Healey bill pours $250 million more into Massachusetts shelter crisis

By Chris Lisinski, State House News Service

Gov. Maura Healey on Wednesday proposed using nearly $300 million in one-time funds to infuse the state's strained emergency assistance shelter system and close a tax revenue shortfall.

Healey filed a more than $2 billion budget to close the state's books on fiscal year 2023 and direct new spending into the shelter state of emergency.

Her spending plan would pull $250 million from a state account known as the "transitional escrow fund" and put it toward the escalating emergency shelter crisis, which in recent weeks has become a focal point as Massachusetts works to assist a record number of people in need.

Healey said that money would allow the state to continue to provide services to families during fiscal year 2024 "as we work toward longer-term solutions," plus provide communities and school districts with needed support to enroll new arrivals.

"As you know, the demand for emergency shelter by families experiencing homelessness in Massachusetts continues to increase in part as a result of migrant families arriving in Massachusetts and lack of federal action," Healey wrote in a filing letter to lawmakers. "This situation is not unique to Massachusetts, but it is one that we must grapple with as our ability to continue to expand capacity, provide services for families in need, and support the communities that are sheltering them demands ongoing attention. We are working with our federal partners to impress upon Washington, D.C. the need for relief and other solutions, including expediting the issuance of work permits."

The state is currently housing more than 6,300 families in shelters, hotels, motels and other sites, an increase of more than 60 percent from when Healey took office in January.

Healey previously told federal officials Massachusetts is spending more than $45 million per month on shelter services, a pace well above the $325 million appropriated for the system in the fiscal year 2024 budget.

"It's almost like having a small city of 24,000 people spread out over more than 100 locations around the commonwealth," Housing Secretary Ed Augustus said of the crisis Wednesday.

An administration official said $2.15 billion in the bill is designed to close the books on fiscal year 2023, and another $250 million will support the shelter system in fiscal year 2024. The bill also calls for $200 million for a reserve to fund collective bargaining agreements with state employees, which the official said had already been budgeted in the FY24 annual budget but still needs to be appropriated.

About $2.11 billion of the closeout costs would go toward MassHealth, which Healey said would allow her team to "proceed with a strategy designed to smooth across fiscal years the impact of the loss of enhanced federal Medicaid reimbursements available during the COVID-19 public health emergency."

The spending bill also proposes sweeping revenue collected from the state's new voter-approved 4 percent surtax on income above $1 million into a separate fund used for education and transportation investments.

The FY24 budget that Healey signed last month implemented a similar mechanic for all surtax collections after July 1, but it did not retroactively apply to money brought in from the levy before that date.

Overall tax collections landed more than half a billion dollars below expectations in FY23. If the state left surtax money in the general fund, the shortfall would total about $39 million, and if lawmakers agree to sweep that revenue into the designated education and transportation account, the gap will increase to $177 million, according to the Healey administration official, who communicated only on background.

The official said Healey's bill calls for using another $40 million in transitional escrow funding to balance the books and plug other remaining holes.

While the bill calls for significant new spending, the official said the books would be balanced using a combination of the transitional escrow funds, about $500 million in reversions, non-tax revenue adjustments, trust fund sweeps and the cancellation of a $50 million transfer to the Commonwealth Care Trust Fund that the administration believes is no longer necessary.

"We have worked hard over the past eight months with our partners in the House and Senate to carefully manage finances and put Massachusetts in the best position to continue to make impactful investments and reforms that will move our economy forward," Administration and Finance Secretary Matthew Gorzkowicz said in a pre-written statement that did not mention the revenue gap.

The transitional escrow fund currently has a balance of about $1.3 billion. If lawmakers agreed to all of Healey's proposals to use that money spread across the closeout supp as well as other bills, it would shave the account down to about $620 million, the official said.

"Sufficient revenues are available to finance the appropriations and other measures proposed in this bill," Healey wrote in her letter, which also did not make explicit reference to the tax revenue shortfall.

Healey said the bill carries a net state cost of $833.3 million, with $798.8 million in net MassHealth costs.

According to Healey's office, other proposed spending includes a $16 million reserve to cover sheriff costs, $15 million to support substance abuse treatment at sheriff facilities, $11 million for shared services at the Department of Unemployment Assistance, and $8.8 million for an MCAS administration contract.

The bill features several outside policy sections, including what Healey's office described as a "technical change" to the state's new free school meals policy that featured in the FY24 annual state budget.

One section would allow municipalities hit by flooding and other recent natural disasters to repay the costs of those incidents over multiple years, and another would sunset daily COVID-19 reporting requirements the Department of Public Health faced during the pandemic.

The governor used her filing letter to make another pitch for spending and policy reforms she sought in prior bills, attaching a table listing Healey-proposed measures that lawmakers have not advanced.

At the "top of that list," Healey said, is tax relief, which remains stalled in private talks between House and Senate Democrats more than a year after legislative leaders first promised action.

"It is more important now than ever for Massachusetts to enact meaningful and lasting tax reform for our families and businesses to make Massachusetts more affordable, equitable and competitive," Healey wrote. "I know that you share my desire to finalize a tax relief package that meets those goals, and I look forward to continuing to work with you to get that done as soon as possible this year."