Mass. House unveils state budget bill, diverging from Healey’s plans for ‘millionaires tax’ revenue

Massachusetts House Speaker Ronald Mariano.Jonathan Wiggs/Globe Staff

In a hint of the policy divisions separating the Democrats who control Beacon Hill, Massachusetts House leaders on Wednesday unveiled a $56.2 billion state spending plan that diverges sharply from Governor Maura Healey’s blueprint for how to distribute revenue from a new surtax on the wealthy.

The chamber’s sprawling spending bill, which will dominate attention on Beacon Hill in the coming weeks, touches every corner of state government. It would pump billions of dollars into state health care, make state Lottery games available online — and use the money to fund grants for child care facilities — as well as beef up rental aid for struggling families.

It also marks the Democratic-led chamber’s first attempt at articulating how it plans to spend at least $1 billion in revenue from the so-called millionaires tax that voters passed last fall. But while House leaders largely embraced Healey’s plan on overhauling the tax code, their budget proposal included marked differences from the Cambridge Democrat’s initial spending offer.

The supermajorities Democrats wield in both chambers offer legislative leaders wide sway over spending preferences. That makes the House’s initial plan an influential guidepost in Beacon Hill’s months-long budget season. The House will debate its version later this month, followed by the Senate in May.

Higher-earners tax

With $1 billion budgeted from millionaires tax proceeds, the chamber’s Democratic leaders want to funnel $161 million toward permanently making meals free in the state’s K-12 schools and put another $100 million behind a new grant program for public schools to create clean energy projects. Neither item appeared in Healey’s proposal.

At least $320 million also would flow to the MBTA, including funds for capital projects and a workforce reserve; that’s a more than 70 percent increase from what Healey sought. The House plan also ditches Healey’s proposal to freeze tuition in the state university system; instead, the House wants to bulk up spending in a scholarship program for so-called “high demand” jobs.

In addition, House leaders want to manage the money generated by the new tax differently than the governor. While Healey sought to create a single fund to house the tax collections, the House is proposing a more complex system that would utilize three separate funds, including two that would capture any excess money generated beyond the $1 billion leaders agreed to spend next fiscal year.

“We knew everyone was going to be watching where this money was going,” House Speaker Ronald Mariano, a Quincy Democrat, told reporters Wednesday. “We wanted to make sure that it was easily identifiable.”

Narrowly passed by voters on the November ballot, the constitutional amendment increases the state’s 5 percent income tax rate to 9 percent on annual income exceeding $1 million, with all revenue required to flow to education and transportation initiatives.

The majority of Healey’s plan — $591 million — of next year’s millionaires tax revenue would be spent on one-time investments; notably, just $10 million, or 1 percent of the new revenue, would go toward the state’s K-12 schools. She proposed dedicating at least $186 million to the MBTA and $360 million to higher education.

While the surtax revenue is only a slice of the overall budget, it’s being closely tracked both on and off Beacon Hill, where demands for the extra money are many while the actual money it will raise remains a bit of a mystery.

Revenue officials have said the new surtax could generate far more than is being budgeted, with anywhere from $1.4 billion to $1.7 billion coming in during the next fiscal year. But they also warn that it relies on “highly volatile” capital gain collections that can fluctuate even in heady fiscal times.

Housing

House leaders emphasized an array of additional spending to help ease the state’s housing crisis. They want to dedicate nearly $181 million toward a rental assistance program that would offer $7,000 per household in assistance each year; Healey had proposed allowing $7,000 every two years.

The House did mirror Healey in one respect, proposing $324 million for the state’s overwhelmed emergency assistance family shelters program.

They also want to revive and make permanent a pandemic-era renter protection law, which would bar landlords from evicting financially struggling tenants who have applied for rental assistance.

The Legislature allowed the original — but temporary — measure known as Chapter 257 to lapse at the end of March despite pleas from homeless and housing advocates to keep it in place until at least July 2024.

Early education

Legislative leaders are seeking to inject the state’s child care sector with a range of new funding in a bid to stabilize an industry plagued by staffing shortages and long wait lists.

This includes a proposed $490 million in Commonwealth Cares for Children funding, known among providers as “C3″ grants — a bump over the $475 million Healey proposed. But that figure includes a different mixture of sources. The House proposed using $250 million from the state’s general fund, the dominant tranche of state funding, and another $40 million would flow from millionaires tax revenue.

The remaining $200 million would come from an entirely new funding source: revenue generated by allowing the Lottery to sell its products online. It’s a revival of an idea that has been floated on Beacon Hill for at least a decade, pushed by state Treasurer Deborah Goldberg, and embraced last session by the House only to falter in closed-doors talks over a wide-ranging economic development bill.

The dawn last month of mobile sports betting also poses another risk of eating into Lottery revenue, argued Representative Aaron Michlewitz, the House’s budget chief.

“It’s time for our lottery system to also have a competitiveness advantage, or an equal playing field,” the North End Democrat said.

Policy pitches

In addition to setting out spending priorities, the House budget includes several notable policy measures:

— The House is pushing to provide calls at no cost in Massachusetts state prisons and county jails, reviving a plan it first embraced a year ago. Its version also goes further than Healey’s proposal, which would include the change in only state prisons under the Department of Correction. The governor also sought to set a monthly 1,000-minute limit for free calls per person. The House proposal includes no such cap, legislative officials said.

— The MBTA’s board of directors would expand from seven to nine seats, with one spot going to an appointee of Boston Mayor Michelle Wu and the other going to an additional gubernatorial appointee that would have to be a municipal official from a city or town served by the T.

— Amid its highly public and politically sensitive dispute with state Auditor Diana DiZoglio, who is seeking to probe the Legislature, the House recommended giving her office $26.6 million, the same amount Healey sought. But it nixed a Healey-backed proposal to give DiZoglio four years, instead of the current three, to complete her agency’s required audits.

“We felt the budget was not the place to potentially settle political scores,” Michlewitz said.