State Budget Supplement

MassBudget’s Fiscal Year 2016 State Budget Analysis

At the end of July the Legislature overrode a number of the Governor's budget vetoes and largely completed the process of setting spending levels for the state programs that educate our children, keep our communities safe, protect our most vulnerable, strengthen our economy and improve the quality of life in our communities. What follows is highlights from MassBudget’s analysis of the budget for the fiscal year that began July 1, 2015. See the full analysis.

The budget contains several significant new initiatives, including:

• Increasing the value of the state earned income tax credit from 15% of the federal credit to 23%. This will provide additional income to over 400,000 lower wage workers and their families (see town-by-town detail).  Besides improving lives now by helping parents to pay for necessities like food and clothing for their children, this additional support is also likely to expand opportunity for these children over the long run: there is growing evidence that when the income of a lower income family increases, the children often do better in school and earn more as adults.
• Addressing substance abuse with targeted investments throughout MassHealth, public health and mental health. In particular, new initiatives support first responders and others in the community struggling to address the challenge of opioid addiction.

As has been the case for many years, state budget choices are being shaped by fiscal challenges that date back to the late 1990s: after cutting the income tax by over $3 billion dollars between 1998 and 2002 our state has had to make deep cuts in areas like higher education, local aid, and public health. Meanwhile, the highest income residents in the Commonwealth are paying a substantially smaller share of their income in state and local taxes than do the other 99%. If our tax system were reformed so that the highest income 1% of taxpayers paid roughly the same share of their income in taxes as everyone else, that would raise about $2 billion that could be invested in things like making college affordable, improving our transportation systems, and providing all children with the supports they need to thrive.

Early Education & Care

The FY 2016 Budget directs $567 million for early education and care programs, an increase of $23 million over FY 2015 current spending, but still far below the $710 million appropriated in FY 2001 after adjusting for inflation.

The largest increase goes for Supportive Child Care subsidies which provide early education and care opportunities to children in the care of the Department of Children and Families (DCF), the primary child welfare agency in Massachusetts. The budget actually combines Supportive Child Care with TANF Child Care into one line item - Supportive and TANF Child Care. TANF child care provides child care for children of families served by or transitioning from Transitional Aid to Families with Dependent Children (TAFDC). Taken together, the budget provides a total of $219.9 million for these subsidies, $8.8 million more than FY 2015 current funding. Just over $100 million is for supportive care, about $20 million more than the FY 2015 current funding level of $79.7 million. Around $119 million is for TANF care, about $12 million below FY 2015 current spending. Because of the significant drop in the overall caseload for TAFDC, this should be enough to provide a subsidy to all families receiving TAFDC who need.

The substantial increase for supportive child care will help DCF provide child care to many more kids who need it. Although not publicized like the income eligible wait list, many children involved with DCF have had to wait for child care in the past even though budget language usually requires a subsidy to any child involved with DCF who needs it. This increase, although not quite up to the $108.0 million the Department of Education and Care (EEC) projected as the need for FY 2016 will help alleviate most of the waiting.

The budget provides $252.9 million for Income Eligible Child Care, and approved $12.0 million to the Income Eligible Wait List. Overall this results in an $8.5 million increase over funding in the FY 2015 current budget. Income Eligible Child Care provides a subsidy for eligible low-income families, but underfunding has resulted in a waitlist for a subsidy that numbered around 30,000 children in June 2015, an increase of about 5,000 children since March. For families of kids on the waitlist who cannot find affordable and stable care for their children, it makes it harder for parents to succeed in the workplace. For a more in depth look at what it would take to provide support to the kids in Massachusetts who need it the most, see MassBudget’s Building a Foundation for Success.

Several K-12 grant programs received increases, including Homeless Student Transportation at $8.4 million, 14 percent ($1 million) over current levels.

