The Massachusetts Fair Share Tax is a Winner

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In November 2022, Massachusetts voters passed ballot question No. 1, the  Fair Share Constitutional Amendment that would impose an additional 4% tax on taxable income above $1 million.The money raised from this so-called “Millionaire’s Tax” would be used exclusively for public education and transportation infrastructure. 

The Fair Share Tax was estimated to bring in approximately $1.2 billion in revenue in the first year, FY2024. Ten months into the fiscal year, that total exceeded $1.8 billion!

It is estimated that 0.6% of taxpayers are affected by the Fair Share Amendment. 

Fair Share Highlights in the FY 2025 Budget

For FY 2024, budget funding from the 4% additional tax (surtax) totaled $1 billion, split almost evenly between transportation ($476.5 million) and education ($510 million). Funding increased to $1.3 billion for FY 2025 and a greater percentage of those funds was allocated to education ($761.5 million) than transportation ($538.5 million).

Here are some Fair Share funding highlights included in the FY 2025 budget.

Education

• $170 million to fund free meal programs at all Massachusetts public schools;

• $175 million for the Commonwealth Cares for Children early education and care programs;

• $117.5 million to provide free community college access across the state;

• $80 million increase in financial aid for Massachusetts residents attending state universities.

Transportation 

• $250 million for the Commonwealth Transportation Fund (CTF);

• $110 million for Regional Transit Authorities throughout the state, including funding for  fare-free service;

• $45 million in supplemental roads and bridges aid for municipalities;

• $4 million for increased mobility options for seniors and others in need.

The CTF is a primary funding vehicle for the Massachusetts Bay Transportation Authority (MBTA) and the entire $250 million will prop up its operating support and debt service. An additional $106 million is allocated for MBTA capital investments, worker safety reserves, and the MBTA Academy.

Though Boston and its environs get the lion’s share of the transportation funding revenue under the new Amendment, Fair Share makes a $100 million pot of money available to all 351 municipalities each year. The first $50 million is distributed via the Chapter 90 program, using a formula based on local road mileage, population, and employment. The second $50 million is based on a city or town’s road mileage alone.

Shutesbury received $51,490 from the Fair Share Tax for FY 2025 in addition to its Chapter 90 amount of $33,105.

Concerns About Fair Share Ease

In the days and weeks leading up to the November 2022 election,   opponents of the Fair Share Amendment voiced warnings that the wealthiest residents would leave the state if the ballot question passed. Nearly two years later, those dire predictions have not come to pass. The Bay State’s population increased by .27% from 2022 to 2023 and the first 12 months of the Amendment’s existence brought $2.2 billion into the state’s coffers. 

Another concern raised was that the tax would significantly reduce the savings of homeowners, small business owners, and retirees who sell their assets in a one-time transaction. However, it's important to remember that the tax only applies to any income exceeding $1 million, not the entire transaction amount.

Why Are Appropriations Not Equal to the Revenues Generated by Fair Share?

Despite the probability that Fair Share raised $2 billion in FY 2024, only $1.3 billion made it into the budget. Why is that the case, and where did the overage go?

Since the state budget process is a long one, reason dictates that budget appropriations work will begin before all revenues are received. $1.3 billion was likely agreed upon based on estimates, not the fiscal year’s total Fair Share revenues.

This explanation from the Massachusetts Budget and Policy Center brings some clarity:

Revenue raised by the surtax is first deposited into the Education and Transportation Fund (E&T Fund). Lawmakers set a spending cap on the amount that can be spent from the E&T Fund each Fiscal Year (see next section). Surtax money that exceeds that cap, “the excess,” will be transferred from the E&T Fund to one of the other two funds. Fifteen percent of the “excess” gets deposited into the “Education and Transportation Reserve Fund” to offer stability if surtax revenue decreases, such as an economic downturn. Eighty-five percent of the “excess” gets transferred to the “Education and Transportation Innovation and Capital Fund,” which supports one-time spending like the construction of a new rail line or vocational school. 

