THE HOUSE on Thursday unveiled its closeout spending bill, and tucked inside was an interesting policy difference with the Healey administration.
Closeout spending bills are intended to deal with fairly random budgetary issues left over from the previous fiscal year. One of those issues for fiscal 2024, which ended on June 30, was a small deficit of $233 million. The question for budget officials was how to cover that deficit.
Gov. Maura Healey gravitated to money from the state’s surtax on income over $1 million, which is often called the millionaire tax. Revenue from the millionaire tax totaled $2.2 billion in fiscal 2024, $1.2 billion more than had been budgeted.
The governor proposed taking $225 million of the excess millionaire tax money and using it to pay for child care grants, universal school meals, and operation funds allowing the state Registry of Motor Vehicles to implement the Work and Family Mobility Act, which permits residents to obtain a driver’s license regardless of their immigration status.
All three initiatives had been funded in the fiscal 2024 budget using a combination of millionaire tax revenues and general tax revenues. Using the surplus millionaire tax revenues to cover the general tax revenue portion of those budget items freed up general tax revenues that could then be used to balance the fiscal 2024 budget.
But Healey’s accounting maneuver aroused opposition from a group of activists who worried that it set a bad precedent. “Using the [millionaire tax] dollars to balance budgets rather than make new investments in transportation and education moving forward risks damaging public trust,” said the activists in a letter to House and Senate officials. “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 House in its closeout spending bill took the critique to heart, leaving the surplus millionaire tax money untouched and proposing instead to use surplus capital gains revenue to cover the deficit.
Normally, 90 percent of capital gains revenue above a certain threshold goes into the stabilization fund. The governor proposed directing 45 percent to the stabilization fund and 45 percent to an escrow fund that could be used for one-time funding emergencies. The governor has largely drained the fund in recent years to cover funding shortfalls in the state’s emergency assistance program.
In its closeout spending bill, the House directs 43 percent of the excess capital gains funds to the stabilization fund and 47 percent to the general fund to cover the small fiscal 2024 deficit and a few other items.
House officials confirmed the spending arrangement but didn’t go into detail on why they adopted that approach. “The House felt like using excess capital gains revenue was a better way to balance the budget than using [millionaire tax] funds,” one official said in an email.
A Healey spokesperson declined comment, saying the House’s close-out budget is still being reviewed.
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