MassHealth (Medicaid) and Health Reform

The FY 2016 budget proposal for MassHealth and related programs does not include significant changes in benefits or in eligibility. MassHealth is the single largest program in the state budget. It provides health insurance to close to 1.7 million people in the Commonwealth (approximately 1 in 4), and is also one of the single largest sources of revenue for the Commonwealth, bringing in close to $8 billion each year (see Understanding the Actual Cost of MassHealth to the State). The program is funded jointly by the state and federal governments, with federal reimbursements covering more than half of MassHealth spending.

The FY 2016 budget – like the budget first proposed by the Governor in the spring – includes payment delays for providers, and builds in caseload assumptions based on being as efficient as possible in trimming program membership.
The biggest “savings” in the FY 2016 MassHealth budget comes from $456.8 million in what is referred to as “cash management.” This is a cost-shifting strategy that has been used in the MassHealth program over the past decade that involves pushing program payments from one fiscal year into the next. Of this total approximately $340 million are costs that were carried forward from previous budget years that will again be shifted forward, and $116 million are additional FY 2016 payments that MassHealth will delay paying until FY 2017.

To reduce program costs, MassHealth will step up its efforts to pare down the MassHealth rolls as quickly as possible when people become ineligible for the program (such as when they have access to other insurance or when they are no longer financially eligible.) This eligibility review, known as “re-determination,” is required by the federal government. The redeterminations could save the program close to $400 million, or $200 million in net savings. Re-determinations are supposed to happen annually, but had been put on hold for over a year during the roll-out of the Affordable Care Act enrollment website. (See accompanying story on MassHealth Redeterminations.)

Mental Health

The FY 2016 budget for mental health is $740.5 million, $26.8 million or 4 percent higher than the FY 2015 current budget. However, mental health services were cut by more than $22.7 million mid-year in FY 2015, so this funding brings totals only slightly above the restoration of those cuts.

Public Health

Funding for public health services in the FY 2016 budget includes approximately $560.9 million, a $20.8 million or 4 percent increase above FY 2015 current funding totals. Funding for public health programs is essential to helping keep the Commonwealth healthy. It supports a wide variety of prevention and wellness programs, substance abuse treatment initiatives, programs that help vulnerable populations get access to health care, and essential environmental health and regulatory programs that keep the air and water clean. The FY 2016 public health budget increases funding for substance abuse treatment and prevention, public health hospitals, and services to support victims of domestic violence. The budget, however, directs less funding to the grant programs that aim to reduce youth violence.

There are several public health programs that work to reduce youth violence by promoting positive youth engagement, including funding for afterschool programming at community centers such as YMCAs and Boys and Girls Clubs. Together, the budget provides a total of $11.3 million, $864,000 less than (7 percent below) FY 2015 current budget totals.

To support the provision of substance abuse treatment and services, the budget includes a total of $116.3 million, a $5.7 million increase in funding compared to FY 2015 current budget totals (see table below.)

In FY 2015, there was $10.0 million to set up the Substance Abuse Treatment Trust, and in FY 2016, the budget includes $5.0 million for the Trust. This fund was established to increase the number of people receiving services from the bureau of substance abuse services in the Dept. of Public Health.

The FY 2016 budget provides $3.1 million for Recovery High Schools which provide a safe and therapeutic environment for youth working towards recovery from substance abuse disorders. This funding would allow for the creation of two new programs.

The budget also includes $100,000 to cover the costs of a new municipal Naloxone bulk purchase program. This program (detailed in Section 48) allows for the state office of pharmacy services to assist municipalities in the bulk purchasing of naloxone (“Narcan”). Narcan is a drug that is often lifesaving in its ability to reverse opioid overdose. The funding would also assist municipalities in providing training of first responders in the use of the medication.

In addition to this new Narcan program, this year’s budget – like in FY 2015 – includes $1.0 million to fund a naloxone distribution program (nasal Narcan) for use by first-responders and bystanders. It also includes $1.5 million for treatment and care management for substance-dependent young adults and their families, and $2.0 million for a program to keep nonviolent offenders with opioid addictions from going to jail.

