BOSTON, Mass. (SHNS)--The House passed a $730 million spending bill on Thursday to close the books on fiscal year 2024, dropping a Gov. Maura Healey proposal to use income surtax revenue to address a state budget deficit. A committee aide said the House spending bill carries a net cost to the state of $162 million. In the bill she filed last month, Healey proposed $714 million in spending with a $149 million net cost after counting for federal reimbursement for the MassHealth program. Lawmakers announce clean energy deal Most of the spending in the budget, Healey wrote in her filing letter, would cover "deficiencies incurred over the course of the prior fiscal year." One of those is the largest item, MassHealth, the massive public health insurance program funded with state and federal dollars, where "caseload exceeded initial expectations." The so-called closeout budget is an annual bill passed every fall to close the books on the previous fiscal year. Fiscal 2024 ended June 30 and was noteworthy because of a softening in overall state tax revenues coupled with spending increases and a surge in collections from the new 4 percent surtax on annual household income above $1 million. Healey noted "budgetary challenges" during fiscal year 2024, and to try to balance the budget wanted to use $225 million of "surplus" surtax collections to support spending on child care grants, universal school meals, early education and care provider rates and Massachusetts Department of Transportation operations. The suggestion was met with resistance from a number of community, health, education and transportation advocacy groups. Voters approved the 4 percent surtax on high-earners in 2022, amending the state constitution to specifically earmark the newly available revenue for new transportation and education investments. Advocates have taken this to mean the funds cannot be used to simply pad the Department of Transportation budget or Chapter 70 funding to local schools, but to actually finance new initiatives such as fare-free free regional transit authorities, universal free school meals, and free community college, which the surtax has funded over the last two years. "We believe that shifting funds from the Education and Transportation Fund to backfill accounts that were previously funded by the General Fund sets a bad precedent for future budgets. Using the Fair Share dollars to balance budgets rather than make new investments in transportation and education moving forward risks damaging public trust," a coalition of advocacy groups said in a letter to House and Senate leaders. Instead of tapping into surtax funds, the bill that was drafted in the House Ways and Means Committee would change the distribution of excess capital gains tax revenues for fiscal year 2024 to cover the unmet costs. The formula for excess capital gains revenue is that 90 percent goes to the state's rainy day fund, 5 percent goes to post-retirement benefits for former state employees and 5 percent to pensions. The stabilization fund is at record-highs, and recently topped $9 billion. The House voted Thursday to divert some of the excess capital gains revenue brought in during fiscal year 2024 before it reached the rainy day fund to fill gaps in the budget. They would direct 47 percent of the excess revenue to the General Fund, 43 percent to the stabilization fund, 5 percent to retiree benefits trust fund, and 5 percent to pension liabilities. "We need to see what the Senate does, but I would consider this a win," said Seth Gadbois, staff attorney with Conservation Law Foundation, which signed on to the letter to lawmakers. "The will of the people of Massachusetts in passing the fair share amendment was to proactively fund education and transportation initiatives, so we're happy to see it prevented from being used for improper rainy day purposes and we hope to see the Senate follow suit and keep public trust." Pete Wilson of Transportation for Massachusetts, also said he felt like the House had listened to their concerns. "It's not that we think the accounts that were being backfilled aren't very important, for child care resources and free school lunch, but spending those dollars, as we put in our letter, would take away from opportunities in the future to invest in transit and roads and bridges and pedestrian and bike infrastructure," Wilson said. "We're happy they chose a different path." Healey had also proposed lowering the amount of capital gains revenue flowing into the stabilization fund, but as opposed to using it to fill fiscal year 2024 gaps, she instead recommended using that money to revive another trust fund. She called for a distribution of 45 percent of capital gains funds going into the rainy day account, 5 percent to retirement benefits, 5 percent to pensions, and 45 percent into a transitional escrow fund — to "rebuild" that account. Former Gov. Charlie Baker created the transitional escrow account in 2021 to stash about $1.5 billion in surplus dollars due to an influx of COVID-related dollars, and the account is now poised to run out as the state taps into it to cover unexpected expenses including a spike in emergency shelter spending. The House did not join in Healey's idea to revive the secondary savings account on top of the rainy day fund. They did, however, agree to move surtax dollars into an early education trust fund. The fiscal year 2025 budget relies on $100 million worth of revenue from online Lottery sales to pay for early childhood education and care grants, but regulators now say the online platform won't be up and running until at least spring of 2026. Healey suggested putting $150 million of surtax dollars into the Early Education and Care Affordability Fund to cover the deficiency — the one move of surtax funds that the House agreed to, to continue to cover the popular Commonwealth Cares for Children (C3) grant program. The House version of the bill also scrapped major policy components of Healey's bill, after they became moot. The House bill was released from the House Ways and Means Committee about 45 minutes after House and Senate negotiators announced a compromise on a climate bill that had been held up in negotiations since July. When the branches failed to reach a compromise on that climate bill at the end of formal sessions, Healey attached similar language into the closeout in an attempt to renew action. The House Ways and Means closeout budget does not include any language related to clean energy siting and permitting reform — the crux of the climate bill that the branches are now moving as separate legislation with their Thursday morning compromise. House Ways and Means stuck with Healey's dollar amount for the largest spending item, MassHealth deficiencies: $565.4 million. The net state cost of this amount, however, is nothing because federal reimbursement is available to cover services provided in fiscal 2024, according to Healey. Other proposals include $46 million for a reserve to cover sheriff costs, $14 million for substance and alcohol use disorder treatment, $7.3 million for the Residential Assistance to Families in Transition program, $5.1 million to support public health hospitals and $2.5 million for costs of launching the online Lottery program authorized in the state budget — all also included in Healey's budget. It also includes $20 million for celebrations related to the 250th anniversary of the American Revolution in Massachusetts. The closeout budget would fund a raft of collective bargaining agreements with public employees. The House did not include a Healey proposal to seed a Disaster Relief Trust Fund with $11 million immediately. Earlier this year, the governor suggested diverting a portion of excess capital gains tax revenue to a proposed fund, which could be tapped to help various sectors of the economy respond to incidents like severe flooding and strong storms. The Legislature did not adopt the administration's proposed funding mechanism, instead dedicating $14 million from a consolidated net surplus at the end of the year. Healey tried to bring that fund up to $25 million with the closeout budget, but the House did not go along with the idea. The House budget bill would also launch a "Dolly Parton's Imagination Library" program in Massachusetts, subject to appropriation. The program, started by the country music star, funds up to 50 percent of the costs to send one age-appropriate book to each registered child from birth to age 5 monthly, to encourage "a love of reading and learning," according to the bill text.