House unveils $40.3 billion state budget

House leaders unveiled a $40.3 billion state budget Monday that slashes a big and controversial new fee proposed by Governor Charlie Baker to fund state health care costs.

The budget proposal, which effectively flatlines spending in many areas, such as the University of Massachusetts system, comes in the context of some economic warning signs, as tax revenue growth has flagged.


Like the plan Baker released in January, the House budget calls for a new fee on employers to help pay for the state Medicaid program, which provides health coverage to 1.9 million residents. But House leaders punted on the details, saying the Department of Revenue — overseen by Baker — should determine exactly which companies would have to pay and how much.

Their proposal would raise an estimated $180 million from employers in the fiscal year that begins July 1, far less than the $300 million proposed by Baker. Business groups have slammed Baker’s plan as an unfair and expensive new tax — and lobbied hard against it.

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Spending on the state Medicaid program, called MassHealth, has doubled over the past decade and now represents 4o percent of the state budget. About half the costs are paid by the federal government.

House leaders also axed a plan by the governor to rein in health care spending by capping the prices charged by expensive hospitals. Speaker Robert A. DeLeo and House budget chief Brian S. Dempsey cast hospitals as critical to the state’s economy and said they should not be subjected to drastic cost-control measures at a time when Congress continues to consider plans to repeal and replace the Affordable Care Act, also known as Obamacare.

Baker had proposed no rate increase for the state’s most expensive hospitals, a 1 percent increase for mid-priced providers, and no cap for the lowest-priced providers. He included a separate measure to cap rates for hospitals that do business with the state Group Insurance Commission, an agency that administers health benefits to public employees and their families. House leaders did away with all of that.


Hospitals have been lobbying against rate caps, warning that such measures could force them to lay off staff.

“When you’re talking about a cap, you’re talking about a limitation as a result of that cap on nursing staff, you’re talking about limitation as to some of the poeple who do home-keeping type of services,” said DeLeo, a Winthrop Democrat. “Those are major employment factors that I would be concerned about if they would be cut as a result of any cap.

The House budget differs slightly from the governor’s plan in several areas related to human services.

It proposes $15 million to increase the pay of childcare workers, an issue the speaker has made a priority. That is more than double the amount proposed in the governor’s budget.

The House budget does not include a controversial proposal by the governor to shrink the number of people eligible for a program that provides cash to the state’s neediest families.

The House plan proposes $6 million more than last year for substance abuse services, slightly more than the governor’s proposal. Among other things, House officials said, that money would pay for two new addiction recovery centers, new substance abuse beds, and 15,000 additional doses of Narcan, a drug that can block the effect of an opioid overdose.

The state’s 11 district attorneys would see a small bump in their budget if the House proposal becomes law.

In line with the governor’s budget, the House budget proposes a $10.3 million increase for public higher education, including $5.1 million for the five-campus UMass system. But that’s a modest increase of about 1 percent.

The plan comes as the state grapples with flagging tax revenue.

In the fiscal year that ended in June 2016, state tax revenue grew by just under 2 percent. Still, policymakers were optimistic and predicted that state tax revenue would grow by 4.3 percent this fiscal year. After some bad fiscal news, they downgraded that number to 3.6 percent. And then, in October, Baker made emergency cuts that presumed a growth rate of 3.1 percent, according to calculations by the Massachusetts Taxpayers Foundation.

But, through March, tax revenues are up just 1.7 percent — about $220 million less than Beacon Hill expected to take in. That could mean more emergency budget-tightening measures from Baker in the coming weeks. And that could impinge on the new budget House leaders are proposing for fiscal year 2018, which begins July 1.

In his January spending plan, Baker proposed several ideas for bringing in additional tax revenue to the state, including more assertive efforts at collection. The House budget proposal embraces some of those plans.

But it rejected the governor’s effort to impose a tax on people who use services like Airbnb — or get any short-term rental — from landlords who have a high-volume rental business.

Dempsey said legislators are examining the issue and hope to address whether short-term rentals like Airbnb should be taxed and regulated like hotels in a more comprehensive bill based on hearings and public input.

“I don’t think that’s a piece of legislation that can be done piecemeal,” DeLeo said.

The House spending blueprint includes no increases in broadbased taxes like those on income or sales. But the Speaker does not have the last word.

The state Constitution mandates that all “money bills” — essentially legislation that transfers property or money from people to the state — originate in the House. Since this year’s proposal is expected to meet that definition, the more liberal Senate could add new taxes in its version of the state budget. Senate President Stanley C. Rosenberg is a frequent advocate for more revenue so, he says, the state can better fund areas like transportation and education.

The House is poised to pass a budget later this month. The Senate will then pass its own plan. And differences will be ironed out in a secret House-Senate conference committee before a final vote.

Baker will likely veto some parts of the budget and sign the rest into law.

Priyanka Dayal McCluskey can be reached at Joshua Miller can be reached at Laura Krantz can be reached at

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