Funding for domestic violence and sexual assault prevention and intervention receive a total of $11.0 million in the budget, an increase of $1.5 million or 16 percent compared to FY 2015 totals. This includes $4.4 million for the sexual assault nurse examiner program, $6.5 million for domestic violence and sexual assault prevention, and $150,000 for the Healthy Relationships grant program, which provides funding for public schools to address teen dating violence.

Housing

The state budget funds affordable housing assistance and shelter for low income homeless families and individuals. The final budget for Fiscal Year (FY) 2016 provides $431.9 million for affordable housing programs which is $2.6 million less than the $434.5 million the state expects to spend in FY 2015. In his veto message the Governor returned with an amendment Outside Section 144 of the Legislature's budget which transferred $5.0 million from the General Fund into the Housing Preservation and Stabilization Trust Fund (HPSTF). For a full explanation of this amendment see the section on HPSTF below.

The final budget decreases funding for shelter for low income, homeless families while increasing funding for a number of programs that help families and individuals move from shelter into housing or prevent them from becoming homeless.

A large portion of the state’s affordable housing budget provides assistance to eligible low income families who are homeless. In FY 2015 the state spent $191.8 million for Emergency Assistance (EA) which funds both state-supported family shelters and hotels and motels when the family shelters are full. The FY 2016 budget provides $155.1 million for EA which is $36.7 million less than FY 2015. As noted in our Budget Monitor for the Senate Ways and Means Budget, previous year’s budgets have reduced funding for EA at the beginning of each fiscal year in anticipation that fewer homeless families will need shelter. But over the course of each year the need for shelter has exceeded the amount provided in the original budget and the Legislature has approved supplemental funding.

In recent years the state has tightened eligibility for EA which has forced some homeless families with children to live in places not meant for human habitation like a car, a public park, or a hospital emergency room before they can move into an EA shelter. (For a full description of eligibility criteria for EA please see MassBudget’s Children’s Budget.) The Senate’s FY 2016 budget proposal included language that allowed homeless families to enter shelter rather than sleep in these unfit places but the final budget does not include this protection. The budget extends a pilot program to make sure that healthy food is available to homeless families who are living in hotels and motels and often don’t have access to proper cooking facilities.

As the final budget reduces funding for EA below the FY 2015 level, it increases funding for housing resources above FY 2015 levels including:

• $18.7 million more for the Massachusetts Rental Voucher Program (MRVP) to $82.9 million. The budget also allows DHCD to transfer up to $8 million in unspent MRVP funds from FY 2015 into FY 2016 making the total amount available as much as $90.9 million. (Because this $8 million is a transfer rather than new funding, MassBudget does not include it in its total for the program.) This total increase will allow DHCD to create from 900 to 1,000 new vouchers. The final budget also removes a restriction adopted in the FY 2015 budget that prevented DHCD from prioritizing new vouchers to help homeless families move from shelters, including hotels and motels, into permanent housing.
• $2.3 million more for HomeBASE to $31.2 million.
• $1.5 million more for Residential Assistance for Families in Transition (RAFT) to $12.5 million.

The final FY 2016 budget also increases funding above the FY 2015 level for a number of other housing programs including:

• $1.7 million more for programs that provide assistance to homeless individuals to $46.6 million. Of these programs, the final budget increases assistance for homeless individuals by $1.9 million to $44.8 million. It cuts funding for the Home and Healthy for Good program, which provides housing and supports to individuals who are chronically homeless, by $200,000 to $1.8 million.
• $1.1 million more for the alternative housing voucher program to $4.6 million. This program provides vouchers to people with disabilities.
• $750,000 more for housing consumer education centers to $2.9 million. These centers provide services and counseling to help low and moderate income people remain in stable housing.

The FY 2016 budget also include a number of new programs:

• $2.0 million to provide shelter and services to unaccompanied homeless youth who are up to 24 years old. The budget also provides $150,000 for the Commission on Unaccompanied Homeless Youth. These provisions were vetoed by the Governor, but those vetoes were overridden by the legislature.

