Now that the long-awaited increase to the CPA Trust Fund has been signed into law, many CPA advocates are asking: What happens now? How much of an increase can communities expect to receive to their matching funds? What about budget surplus funds for this November’s Trust Fund distribution?
The Coalition has the answers to all of these questions and everything else you need to know about the new CPA revenue.
Part One: The Increase in Registry Fees
What exactly was passed? The legislation that was passed in the FY20 budget increases the recording fees at the Registries of Deeds which provide revenue to the statewide CPA Trust Fund. For most documents filed at the Registries, this fee was increased from $20 to $50, and the fee for municipal lien certificates was increased from $10 to $25.
How much new revenue will be generated? In recent years, the recording fees have brought in approximately $24 million annually to the CPA Trust Fund, and we estimate that will rise to $60 million after the new fees are fully implemented. How did we arrive at that estimate? The increase from $20 to $50 is 2.5 times, so we multiplied the current revenue of $24 million by 2.5, yielding an estimated $36 million in additional revenue. This is admittedly a back-of-the-envelope calculation, and the Department of Revenue will provide an official estimate in the spring of 2020.
When does this take effect? While the FY20 budget was signed into law on July 31st, the Registries will not begin collecting the new fees until the end of the year. Here’s a breakdown of the timeline over the next few years:
- October 31, 2019: The balance in the CPA Trust Fund as of this date will be distributed to all 175 CPA communities on November 15, 2019
- November 1, 2019: Because the CPA match was just issued, a new 12 month "Trust Fund Year" will begin. The old fee amounts ($20 and $10) will still be in place.
- December 31, 2019: The increased fees will go into effect at the Registries of Deeds ($50 and $25).
- October 31, 2020: CPA communities will recieve a Trust Fund distribution comprised of 2 months of revenue at the old fee level (November & December 2019) and 10 months of revenue at the new fee level (January - October 2020).
- October 31, 2021: The first distribution to CPA communities that will include a full year of new revenue.
What will each community receive with the new revenue in place? As we've always said, future distributions from the CPA Trust Fund are impossible to predict, and this is even truer now with the new revenue being implemented. Several factors can affect how much revenue is distributed each year, including the increase in local surcharge revenue in the existing 175 CPA communities, new communities adopting the program, and the level of activity at the Registries of Deeds.
With that said, however, the Coalition has done some calculations on a hypothetical scenario to give communities an idea of how the new revenue will impact their matching funds. We've created a chart that displays our estimates of what communities would have received if the new revenue had been included in the November 2018 distribution. Please note that these calculations do not include any funding from state budget surplus funds.
Part Two: Surplus Funding for Fall 2019
Updated January 27, 2020: After the FY19 state budget closeout was completed, $20 million in state budget surplus funds were transferred to the CPA Trust Fund. Click here to read more about the distribution of these funds and the impact it had on the November 2019 state match.
What was passed? The FY20 budget also included language that could provide up to $20 million in budget surplus funds for the November 2019 CPA Trust Fund distribution. Should a budget surplus be available, these funds would avoid a record-low disbursement this year.
When is the availability of budget surplus funds determined? In late September or early October, the legislature will most likely pass a supplemental FY19 budget bill, in which they will spend some (or all) of the FY19 surplus. After that bill is signed into law, the comptroller will announce the consolidated net surplus, which is the amount of the FY19 surplus that was not spent during the supplemental budget bill. These funds are what would be allocated to the CPA Trust Fund. The announcement usually comes before October 31st, although it has been late the past few years.
So if there is a consolidated net surplus, will CPA get extra funding? Not necessarily! In the language that was passed in the FY20 budget, there was an order of precedence for how the funding would be distributed. Before CPA receives any funding, up to $10 million will be distributed to the Massachusetts Life Sciences Investment Fund. After that distribution, if there are funds still left in the consolidated net surplus, up to $20 million will be distributed to CPA. This means that a total of $30 million needs to be available in the consolidated net surplus for CPA to receive the full amount.
If there is funding available, when will communities receive it? Any surplus funding we receive will be distributed along with the Registries of Deeds revenue on November 15th, 2019. Earlier this year, DOR estimated that the November 2019 match would be 11.6% of what communities raised at the local level, an all-time low for the program. Should budget surplus funds be available for the 2019 distribution, it would almost certainly increase this match percentage to avoid that record-low.