The article explains that imposing caps on long-term spending can help smooth out revenue fluctuations over time, making it easier to make funding decisions for long-term projects. During lean years, excess funds can be used for projects that have already been planned. Eventually, the spending cap will be determined based on the Fair Share revenues received over a previous 10-year period.

The Fair Share Amendment is successfully providing financial support to two previously underfunded areas essential to our state's economy and society. The best part is that it has achieved this without burdening low- and average-income residents' finances; a definite win-win.

MA Clean Energy Siting Bill Retains Language Harmful to Rural Towns

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Our Massachusetts legislators started their summer break after passing a last-minute state budget and leaving a stack of legislation pending until their return in September.

One of the unfinished bills is “An Act upgrading the grid and protecting ratepayers”, S2838, passed by the Senate on June 25, 2024, and the House version, H4884 passed on July 17. The two chambers were unable to agree on a unified version before July 31.

For residents in Western Massachusetts, it appears evident that language limiting local authority over the siting of clean energy projects remains in both versions of the bill and is likely to be enacted into law.

The Massachusetts Plan for Net-Zero Emissions by 2050

As part of the Massachusetts Clean Energy and Climate Plan for 2050, Governor Maura Healy created the Commission on Clean Energy Infrastructure Siting and Permitting on September 26, 2023. The new entity comprised representatives from various state agencies, municipalities, electric utilities, the clean energy industry, environmental justice organizations, and land use advocates. The group's purpose was to recommend ways to expedite the permitting process for clean energy infrastructure projects.

In April 2024, the Commission released its recommendations. New clean energy projects were defined as “solar, wind and anaerobic digestion facilities; storage facilities; and transmission and distribution infrastructure.” Local, state, and regional permits for larger projects of 25 megawatts or more for solar, wind, or anaerobic digestion facilities and 100 or more megawatts for energy storage facilities would be combined and issued by the Energy Facilities Siting Board (EFSB). The EFSB is supported by the Department of Public Utilities, which “oversees investor-owned electric power, natural gas, and water companies in Massachusetts.”  The EFSB must issue the consolidated permit within 15 months of receipt.

For smaller projects of fewer than 25 megawatts for solar, wind, and anaerobic digestion facilities, all local permits must be rolled into a single permit and issued in less than a year. State agencies will create standards to “guide municipalities in the issuance of permits for clean energy infrastructure.”  

The Western MA Solar Forums and the Forests as Climate Solutions Initiative

Between June 2023 and June 2024, several events took place including the Western MA Solar Forums (parts I & II) and the Forests as Climate Solutions Initiative. The solar forums were held weekly in September 2023, and the last forum took place in December. The second part of the solar discussions occurred on June 4, 2024. These events were open to the public and aimed to gather citizen input on the roles of renewable energy and forests in combating climate change.

I attended all the forums and was impressed with the first part, which I found informative and supportive of protecting forests and woodlands while developing solar facilities. 

The speakers discussed the challenges that community and residential solar are currently facing. Community action groups raised concerns about the lack of solar equity for low-income residents and the lack of transparency in the decision-making process of the Department of Public Utilities. A representative from the Attorney General’s Office talked about deceptive marketing and sales practices in the community solar sector, which led to customers overpaying for their share of a community solar farm. 

He also mentioned many Massachusetts residents filing complaints about residential solar scams involving aggressive door-to-door sales tactics and unfulfilled solar panel installations. These scammers often target the elderly, low-income, and those with language barriers.

Following the conclusion of the initial forum in December, there was a prevailing sentiment among speakers and the public that solar development should prioritize built environments such as rooftops and parking lots, and steer away from industrial solar projects that necessitate the clearing of forested lands.