Child Welfare

The Department of Children and Families (DCF) is the state’s child welfare agency.

The number of children involved with DCF steadily increased between 1999 and 2009. Over the next 4 years, the number of children declined significantly, but in 2013 the number of children began to increase again. With the number of kids with open cases increasing, DCF needed and received an increase in funding through supplemental bills during FY 2015. The FY 2016 Budget provides $907.7 million for Child Welfare programs and services, a $43.1 million (5 percent) increase over FY 2015 current spending.

With the number of open cases increasing, the focus on caseworker’s caseloads has grabbed an increasing amount of attention. The budget increases funding to hire more caseworkers by $18.3 million (10 percent) to $203.8 million. This increase should allow DCF to maintain current staffing levels. But even with the hiring of hundreds of new case workers in FY 2015, employee turnover and the increase in the number of open cases still has many case workers with caseloads over 20 cases each, much higher than the recommended 15 cases to keep kids safe. Language included in the administrative account would require DCF to track the number of kids in placement, the kind of placement (foster care, group care, kinship care, etc.) and the services they receive.

The Child Welfare Training Institute, which provides training to all of the new case workers hired by DCF, also receives an increase for FY 2016 of $415,000 (20 percent) to $2.5 million. Even with the hiring of hundreds of new case workers last year, the institute was level funded in FY 2015.

Elder Services

The FY 2016 budget funds Elder Services at $264.8 million, $12.1 million (4.8 percent) over current 2015 levels.

Elder services programs receiving the most significant increases over FY 2015 include:

• Elder Enhanced Home Care Services and Elder Home Care Purchased Services at $70.3 million and $104.6 million, respectively. These items received a combined increase of $8.9 million. This increase may allow more seniors to age in place instead of living in a nursing home.
• Grants to Council on Aging at 13.7 million, an increase of $2.4 million. Some of this increase is earmarked for specific council on aging centers in cities and towns around the Commonwealth.

Additionally, the budget establishes a commission within the Executive Office of Health and Human Services that will study and make recommendations to ensure equal access, treatment, care and benefits for older LGBT adults.

Disability Services

The state budget funds services for individuals with disabilities that support overall well-being, inclusion and meaningful participation in our local communities. Overall, the FY 2016 budget provides $1.85 billion for disability services, a 5 percent increase from current FY 2015 levels and a 40 percent increase from FY 2001 levels in inflation-adjusted dollars.

The bulk of this year’s increase - $35.8 million – is for Community Residential Supports for the Developmentally Disabled, which supports adults in various residential settings to live as comfortably and independently as possible.

Other disability programs that receive increases include:

• Autism Omnibus Services, a new line item, funded at $12.7 million, provides services to individuals with autism spectrum disorders. Much of this funding supports programs that in the past have been funded in the Respite Family Supports and Department of Developmental Disabilities Administration (DDS Administration) line items. This funding level is in line with the projected spending for these services for FY 2015. In addition, $300,000 is earmarked to fund the autism commission, which will examine the range of services and supports necessary for individuals with autism to achieve their full potential throughout their lives. In total, the budget for these services is $6.4 million higher than the Senate proposal and $300,000 higher than the House proposal.
• Turning 22 Services for the Developmentally Disabled, funded at $7.0 million, a $500,000 increase from current FY 2015 levels. This program pays for a share of services to eligible young adults with disabilities during their transition year when they turn 22.
• Aging with Developmental Disabilities, a new line item, funded at $250,000. This new program provides direct support for older adults with developmental disabilities, staff training for identifying age-related conditions, and data collection on the effectiveness of their direct support and training.

