BOSTON (AP) - A $40.5 billion state budget filed Wednesday by Republican Gov. Charlie Baker seeks new ways to control Medicaid expenses and proposes several changes in tax rules.
The proposed budget for the fiscal year starting July 1 calls for overall spending to rise 4.3 percent, with a net increase of 2.7 percent after federal Medicaid reimbursements. It would mark the first time annual state spending has exceeded $40 billion.
Baker said the spending plan reduces a structural deficit that was $1.2 billion when he took office in 2015 to less than $100 million, and guarantees $98 million will be deposited into the state’s so-called rainy day fund.
The budget reflects “fiscal discipline,” the governor said, and “reaffirms our commitment to the hardworking people of the Commonwealth.”
The plan will be reviewed first by the House and later the Senate.
Here are some highlights of the governor’s recommendations:
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HEALTH CARE
Baker’s plan forecasts a 6.6 percent increase in the state’s Medicaid program, known as MassHealth, which accounts for about 40 percent of the entire state budget and has seen spending double in the last decade.
Driving part of that increase, Baker said, is a sharp rise in people who have full-time jobs but choose to go on Medicaid either because their employers don’t offer health insurance or the coverage that is offered is less generous than MassHealth.
“It was never intended under the original (Massachusetts) health care law that hundreds of thousands of people who are working full time would end up having their health care funded by the Commonwealth of Massachusetts,” the governor said.
The proposals include a $2,000 per worker charge assessed to employers with more than 10 workers who do not offer adequate health insurance to workers and imposing caps on rates provided by certain large health care providers.
The changes, if implemented, also would help prepare the state for the potential repeal and replacement of the federal Affordable Care Act by allowing Massachusetts to return to its earlier health care law, Baker said.
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TAXES
The budget envisions $187 million in new state revenues from several “tax modernization” proposals that administration officials emphasized were not to be considered tax increases.
The measures include applying the state’s hotel tax to online lodging services such as Airbnb, and ordering more large online retailers to collect sales taxes, even if they have no physical presence in Massachusetts.
The budget assumes a small automatic cut in the state’s income tax next January and offers a $4,000 tax credit to companies that hire unemployed veterans.
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MUNCIPAL AID
The spending plan calls for a $40 million increase in unrestricted local aid - state money that can be used for any municipal purpose - and $91 million in aid for public school districts.
Lt. Gov. Karyn Polito said the budget maintains the administration’s firm commitment to cities and towns.
But Democratic state party chairman Gus Bickford said the $20 per pupil increase in education aid would be the smallest in six years, and “force school districts across the state to make painful budget cuts.”
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MBTA RETIREMENT
Baker proposes doing away with the independent pension fund for retired Massachusetts Bay Transportation Authority workers, who would be merged into the state pension system.
The MBTA’s retirement fund has been criticized for excessive costs and a lack of transparency.
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