The second part of the solar forums took place in June 2024, after the Commission released its recommendations. This event spent much time explaining that guidance and asking for public feedback on its content. It was a more focused discussion that seemed designed to “sell” the Commission’s recommendations to the public. Toward the end of the forum, speaker presentations spoke of “nimbyism”. They gave the impression that western Massachusetts communities should stop complaining about local control and do their fair share to help the state attain its energy goals.

While the foregoing is my opinion of the proceedings, the published comments and feedback show that many respondents were concerned that Boston would have a heavy hand in decisions affecting Western MA residents. The references to “local input” in the Commission’s recommendations did nothing to assuage the fears that the forests we live in would bear the brunt of the state’s accelerated clean energy plans.

In January 2024, the Climate Forestry Committee released its report on conserving forest lands, and the following June,  the state released its response to that report.  The committee’s report notes the state’s clean energy plan aims to protect “30% of Massachusetts lands by 2030 and 40% by 2050, much of that land to be forested (which entails doubling the recent pace of land protection).” One way to attain this goal is to pursue “policies to avoid conversion of forest land (e.g., siting of solar, housing, and other development).” 

Similarly, the state’s response notes, “To reach net zero by 2050 the Commonwealth will look to forests to sequester approximately half of the projected residual emissions. As such, forests are an essential climate solution to the Commonwealth.” 

Solar Siting: Public v. Private land

One issue never fully addressed at the forums is that installing solar on built environments is more costly than encouraging large, private landowners to lease their land to big solar companies. 

The city of Boston and its environs host many public buildings, parking lots, and vacant land that could be hosting solar panels. But it’s more expensive to install solar on built environments than it is to clear trees and put up industrial solar. This is especially true when it won’t cost Massachusetts a dime to put solar farms on land owned by the largest private landowner in the state.

The state wants to pretend that all municipalities in Massachusetts are similar and that the issue of local control affects all equally. This is untrue, and Western MA residents know it. We have spoken out against the hefty burden we are being made to bear for decisions made at the state capitol, but it seems to have fallen on deaf ears.

Though both versions contain the troublesome siting language, there is still time to register your thoughts about this legislation. Contact your legislators and let them know we need them to ensure that local energy projects are administered by the people who will live with them–not a faceless Boston-based committee.

Means-tested Tax Exemption Can Save Seniors a Bundle

 

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The Commonwealth of Massachusetts and its municipalities offer property tax exemptions that assist veterans, survivors of emergency personnel killed in the line of duty, blind persons, and senior citizens. The state offers most of these exemptions, and municipalities can expect at least partial reimbursement for implementing them. Others are local options, meaning the community votes to provide a particular exemption or increase the exemption criteria to bestow greater relief. In local option cases, other taxpayers in the municipality offset the loss of tax revenue.

Several Massachusetts communities, including Shutesbury, have adopted an additional local-option senior exemption called the Means-Tested Senior Property Tax Exemption. This exemption is based on the state “circuit breaker” tax credit and primarily uses age, residency, income, and assets to determine eligibility.

The State Senior Circuit Breaker Credit

For seniors, the Massachusetts Senior Circuit Breaker Tax Credit is a simple way to get some relief from high property taxes. For those aged 65 and older who meet the eligibility requirements, the Circuit Breaker ensures that homeowners won’t pay more than 10% of their income on property taxes and renters will get a break if 25% of their annual rent exceeds 10% of their income.

The maximum credit for tax year 2023 was $2,590, up from $1,200 for the previous year. Eligibility requirements include the above-mentioned factors and a restriction on the home's assessed value, which cannot exceed $1,025,000. Taxpayers must also file Schedule CB with their state tax return.

Shutesbury’s Means-Tested Tax Exemption: How it Works

Shutesbury’s 2021 Annual Town Meeting passed a resolution petitioning the Massachusetts legislature to pass a special law to create a Senior Means-Tested Senior Citizen Property Tax Exemption. Bill H.4559, presented by Representative Natalie Blais and Senator Joanne Commerford, was signed by the Governor on November 7, 2022. 

