With no state budget in place weeks into the new fiscal year, a top state official called for Governor Charlie Baker on Monday to file another temporary spending bill to keep state government funded through August — a major indication negotiations are far from settled.
Massachusetts is one of just two states with a fiscal year starting July 1 where lawmakers have yet to pass an annual spending plan, despite a healthy flow of tax revenues and relatively few policy proposals to be settled between negotiators. The other state is Ohio, where lawmakers face a Wednesday deadline to pass their annual proposal before requiring another extension.
A $5 billion placeholder is also keeping Massachusetts government afloat, albeit through July. But in an early evening statement, a spokeswoman for House Speaker Robert A. DeLeo said it would be “prudent” given the state of the negotiations that Baker file a placeholder bill for August “to ensure the Commonwealth’s fiscal obligations are met.”
The speaker’s comment came just hours after DeLeo first injected doubt into the talks’ progress, saying the delay is something to be “concerned about. He also floated that lawmakers may have to weigh “other options” if talks drag on, including separating the plan’s policy and spending differences.
It’s an idea he also floated a year ago when the Legislature was the last in the country to enact a budget. “It’s my hope that we don’t get to that point,” DeLeo said.
A Baker spokeswoman did not commit to the governor filing another temporary spending bill, saying in a statement that he “looks forward to the Legislature reaching consensus soon.”
That the Legislature is so far behind isn’t unprecedented. In rapping Massachusetts and others with late budgets for “governance weakness” earlier this month, Moody’s Investor Services noted that tardy budget-making is common here. In fact, it’s now nine straight years that officials have used a temporary budget to keep government running.
There’s an array of potential hang-ups lurking in budget talks, from wrangling over specific issues to the bandwidth of staff and negotiators. The sides are led by Representative Aaron Michlewitz and Senator Michael J. Rodrigues, both of whom were named their chambers’ budget chairs this year.
Lawmakers, however, can’t blame the fiscal environment. The state is flush with cash, and an expected fiscal year-end surplus — potentially worth hundreds of millions of dollars — still awaits policy-makers, eliminating any need for painful discussions over cuts.
The budget is also relatively thin, at least as far as a $43 billion proposal goes. The House tucked 52 unique policy sections — aspects of the budget that don’t concern spending —into its proposal this year, while the Senate passed 86 that the lower chamber didn’t include. That’s less than half the number from last year, when the House and Senate had 109 and 185, respectively, according to the Massachusetts Taxpayers Foundation, a business-backed watchdog.
The differences between the chambers “do involve some impactful programs — like education, like prescription drugs, like taxes — but it is a little bit surprising,” said Eileen McAnneny, the foundation’s president, of the delay. “This budget certainly wasn’t as challenging as the early years after the recession where there were deficits and a lot of demands for spending. This year poses fewer of those challenges, for sure.”
SO WHAT’S THE IMPACT?
There hasn’t been a threat of a government shutdown because officials have the ability to file placeholder budgets.
Nevertheless, the delay in cementing an annual plan is trickling down: the UMass Board of Trustees, which has yet to set to tuition and fees for next academic year, decided last week to postpone its meetings until officials have “additional clarity around the state budget,” according to spokesman Colin Murphy.
Both chambers voted to give the five-campus system a $39 million hike to its state spending package, but the Senate’s came with a major caveat to unilaterally freeze tuition and fee hikes. That set off a heavy lobbying push by UMass officials, who warned that handcuffing their ability to raise costs for students could lead to deep cuts.
Without a finalized budget, that’s a still a major question left unanswered, and Murphy on Monday warned of other “downstream impacts,” including delaying the release of invoices and financial aid to students.
Any lingering delay could begin to hamstring other public agencies, too.
“One drawback is agencies are uncertain what their spending levels are going to be for the year,” Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers, which tracks legislative spending nationwide, said of a tardy budget. “We’ve seen some states now with school districts being uncertain about what they’re going to receive. That can make it more difficult for planning.”
SO WHAT’S THE HOLD-UP?
Budget negotiators routinely do not discuss the substance of their closed-door talks, and the six members — four Democrats, two Republicans — have said little publicly since first meeting on June 5. But there were a number of stark differences facing them, most notably plans intended to curb drug prices paid by the state Medicaid program.
The Senate largely adopted Baker’s approach , which gives state officials more power to demand that companies negotiate lower prices by publicly setting target values for expensive drugs and subjecting companies to more oversight from the state Health Policy Commission — including public disclosure of price information.
The House, after a lobbying push from the Massachusetts Biotechnology Council, backed a softer version of the plan that strips requirements around public disclosures.
Both chambers also included what they described as down payments toward a larger (and still under discussion) overhaul of state education funding. The Senate proposal, however, tabs tens of millions of dollars more in local aid to school districts, while the House offered a plan to change the state’s charter school reimbursement formula.
And there are tax differences, too. The Senate, like Baker, proposed targeting drug manufacturers with a 15 percent levy on gross receipts of opioid sales in Massachusetts and extending taxes to e-cigarette products. The House didn’t include either in its plan.
SO WHAT’S NEXT?
When lawmakers ultimately do reach a deal, it will have to pass both chambers, which usually is a formality.
Baker will then have 10 days to review it, and he has the power to veto specific spending and policy sections. That could set off a new round of maneuvering in the form of budget overrides.
But lawmakers need to agree on what the budget will look like first.
“We need to do our job and get the budget done as soon as we can,” Senate President Karen E. Spilka said Monday. “I think all focus and all energies should be on getting the budget done so we can move forward on so many other important issues before us.”