Baker Takes $750M from MassHealth with New Budget

On Wednesday, March 4th, Governor Charlie Baker filed a $38.1 billion budget proposal which includes recommendations for increased spending on objectives like local aid, transportation and higher education. The budget also proposes cutting more than $750 million from MassHealth to help fill a projected deficit of $1.8 billion.

For his first budget, Baker says he inherited a gaping shortfall in the available sources of revenue required to continue funding state government at the current level of service. The gap, officials say, was caused by an 8% increase in spending within the current budget year and reliance on one-time sources of up to $1.2 billion in funding.

Baker will file two pieces of companion legislation with the budget, including a bill to establish an early retirement program. The second bill entails his proposals for a tax amnesty program for first time filers, a gradual elimination of the film tax credit program, and an expansion of the earned income tax credit to 30 percent of the federal credit.

Without withdrawing from the state’s savings, increasing taxes or raising fees, Baker’s budget proposes to limit growth in spending by 3 percent, or $1.1 billion. It would also reduce the state’s reliance on one-time sources of funding by half. MassHealth, one of the largest expenses in the state budget, will grow by $950 million. This will represent a 5.6 percent increase in the nearly $14 billion Medicaid program, which provides healthcare to 1.7 million low and moderate income residents.

MassHealth had been expected to grow by 16 percent in fiscal 2016. However, Baker’s administration have budgeted $761 million in net savings back to the state, which includes $400 million in cuts at MassHealth after a redetermination process for 1.2 million subscribers. Budget officials have stated that chiropractic benefits would no longer be covered, though adult dental coverage and coverage for autism services to 10,000 children will be extended.

Besides trimming funds from MassHealth, the Baker Administration also plans to direct all capital gains taxes into the general fund in fiscal 2016. This represents nearly $300 million that would otherwise be earmarked for the stabilization account, currently holding $1.2 billion. $178 million in savings has also been budgeted from an early retirement fund while another $125 million will be taken from the Group Insurance Commission by increasing deductibles and premium co-pays, as well as increasing the employee health insurance contribution for all employees hired after 2003.

Other solutions to the budget gap include:

  • $100 million from a tax amnesty program;
  • $30 million from the sale of the Sullivan courthouse in Cambridge;
  • $125 million for actions like the state hiring freeze and the annualization of emergency cuts, and;
  • A minimum $17 million in federal emergency snow disaster money expected to arrive in July.

Most budgets were level funded, including the majority of agencies that faced budget cuts in fiscal 2015 to solve a mid-year deficit, which were level-funded to post-cut numbers. Exceptions included spending increases at MassHealth, health and human services like the Department of Children and Families, a $105 million increase for Chapter 70 school aid, and a $34 million increase in unrestricted local aid. The budget also includes a 3 percent raise in funding for higher education campuses, police training, and summer job programs.

With Plainridge Park Casino scheduled to open this summer, Officials say the governor has budgeted an additional $87 million in revenues that will be used, along with lottery profits, to fund unrestricted local aid in cities and towns. Roughly $70 million in legislative earmarks that had been engraved into the fiscal 2015 state budget have been eliminated.

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