Facing a growing clamor to boost public transit funding, Governor Charlie Baker on Wednesday unveiled a $44.6 billion budget plan that would raise the fees imposed on Uber and Lyft rides by $100 million, and funnel the new cash into the MBTA and municipal coffers.
The ride-hailing proposal, which needs legislative approval, opened a new front in the debate over public transportation financing on Beacon Hill, where Baker has generally resisted calls to raise taxes to better fund the Massachusetts Bay Transportation Authority.
It quickly gained support with House leaders, who are weighing their own transportation bill, while putting Baker more at odds with the juggernaut ride-hailing industry over which he’s already sought stricter oversight.
The proposal would increase the per-ride fee on ride-hailing trips from 20 cents to $1, and set aside $73 million specifically for the T. That makes up most of the additional $135 million Baker previously said he would steer to the agency in the fiscal year that begins in July.
It’s also just one part of his broad spending plan for state government, which includes $303 million more for direct local school aid, increased funding for child welfare, and more than 100 policy changes. Those include changes ranging from allowing people to buy lottery products with debit cards to studying whether to cap how much each taxpayer can claim in a state charitable deduction.
“This is the right thing to do,” Baker told a State House news conference about the fee hike, citing the rapid rise in ride-hailing trips statewide that he said puts added stress on roads and bridges and chokes city streets. "This is a significant issue and one we need to deal with it.”
State officials have said that the T was already slated to receive more than $1.1 billion from the state sales tax next year. Baker’s proposal for roughly $135 million more, however, relies on some high-wire budgetary maneuvers.
About $40 million would be generated by a proposal to accelerate sales tax collections by requiring businesses that collect at least $100,000 in sales taxes to more quickly remit money to the state. He also proposed requiring same-day remittance of sales tax on credit and debit card purchases by July 2023, echoing a proposal he submitted, but lawmakers rejected, last year.
Baker is also projecting better-than-expected sales tax revenue in general, which his aides say would pour another $21.8 million into the T.
In addition to bumping the fee to $1, which would push the revenue the state collects from $20 million to $120 million, Baker’s plan would carve out 30 percent of the revenue for cities and towns, while setting 70 percent aside for transportation spending. Baker would then dedicate $73 million of that to the T.
A second-term Republican, Baker had run on a platform of generally opposing fee and tax hikes, though he’s signed a variety into law during his five-plus years in office. And he’s already targeted ride-hailing companies, blaming them on Tuesday for clogging the state’s roads with “very little oversight.”
“It’s very important and it’s clearly popular,” Baker said, referring to state data that show ride-hailing companies completed more than 81 million rides in 2018. But, he added: “There’s a lot of disruption that comes with this.”
The idea appears to have backing in the House. Speaker Robert A. DeLeo said Wednesday that raising the fee is “actively being considered” by lawmakers for their own transportation financing bill, which DeLeo has promised to take up this winter.
Uber executive Josh Gold said in an interview that there are elements of the fee the company supports. For example, he said it’s good that much of the revenue would go to mass transit. But he said Uber would prefer a plan that charges all vehicles, including delivery trucks and personal vehicles, through a scheme such as congestion-pricing.
“Having a fee on one form that makes up less than 10 percent [of congestion], in our mind, that only can be part of a solution,” Gold said.
Lyft, meanwhile, was more critical of Baker’s plan, releasing a statement calling the proposed fee “a five-times increase” that “will not solve the transportation challenges in the state, and will hurt those who can least afford it.”
Budget writers have regularly carved out additional money for the T since Baker took office, including $127 million each of the last three fiscal years. By adding the $73 million from the ride-hailing fee increase in the coming year, it would push that annual transfer to $200 million.
In the past, T officials have often put most of that extra money toward capital projects, a decision that came under harsh scrutiny in a safety panel report released last year that found widespread concern that the push to complete some of those projects came at the expense of daily operations. Baker said this year’s transfer would be for “operating funds.”
While the Baker administration has spent most of its tenure at the T seeking to control its operating budget, officials in recent months have said that various initiatives were likely to create a financial pinch.
That was only compounded by the scathing report examining the T’s safety culture, which called for work that would require still more funding. And many transit advocates have warned for years that the T would be unable to keep its budget balanced without new revenue.
“What we’re seeing from [Baker’s] recent actions is some recognition of that problem,” said Richard Dimino, director of the business group A Better City. He also pointed to Baker’s support for a controversial multistate agreement to price carbon emissions from transportation that would help raise new money for transit, while also likely hiking gas prices. “At least the door is opening in a very important way.”
The budget proposal also increases spending at the Registry of Motor Vehicles by $9 million following its high-profile failure to track alerts on law-breaking Massachusetts drivers. And it adds $500,000 more for “oversight” of ride-hailing companies.
Baker’s plan sets aside $355 million in new spending on K-12 education. Most of that, about $303.5 million, goes toward direct local aid, pushing it to $5.48 billion in total, as officials begin fulfilling the promise of pumping hundreds of millions of more dollars into local schools under the revamped school funding formula lawmakers passed, and Baker signed, last year.
After back-to-back years of budget surpluses topping $1 billion, analysts warned that state was entering a far more challenging fiscal year that could force Baker and lawmakers to make unpopular decisions.
Baker’s proposal sets aside a variety of increases: nearly $10 million for social workers at the Department of Children and Families, $4 million more for the secretary of state’s elections division ahead of the November vote, and $8.4 million for new vocational program designed to train thousands of new workers.
But there also were cuts. The Bureau of Substance Addiction Services saw its budget drop about $10 million, to $153 million. And an account targeting neighborhood gun and violence prevention, supported with $8.3 million this year, was not funded at all. The reason: “to meet projected need,” according to budget documents.