair Share dollars because that was the name of the coalition that advocated for the tax change, should be used for new investments in transportation and education, not to “backfill accounts to balance the budget.” The groups urged the administration to balance the fiscal 2024 budget using money from the state’s stabilization budget, which currently has a balance of nearly $9 billion.
“We believe that shifting funds from the Education and Transportation Fund [the account where surplus millionaire tax revenues are kept] to backfill accounts that were previously funded by the General Fund sets a bad precedent for future budgets,” the advocates said in their letter. “Using the Fair Share dollars to balance budgets rather than make new investments in transportation and education moving forward risks damaging public trust. We believe a much better approach would be to use funds from the Stabilization Fund, as historically has been done, to close out prior year’s budgets.”
The advocates who signed the letter included representatives from Transportation for Massachusetts, WalkMassachusetts, LivableStreets Alliance, TransitMatters, the Massachusetts Bicycle Coalition, the Conservation Law Foundation, and the Massachusetts Public Health Alliance.
Doug Howgate, president of the Massachusetts Taxpayers Foundation, said his organization is taking a slightly different stance on the budget dispute. He noted the state budgeted to spend $1 billion in millionaire tax revenues in fiscal 2024, but ended up at the end of the year with $2.2 billion. What the administration is doing, he said, is retroactively upping the budgeted amount from $1 billion to $1.25 billion.
Howgate said that approach may make sense, but clear rules and transparency are essential. He urged state officials to take millionaire tax revenues left over from fiscal 2023 to balance the fiscal 2024 budget and then, going forward, establish ground rules for spending surplus millionaire tax funds.
House and Senate budget officials have taken no action yet on the governor’s closeout spending bill.
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