United States: Governor Baker Files FY2019 Budget

On Wednesday, January 24, 2018, Governor Charlie Baker released a $40.9 billion budget proposal for FY2019. The plan, commonly referred to as House 2, is the fourth Baker has proposed since assuming office and increases spending by 2.6% over FY2018 levels.

The proposal relies on $27.594 billion in revenues, a 3.5% increase over FY2018 levels. The budget does not call for any new broad-based tax increases, though new revenue is estimated to be generated through a tax on short-term rentals, corporate repatriation, and retail marijuana sales, among other sources.

Although the budget contains few major new policies, it notably revives the Governor's earlier proposal to shift 140,000 low-income individuals from MassHealth to private plans on the Health Connector and expands the state's Earned Income Tax Credit. New investments are also called for in education, substance misuse treatment, and mental health services.

Below we have outlined the budget's highlights:

Health Care

  • MassHealth is funded at $15.9 billion, which the Executive Office of Health and Human Services (EOHHS) says represents a 1.3% increase over FY2018 spending.
  • Aiming to control rising MassHealth spending, the budget proposes transitioning 140,000 non-disabled adults between 100% and 138% of the federal poverty line off MassHealth and onto comparable plans at the Massachusetts Health Connector. Baker made a similar proposal to the legislature last summer that was rejected by lawmakers, and the Governor says the new proposal responds to the concerns of that plan. Those being transitioned will not be required to pay more out of pocket and they would not need to pay for extra dental benefits. The move would yield $120 million in additional revenue for the state.
  • The budget includes language permitting changes to the financing and coverage of prescription drugs in MassHealth. EOHHS is permitted to directly negotiate supplemental rebate agreements with drug manufacturers outside of existing state procurement rules. EOHHS can require pricing information from the manufacturer if a supplemental rate cannot be agreed upon and impose monetary penalties if the manufacturer does not comply or if the agency determines the drug's pricing is unreasonable or excessive.
  • Group Insurance costs are expected to decline by $37.2 million. Last week, the Group Insurance Commission (GIC) approved a proposal that would consolidate health insurance benefit plans among three carriers from the current six carriers. This accounts for $20.8 million of the spending reduction. This proposal has generated pushback from the Attorney General and public employees, however, and the GIC has said that it will be reconsidering this decision.
  • As a follow up to the recently filed Medicaid waiver amendment request, EOHHS is permitted to institute a closed formulary in the MassHealth program subject to federal approval.
  • Reimbursement rates for most providers are assumed to be held at current levels. Wages for skilled nursing and personal care attendants are assumed to be raised to $15 per hour, and a 2% utilization increase is expected.
  • A new trust fund called the Safety Net Provider Trust Fund is created for hospitals that qualify for Safety Net Provider Payments under the current MassHealth waiver. The proposed budget allocates $167.64 million for this fund.
  • The Department of Mental Health's budget is increased by $93.2 million, which includes additional funding for the adult community clinical services model to improve community-based services for adults with mental illness.

Public Health & Human Services

  • $149.2 million is provided to the Department of Public Health to combat the state's ongoing opioid epidemic. This includes $63 million in residential services; $21 million in step-down and transitional beds; $4 million in youth step-down, transitional, and residential services; and $4 million in Section 35 step-down beds for civilly committed individuals.
  • $5 million is provided for a new Substance Use Prevention, Education, and Screening Trust Fund, which will help identify and implement prevention and intervention programs and tools for students.
  • $550,000 in additional funding is provided for the Attorney General's office for investigations into fraudulent prescribing practices, the expansion of heroin and fentanyl trafficking enforcement, and the expansion of youth-based efforts to address addiction.
  • The Massachusetts Alcohol and Substance Abuse Center in Plymouth receives an extra $3 million to support the hiring of new substance abuse counselors and implementation of a new Medication Assisted Treatment Reentry Initiative.

Tax and Revenue

  • The budget estimates that the state will receive $63 million in revenue from the state's portion of marijuana taxes. Retail marijuana sales are set to begin on July 1, 2018.
  • $96 million is transferred to the Stabilization Fund, bringing the size of the rainy day fund to $1.463 billion.
  • The fee for creating a limited liability company is reduced from $500 to $250.
  • For the second year in a row, the Governor proposed extending the state's room occupancy tax to short-term rentals, such as Airbnb. Under the plan, those renting properties for 150 days or more in a year would be subject to the tax. It is estimated that this will generate $13 million annually.
  • The Earned Income Tax Credit is expanded to increase the state match of the federal credit from 23% to 30%. It is estimated that this expansion will cost $65 million in FY2020.
  • The budget assumes that $63 million will flow into state coffers as a result of the requirement in the recently enacted federal tax law for companies to repatriate accumulated foreign profits.
  • Employers who are required to pay both the Employer Shared Responsibility Payment to the federal government for Massachusetts employees and the recently increased Employer Medical Assistance Contribution supplement to the state are allowed to claim a refundable tax credit.

Education and Local Aid

  • State funding for the University of Massachusetts, state universities, and community colleges is increased by 1%.
  • $4.865 billion is provided in local education aid for K-12 schools, an increase of $118.6 million. The increased funds include a $15 million appropriation for school districts that have experienced significant enrollment of students from Puerto Rico and the U.S. Virgin Islands and $24.3 million for healthcare costs for retirees.
  • $1.1 billion is proposed for unrestricted local aid, an increase of $37.2 million or 3.5%.
  • The MassGrant scholarship for community college students is provided with an extra $7.1 million.
  • $1.2 million is proposed to fully fund tuition and fee waivers for children in the custody of the Department of Children and Families to attend public colleges.


  • $584.8 million is invested in the Massachusetts Department of Transportation, an 8% increase over FY2018 spending.
  • Sales tax revenue transfers to the Massachusetts Bay Transportation Authority (MBTA) would increase by $25 million over FY2018 levels.


  • The Department of Revenue is required to promulgate regulations by May 31, 2021, which would require third-party processors to remit to the Commonwealth, on a daily basis, the portion of a sale that is attributable to sales tax. There would be no change to the current schedule for reporting and remitting the sales tax for cash sales. The Department of Revenue is also required to treat sales tax revenue remitted in July as revenue for the previous fiscal year for fiscal years 2019 and 2020.
  • $2 million is provided for the Small Business Technical Assistance Program to provide technical assistance, education, and access to capital for small businesses.
  • The Executive Office for Housing and Economic Development will receive $1.7 million in new funding to provide grants to regional workforce organizations to train unemployed and underemployed individuals in advanced manufacturing.
  • An additional $2 million is allocated to support cities and towns in their climate adaptation planning and to accelerate statewide hazard mitigation planning.

Next Steps

The filing of Governor Baker's budget kicks off the annual budget process, which now shifts to the House Ways and Means Committee. The Committee's spending plan will be the first developed under the leadership of Chairman Jeffrey Sánchez and is likely to be debated in April. Once the House finalizes its plan, the Senate, under the leadership of Chairwoman Karen Spilka, will draft its own version and debate the bill by the end of May. Senator Spilka has already pushed back on the Governor's renewed attempt to shift MassHealth enrollees to Health Connector plans, saying she's "not aware of new circumstances" that would convince the Senate to support it.

After the House and Senate finalize their versions of the budget, a conference committee will then negotiate the differences between two spending plans. The final budget must be signed into law by the beginning of the next fiscal year on July 1, 2018.

ML Strategies will continue to monitor and report on the budget process and policy proposals coming out of the House and Senate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions