To state officials and legislators, the new law pouring $1.5 billion in extra money into Massachusetts schools is not just transformative, it’s “unprecedented.” More commonplace is the answer to how to pay for it: They’ll figure it out later.
With no dedicated funding source in place, the newly promised cash infusion is relying, in part, on the state’s economy — and its tax receipts — to keep growing and on policy makers to carve the annual funding from their famously tight budget process each year through 2027, when the law is fully implemented.
It will require committing roughly $300 million more to direct local school aid every year, according to lawmakers’ estimates — an amount that would double, and in some cases nearly triple, the increases they wove into budgets between 2014 and last fiscal year.
Legislative leaders have said they’re confident they’ll meet their commitments, noting they included a similar $268 million increase this year. But economists say the budget forecasting has been significantly complicated by recent changes in federal tax law. They also point to warnings of a slowing economy that, if proven true, could slice into the revenue from which lawmakers would pull the additional funds or force them to siphon money from other priorities to meet the new law’s commitment.
“The idea that it’s just going to pay for itself seems unlikely,” said Michael Goodman, executive director of the Public Policy Center at the University of Massachusetts Dartmouth.
“I think the commitments that have been made to K-12 [education] have been long overdue and those investments, if used wisely, will pay off,” he said. “But it’s fair to say there’s going to be winners and losers in these budget discussions.”
For months, legislative leaders have been upfront that they weren’t tying major increases in education funding to raising taxes or fees, even as House officials have pursued a potential revenue bill to pour money into the state’s transportation needs.
House Speaker Robert A. DeLeo said in September that lawmakers “plan to stay within the present confines of our budget.” Senate President Karen E. Spilka acknowledged then, too, that paying for the bill could mean other areas could be crowded out from seeing increases in future spending bills. But she was optimistic it wouldn’t be a budget-buster.
“If our economy keeps growing, and we’re hoping that it does . . . we will be able to afford this,” she said on WGBH radio.
Also on the horizon is a potential surtax on income above $1 million, which supporters say could generate $2 billion in revenue should it pass muster with lawmakers, the courts, and then voters. But it wouldn’t kick in until 2023.
Wherever the money comes from, state officials say it will be well worth it. The new law favors school districts with the greatest need, notably those with more students living in poverty and those with disabilities or language barriers. Lawmakers also crafted language to ensure districts are reimbursed for charter school tuition costs up to the full amount the state is obligated to by fiscal year 2023.
The law, officials say, would add $1.4 billion in direct local aid — not by appropriating a specific new dollar amount but by changing the state’s decades-old formula used to determine a minimum cost for educating students in a district, as well as how much the municipality and the state should chip in. Lawmakers say they’ll also commit another $100 million to grants and other programs.
When the Baker administration released a disputed analysis of how the bill would affect individual districts, it estimated that direct local aid would ultimately increase by $2.1 billion by 2027, when factoring in assumed inflation on top of the $1.4 billion. And in fiscal year 2021 — which starts in July — the state would have to commit $427 million more, according to its estimate then.
The Department of Elementary and Secondary Education, which performed the analysis, said this week that the number for the upcoming fiscal year is no longer valid, and that it’s calculating a new figure based on more recent data before Governor Charlie Baker releases his next budget plan, in January.
Lawmakers, too, were uneasy with putting an exact figure on what the law will require next fiscal year.
Senator Jason M. Lewis, Senate chairman of the education committee, said the law will require approximately $300 million in added money each year over the law’s seven-year timeline, though he cautioned that it’s a “rough estimate” based on the money lawmakers put toward education this year. Representative Alice H. Peisch, the House chairwoman, said she is waiting to see Baker’s proposal.
“Any estimate depends on a wide variety of variables,” Lewis said in a statement.
No one disputes, however, that the promised education funding increases will be significant. For example, in the seven years between fiscal years 2013 and 2020, the state increased direct local aid by $1 billion, state figures show. That is less than half of what Baker and lawmakers have estimated it will jump, through inflation and the new law, over the next seven.
It’s also starting amid cautious financial forecasting. While the state has enjoyed surpluses topping $1 billion each of the last two years, economists and budget-watchers say those heady results may have been fueled by the 2017 federal tax law overhaul and an uptick in the capital gains tax, a historically volatile revenue source.
Alan Clayton-Matthews, a Northeastern University professor who was among those who offered a financial forecast at a State House budget hearing Wednesday, estimated this week that state revenue collections would grow 3.5 percent from this year to next. But how the money is used and what’s ultimately available, including for education, are questions, he said.
“It’s only one side of the ledger,” he said of the projected revenues.
State budget officials also have to weigh increasing health care costs, which typically eat up 40 percent of the state’s $43 billion-plus budget, plus pension obligations, non-education aid to cities and towns, and a range of new commitments that, when combined with the added money for education, can quickly eat into new discretionary revenue.
“Over the long term, education finance reform, on average, is affordable,” said Heath Fahle, director for policy and research at the Massachusetts Taxpayers Foundation, a business-backed budget watchdog. “But in any given year, the experience will vary quite a lot between affordable and unaffordable,” depending on tax revenues.
Colin Jones, a senior policy analyst at the left-leaning Massachusetts Budget and Policy Center, said that if revenue does tighten up, the “most drastic” scenario could see lawmakers taking longer than the promised seven years to provide full funding, which would dull the plan’s impact.
He said lawmakers also want to avoid putting themselves in an either-or position.
“Do we fix the T,” he said, speaking hypothetically, “or do we stay on schedule with K-12?”