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Deal struck on $43 billion state budget, drug price controls

(Nathan Klima for The Boston Globe/File)

Three weeks into the fiscal year, legislative leaders on Sunday filed a compromise state budget proposal that plows nearly $270 million more into public school spending, increases funding to the University of Massachusetts without freezing tuition, and spends hundreds of millions more dollars than either the House or Senate initially proposed.

The $43.1 billion proposal, which lawmakers expect to pass and send to Governor Charlie Baker on Monday, also includes compromise language aimed at curbing the cost of prescription drugs in the state Medicaid program — a time-consuming debate during lawmakers’ weeks-long negotiations.

Overall, the bill tacked on $317 million more in spending than either the House or Senate had approved as part of its own debate in the spring, in addition to setting aside hundreds of millions more for the state’s reserves and $23 million more for the MBTA and Massachusetts School Building Authority. That’s because an expected budget surplus prompted negotiators to rely on a rosier fiscal forecast for the current fiscal year.

The bill also slashed plans for new taxes on opioid manufacturers and vaping products, both of which Baker had proposed.

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As expected, the proposal puts a heavy emphasis on beefing up school spending. It would add $268.4 million to the state’s current contribution to public school funding, officially known as Chapter 70, pushing total aid to nearly $5.18 billion. It’s the same amount the Senate had passed in May in what officials then called the largest one-year hike in the last two decades.

It also includes a $39 million increase for the University of Massachusetts system. But it drops language the Senate passed to freeze in-state tuition and fees, making it very likely UMass officials will hike costs for students in the fall. In its place, the bill requires that university officials meet with lawmakers in January to detail their spending.

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“This is a good first step. I think the message was sent that we’re going to take higher education [funding] as seriously as we take K-12,” said Senator Michael Rodrigues, the Senate’s budget chair.

Massachusetts is the only state in the country with a fiscal year starting July 1 in which the Legislature has yet to pass a final spending bill. State government has not shut down because lawmakers passed a temporary $5 billion budget in late June, but the delay in reaching a budget deal had prompted House Speaker Robert A. DeLeo to call on Baker to file another stopgap spending measure.

The move sparked questions of just how long negotiations could drag on, but both chambers’ budget chairs said they were hopeful the state would not need another placeholder to supplement the $5 billion appropriation, even though the 10-day window Baker is given to review the budget could carry into August.

“All in all, I wish we would have completed it three weeks ago,” Rodrigues said Sunday. “It’s a good, fiscally responsible budget. Hopefully tomorrow, the House and Senate can vote on it and send it to the governor.”

Lawmakers also reached a compromise on a controversial proposal to tackle prescription drug spending in the $16 billion MassHealth program, the state’s version of Medicaid. Their budget deal gives administration officials more authority to negotiate prices with drug manufacturers, and it would allow the administration to set a proposed value for expensive drugs and to hold public hearings about the proposed value.

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The compromise budget allows the administration to refer an expensive drug to the state Health Policy Commission for further review. The commission could then demand detailed information about the drug price.

Baker’s original proposal went further, allowing the Health Policy Commission to refer drug makers to the attorney general’s office for investigation under consumer protection law.

The compromise budget does not include the mechanism to refer drug companies to the attorney general, and it would not force drug companies to testify before the Health Policy Commission at a public hearing.

Rodrigues said lawmakers spoke with Attorney General Maura Healey, who said “very clearly” that she has the authority to intercede without a specific referral.

The debate around drug pricing was marked by heavy lobbying from industry groups such as the Massachusetts Biotechnology Council. Industry lobbyists argued that Baker’s proposal went too far; they said it would punish innovative companies while chilling investment in the sector.

Senators largely sided with Baker in their budget proposal, while the House softened the language.

“I think the process that we have in place will allow for us to accomplish the goal that we all want, to lower drug prices,” said Representative Aaron Michlewitz, the House’s budget chair.

Massachusetts Biotechnology Council president Robert K. Coughlin said the Legislature’s compromise on drug pricing is “the most severe Medicaid drug pricing reform in the country and is not a win for the life sciences industry.” But Coughlin thanked House and Senate budget negotiators for leaving out “the most radical language proposed by the Baker administration.”

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Matt Stout can be reached at matt.stout@globe.com. Follow him on twitter @mattpstout. Priyanka Dayal McCluskey can be reached at priyanka
.mccluskey@globe.com. Follow her on Twitter @priyanka
_dayal.