Transitional Assistance

• For entitlement programs like transitional assistance, funding levels are significantly affected by anticipated caseload levels. The “entitlement” part means that any qualified person who applies must receive the service. Funding for these then is directly tied to how many people qualify and apply. Transitional Assistance caseload levels have dropped significantly in the past few years, although they may be dropping partially because of new administrative changes that are making it harder for clients to maintain their benefits. For more detailed information on caseload levels for transitional assistance accounts, see “Research and Statistics” on the DTA home page. The caseload for Transitional Assistance for Families with Dependent Children (TAFDC) dropped from 52,659 in December 2013 to 46,546 in December 2014. That trend has continued with the caseload dropping further to 37,427 in May 2015.
• The FY 2016 Budget provides $230.9 million for TAFDC, $19.3 million less than FY 2015 current spending. It is important to note that under this program, grants given to qualified families have lost significant value over time due to inflation. For a more in depth analysis of the grants value, see TAFDC: Declines in Support for Low-Income Children and Families. Instead of decreasing the appropriation in response to declining caseloads, the budget could have increased the value of the grant to help these children and families pay for basic necessities. The budget also could have directed these funds to the Income Eligible Child Care subsidy so more low-income working parents could find stable and affordable care for their children allowing them to succeed in the workplace. For more information on this subsidy, see the MassBudget Children’s Budget.
• For those families receiving TAFDC, the budget includes a rent allowance of $40, and a clothing allowance was increased from $150 to $200 – the first increase to this allowance in almost 30 years. The clothing allowance is a one-time payment made in September helping poor families pay for back-to-school clothing. (See accompanying story on the TAFDC September Clothing Allowance.)
• The budget provides $12.1 million for the Employment Services Program, a slight increase over FY 2015 current spending for the primary education and job training program for TAFDC clients. These supports received a big funding increase in FY 2015, but are still far below the level of support provided before the recession, over 60 percent lower than the FY 2009 GAA Budget. For a more in depth analysis on funding for education and job training programs, see Declines in Work Supports for Low-Income Parents.
• The Pathways to Self Sufficiency program, a new job training and counseling program administered by the Commonwealth Corporation receives $3.0 million. It was initially funded at $11.0 million in a FY 2015 supplemental budget bill in July which accompanied a welfare bill changing the disability standard. Implementation of the welfare bill has been delayed though and funding for this program was eliminated in two 9C cuts in November and February. An outside section in the budget provides provide job support services to TAFDC recipients who will no longer be exempt from work requirements due to changes to the disability standard in the welfare bill. The program would utilize specialists in each community service area to help find jobs, training or education.
• Emergency Aid to the Elderly, Disabled and Children (EAEDC) receives $76.2 million, $9.3 million below FY 2015 spending. EAEDC is a cash assistance program for individuals who are disabled, caring for someone who is disabled, 65 or older, in a Mass. Rehab program, and children who are not able to get TAFDC benefits.

Revenue

Increasing the Earned Income Tax Credit

• In the FY 2016 budget, lawmakers increased the value of the state’s Earned Income Tax Credit (EITC) by a little over 50 percent. The state Earned Income Tax Credit (EITC) is a refundable tax break provided by the Commonwealth to lower-income workers in order to increase the after-tax rewards to work. It is available only to tax filers with earned income and provides benefits primarily to workers with children. A tax filer's federal EITC eligibility and credit value depend on marital status, the amount of income the filer(s) has/have earned during the tax year, and the number of dependent children the filer(s) claim.
• The Massachusetts EITC operates under the same eligibility rules as the federal EITC, with the state credit value calculated as a percentage of the federal EITC amount claimed by the tax filer. Currently, this percentage (or “match rate”) stands at 15 percent. The budget increases the match rate to 23 percent, effective January 1, 2016. 
• Under the current 15 percent structure, in Tax Year 2015 the maximum value of the Massachusetts EITC will be $937 for a family with three or more children and $832 for a family with two children. Under the higher match rates, these maximum amounts would jump to $1,436 and $1,276 respectively (an increase of some $500 and $440, respectively).

-Abridged from, and more information at: http://massbudget.org/report_window.php?loc=Analyzing_the_State_Budget_for_FY2016.html