House leaders unveiled a $41 billion spending plan on Wednesday that rebuffs Governor Charlie Baker’s budget proposal on several fronts, thwarting his efforts to move 140,000 poor adults from Medicaid to private plans and insisting on tighter oversight of the scandal-scarred State Police.
The $40.98 billion budget proposal also ditches Baker’s call to shift millions of dollars of MBTA salaries from its operating budget onto its capital spending plan, a move House Speaker Robert A. DeLeo likened to paying people with a credit card. At the same time, the House instead funnels more money toward the T to help prop up its budget.
The budget proposal relies on a 3.1 percent increase in spending from the current fiscal year, and plows new money into state parks, aid to cities and towns, and funding for K-12 education.
“I feel right now, fiscally, this is a responsible budget,” DeLeo said during a briefing with Globe reporters, adding that it serves the needs of the state’s people while preparing for future economic downturns. “This is sufficient.”
DeLeo had telegraphed a desire to tuck proposals aimed at the State Police in the House budget plan following a string of “troubling” scandals at the law enforcement agency. The agency has been rocked by allegations that dozens of troopers in Troop E put in for overtime shifts they didn’t work. There have also been questions about hidden payroll records and hefty overtime payouts in the unit that patrols Logan International Airport and the Seaport.
As a result, House leaders included a provision to create a “special audit unit” within the State Police that would operate independently of the department and under the direction of the inspector general’s office. Sanchez likened it the special unit the state created years ago in the inspector general’s office that specifically focuses on MassDOT and the MBTA.
House leaders also want to assemble a special legislative commission to study promotion policies at the State Police, in addition to tasking the UMass Boston’s Collins Center for Public Management with making recommendations about how to improve the agency’s “overall management structure.” Reports for each would be due the end of the year.
The proposals come on top of a raft of changes Baker said he’d pursue to overhaul the agency, including eliminating Troop E and starting the process of tracking all police cruisers with GPS monitoring.
The House leader’s spending plan matches Baker’s significant increase for the Department of Mental Health, which put $83 million in new funding to bolster community-based services for adults with serious mental illness. And the House budget matches Baker’s increase for the Earned Income Tax Credit, which helps the working poor.
But they also deviated from some of Baker’s own budget priorities.
The governor’s $40.9 billion budget proposal in January included a plan to move 140,000 low-income adults off Medicaid and onto private plans to save the state money.
Baker said at the time the state could “basically” give people the same benefit plan even with the change, but, under the funding formula, also net the state an additional $120 million in federal funds each year.
But the proposal — which Baker had unsuccessfully pushed last year — was met with vocal opposition by advocates and in the Senate.
Representative Jeffrey Sánchez, the chairman of the House Ways & Means committee, said on Wednesday that House leaders had concerns that Baker could not guarantee that people’s benefits would be protected.
Baker had also sought approval to move some employee salaries at the MBTA to the agency’s debt-financed capital budget, a maneuver designed to slice $27 million from the agency’s budget deficit.
But Sánchez described that effort as “kind of broad” and said that it lacked specificity on which employees would be shifted. The House did, however, include $154 million in stopgap funding for the T — which is $27 million more than what Baker proposed.
“One of the major items we worked on was taking people off that capital budget because quite frankly, you’re paying people on a credit card,” DeLeo said. “I feel for us to be going back to that model would be reversing our course.”
Baker told reporters after an event in the House chamber on Wednesday afternoon that he hadn’t yet seen the details of the House’s plan. But when he was told that lawmakers again rejected his Medicaid proposal, he said he wasn’t concerned about the effect it could have on reining in costs.
“We’ve managed to work our way through some pretty tough budgets over the course of the past few years,” he said, pointing to revenue gaps he said stretched as deep as $600 million toward the end of the fiscal year. “And we managed to put together a budget that worked for the people of Massachusetts. And I’m sure we’ll be able to do it this time.”
The entire budget process comes amidst uncertainty over how state tax policy will look next year. Two separate ballot questions — one raising income taxes on the very wealthy and one lowering the sales tax for everyone — may be put to voters in November, which could scramble the state’s revenue picture.
And then there’s also national economic volatility — for example, whether the United States is facing a trade war with China.
Sánchez said House officials didn’t factor in the impact of either of the ballot questions in crafting the initial proposal, but said they’ll have to adjust if the questions pass. The proposed sales tax cut, for one, could create a $1.2 billion annual hole in the budget if voters pass it.
“If we have to have those difficult discussions, we will have them,” said Sánchez, who labeled the spending plan a “defensive budget for the future.”
Baker has not said whether he supports either of the ballot questions, but said Wednesday he hopes the Legislature can resolve them before the voters do in November.
“I’ve said several times that I would like to have the ballot stuff get dealt with in this legislative session because I think we’ll get a better product,” he said.
While advocacy groups are likely to praise many aspects of the House’s spending document, fiscal watchdogs may growl.
Like Baker’s spending plan, the House leaders’ budget plans for a relatively modest investment in the state’s emergency rainy day fund, plowing $96 million into the account. That would leave the savings account with about $1.5 billion in it by June 2019, or about 3 percent of the state’s budget.
By way of comparison, Massachusetts had socked away a lot more money before the December 2007-June 2009 recession — the state had the equivalent of about 8 percent of the state budget to rely on when the economy tanked. That money, along with help from the federal government, was used to avoid painful cuts to services for the state’s most vulnerable.
This year’s budget comes in the context of a top bond-rating agency rapping the state’s knuckles. Last June, S&P Global Ratings downgraded its measure of Massachusetts’ creditworthiness for the first time in almost 30 years, saying Beacon Hill had failed to replenish the state’s rainy day fund as promised after the last recession.
Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center, said the current deposit is “less than we’d like it to be,” but he said he’s hopeful that lawmakers may have more cash to funnel into its savings account by year’s end.
State revenue is currently running $892 million above benchmark, but House officials say they estimate that number is actually closer to $142 million, given the higher figure may be fueled by people simply filing their property taxes earlier in wake of the new federal tax law.
“Surpluses traditionally go into the stabilization fund,” Berger said.
In the coming weeks, the full House of Representatives will offer amendments to the budget and then pass a full spending plan for the fiscal year that begins on July 1.
Then the Senate will do the same and, subsequently, the two chambers will reconcile their differing budgets before sending the plan to the governor for his signature.Reach Matt Stout at email@example.com. Follow him on twitter @mattpstoutJoshua Miller can be reached at firstname.lastname@example.org.