The new exemption went into effect in 2023 and is available to any taxpayer who received the state Circuit Breaker tax credit. The details were discussed at the November 8, 2023, tax classification hearing, the annual public meeting whereby the town’s tax rate is set. In Shutesbury, the Select Board historically votes for a single tax rate, applied to all classifications: residential, commercial, industrial, open space, and personal property.

The residential class currently has a slightly higher rate than the other classes even though the Select Board voted for a single tax rate. That is because, as Shutesbury’s Administrative Assessor explained at the meeting, eight taxpayers applied for and received the Senior Means-Tested Exemption. As noted above, this is a local option exemption, meaning that tax revenue uncollected due to the exemption is divided among the remaining tax-paying households in town. This raised the residential tax rate from $17.81 to $17.84 (the Assessors webpage lists the current residential rate as $17.83).

The Select Board must vote on the exemption amount annually. The percentage must fall between 50% and 200% of the state Circuit Breaker tax credit received by taxpayers. Upon recommendation from the Board of Assessors, the Select Board voted for a 100% exemption.

Here’s how the Administrative Assessor explained the formula: 

Total amount received by the eight households ÷ Original tax rate = Dollar amount of value to be exempted (and compensated for via a higher residential tax rate)

$8,221 ÷ .01781 = $461,595 

He noted that the exact amount each taxpayer received from the state will be calculated and the exempted amount of value will be deducted from each property tax bill.

The Assessors have posted the application form, due annually by August 31st, on the town website.

 An Underutilized Resource

How much can seniors save with this exemption? For a rough estimate, we can see that dividing 8 by $461,595 equals $57,699–which, when multiplied by .01781, shaves $1,027 off the recipient’s tax bill. Which begs the question: why aren’t more homeowners participating?

One likely answer is that the program is very new, and few residents know about it. 

Another reason could be privacy concerns. The application requires a lot of personal financial information that some people may not be comfortable sharing. By law, exemption applications are not public documents and assessors cannot share residents’ personal information. However, a fact of small-town life is that many long-term residents know each other. For some, revealing so much of their financial lives isn’t worth the savings.

To be fair, no one should be surprised by the breadth of financial information required for a means-tested exemption, particularly since other taxpayers in town subsidize successful applicants. Notably, getting this exemption doesn't preclude residents from applying for and receiving other exemptions.

A consequence of the means-tested exemption is that receiving one may prevent a taxpayer from obtaining another the following year if the amount of tax paid no longer exceeds 10% of annual income. This may happen more often now that the state has increased the maximum credit to $2,590. Seniors considering this exemption should do the math to ensure they receive the greatest benefit possible.

2 Big Reasons MA Schools Face a Budget Crunch

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Across the state, school districts are dealing with budget deficits and funding shortfalls due to the expiration of pandemic-era assistance programs and decreased state aid to public schools. Many cities and towns are scampering to bridge the financial gaps through budget cuts or Proposition 2 ½ overrides. 

How did things get so bad? Though it may seem that the bottom has suddenly fallen out of every public school district’s budget, this problem has been simmering for some time and can be traced back to two specific factors. One is a cap on inflation adjustments to education budgets under the state Chapter 70 program, which is the primary source of state funding for public K-12 schools. The other is the 2020 Covid-19 pandemic.

Chapter 70 and the Student Opportunity Act

Massachusetts’ efforts to modernize its public school funding formula contained in M.G.L. Part I, Title VII, Chapter 70 resulted in the Student Opportunity Act (SOA), passed in 2019 after years of legislative discussion and debate. The SOA was meant to eliminate inequitable funding between wealthy and low-income districts. Over seven years, $1.4 billion would be dispersed to public schools in pursuit of that objective.

While some disadvantaged communities found relief through the SOA funding model, early data showed problems attaining the law’s goal of eliminating funding disparities statewide. In 2020, a joint study by the MA Business Alliance for Education and the Greater Boston Chamber of Commerce showed that Chapter 70 aid for FY 2021 was not evenly distributed, with many wealthier districts getting disproportionately more than low-income areas. 

