Date: Thu, 27 Jan 2005 18:40:40 -0500
From: Arline Isaacson, MTA
Subject: Higher Education: Romney's FY'06 State Budget (House One)

Below is a preliminary analysis of the highlights of the Governor's Budget (House One) for the coming fiscal year:

Tax Cuts
Romney includes in his budget a cut in the income tax rate from the current 5.3% to 5.0%. This cut reduces revenues available for the budget by $225 million in the FY'06 budget. Since income tax revenues are expected to increase in the coming year, this tax cut would actually cut closer to $550 million for the following year.

Higher Education Funding (see attached spreadsheet)
Romney announced that he was increasing spending on higher education by 2.3%. However, this modest increase includes no additional monies to cover the mandated $21 million for the nanotechnology center at UMass Lowell and it does NOT include the roughly $31 million for retroactive payments for higher ed contracts.

MTA's analysis shows that the Romney budget for higher education increases by only $5 million (or less than 1%) the funding levels over last year's budget. By segment, the amounts are as follows:

University of Massachusetts - Increased $11m (2.6%)
State Colleges - Increased $2.8 million (1.5%)
Community Colleges - Increased $4.9 million (2.5%)

Health Insurance Costs (line-item 1108-5200)
Romney proposes increasing the costs state employees pay for their health insurance to 25% ("75/25") from the current 3 tiered sliding scale (15%, 20%, 25% dependent on salary levels). Under his proposal, retirees who are 65 and retired before 7/94 would remain at 90%. Retirees over 65 who retired after 7/94 would remain at 85%.

Retirees under 65 would have 3 possible levels of contributions:

- Those who are eligible for medicare coverage (presumably through a spouse) and who retired before 7/94, would receive 90% from the state toward their medicare supplement.

- Those eligible for medicare coverage who retired after 7/94 would receive 85% from the state toward their medicare supplement.

- Those not covered by medicare would receive only 75% from the state.

This proposal of course totally contravenes the sunsetting of the sliding scale / 3 tiered system which passed a few years ago and was due to expire this year.

According to Romney's budget, the increased costs to the state for the GIC line item is over $64 million (even including this provision for 75/25).

Privatizing / Outsourcing (The Pacheco Law) Sections 14-16
While maintaining the appearance of retaining the "Pacheco" law, the Romney budget again attempts to essentially gut the law in several outside sections of his budget.

UMass Amherst
* Tuition Retention Section 168 Romney's budget reinstates the requirement that UMass Amherst be allowed to retain tuition from out of state residents. (Previously, this program was only a pilot program).

COLA
The budget contains a 3% cost of living adjustment for retirees.

Reporting Requirements (Sections 29,30,61,62)
In several outside sections of the budget, Romney eliminates reporting requirements imposed on institutions of higher education.

Creditable Service for National Guard Service
Romney's budget eliminates from the creditable service provision (for service in the National Guard) the requirement that such service must have been with this state's National Guard.

Collective Bargaining
Unlike in past years, Romney's budget includes no provisions to eliminate collective bargaining rights from state employees.