Another problem concerns the recent rate of pandemic-induced inflation that has eroded funding under the SOA model. Whereas state law allows for increases tied to inflation, it caps the rate of inflation at 4.5% (see “Foundation Inflation Index”). As this recent analysis by the Massachusetts Budget and Policy Center shows, inflation over the past two fiscal years has hovered between 7% and 8%. The analysis estimates that the FY 2025 state budget needs $465M to close the funding gap. The budget currently awaiting the governor’s signature comes up short as it includes an additional $317M in Chapter 70 funding.

 Special Funding helped Schools Weather the Pandemic

For the past few years, federal pandemic relief dollars flowed to states and their communities, including Massachusetts. Public schools and other Local Education Agencies (LEAs) such as charter and virtual schools received assistance through several federal/state agencies and programs, such as:

1. Federal Emergency Management agency

1. 5/18/23: $5.2M for Covid test kits;

2. 1/31/24: $64M for Covid School Testing;

3. 2/13/24: $13.5M for Covid School Testing;

2. Elementary and Secondary School Emergency Relief I, II, and III Funds (ESSER I, II, and III);

3. Remote Learning Technology Essentials Grants (RLTE) that supported remote learning;

4. School Reopening Grants (SRG).

It's important to note that not all school districts and Local Education Agencies (LEAs) received equal amounts of Elementary and Secondary School Emergency Relief (ESSER) funds. This is because the funds were intended to provide greater support to low-income districts. Data available on the state website indicates that some school districts received no ESSER fund allocations for one or more of the three dispersals. 

Additionally, certain districts still need to claim their total funding allotments and have until this September to commit the allocated funds for ESSER III, or risk losing the money. Committed funds may be spent through December 2024 or, if an extension is granted, through March 2026.

Panic Sets in as Temporary Funding Ends

In early 2023, experts began predicting a "funding cliff" for state school districts–a crisis related to the expiration of temporary funding sources meant to assist schools with pandemic-related expenses. 

For many school districts, the crisis has arrived. Schools that created new programs and staff positions funded with ESSER money must find new funding sources or terminate programs and lay off staff. 

Of course, districts were aware that ESSER funding was temporary, so its expiration should come as no surprise to anyone. In some cases, the use of temporary funds for ongoing expenses is a major contributor to the current crisis, as highlighted by a recent Western MA News article comparing Northampton and Holyoke public school districts.

Northampton faced a $4.77M shortfall in its public school budget, a problem explained on the city’s website by Northampton Mayor Gina Louise Sciarra: “The deficit has grown in recent years because recurring expenses were covered with non-recurring revenues. Federal pandemic relief has been spent.” 

The article’s authors contacted the Northampton School Committee’s vice chair who confirmed the Mayor’s description of the district’s budget dilemma. She also acknowledged that the district knew not to fund permanent positions with temporary money, but felt they needed to do so. 

The authors’ conversation with the Holyoke Superintendent of Schools yielded a different view. The district is not in crisis since it did not create new, permanent positions that could not be supported once the temporary funding ended. The Superintendent also noted that SOA money helped Holyoke maintain temporary ESSER positions until that funding ends. He expects that only those temporary jobs will be cut once the funding runs out.

When comparing the demographics, we see that Holyoke, with a population of 38,238, has a much lower median household income of $49,007 compared to Northampton, with a population of 29,571, and an income of $80,981. When checking the ESSER data page, we find that Holyoke's total allocation of funds was $57,919,513, significantly higher than Northampton's  $5,229,522. 

Despite receiving a large cash infusion, Holyoke avoided becoming dependent on temporary funding and averted a budget crisis through careful planning.

As for Chapter 70, the law must be amended to adjust for inflation. As taxpayers and citizens, we have a right to expect the state to contribute its fair share to our public schools. If you agree, let your legislators know!