July 13, 2008

To the Honorable Senate and House of Representatives:

Pursuant to Section 5 of Article 63 of the Amendments to the Constitution, I am today signing House 4900, "An Act Making Appropriations for the Fiscal Year 2009 for the Maintenance of the Departments, Boards, Commissions, Institutions and Certain Activities of the Commonwealth, for Interest, Sinking Fund and Serial Bond Requirements and for Certain Permanent Improvements."

I am generally pleased with House 4900. This budget reflects the strong partnership between us on a number of shared priorities - including Chapter 70 and other education funding, the Life Sciences Investment Fund, and public safety. These investments will expand opportunity and improve the quality of life for the people of the Commonwealth. I sincerely appreciate your support of these and other strategic investments in our economy and our future.

At the same time, I believe we should prepare now for trouble ahead. While the Massachusetts economy has so far outperformed the struggling national economy, experts project that worsening national economic circumstances, including rising energy costs, could cause state revenues to drop below budgeted estimates. Those same deteriorating circumstances portend increasing stresses on state programs to meet the needs of our citizens. This is particularly so for safety net services which play a fundamental role in protecting the well-being of the people of Commonwealth in difficult economic times.

In recognition of these evolving fiscal and economic circumstances, I am - along with signing House 4900 into law - proposing a five-point plan to manage state finances through these challenges. This plan is proactive, balanced and flexible, and designed to ensure that state government can meet the highest priority needs of our citizens in challenging economic times. It will both provide and preserve resources for making key investments in our economy and maintaining a strong safety net for our citizens.

The plan has the following elements:

1. Responsibly closing the books on fiscal year 2008

With the budget, I am separately filing a final fiscal year 2008 supplemental appropriation bill that fully funds two years of prior Lottery Fund shortfalls - removing these exposures from the state's books - and closes out modest deficiencies from fiscal year 2008. I am also creating a collective bargaining reserve fund and transferring $61.8 million in fiscal year 2008 surpluses to pay for anticipated fiscal year 2009 collective bargaining costs not reflected in the budget. These measures will address remaining fiscal year 2008 priorities and help start out fiscal year 2009 on a fiscally responsible path.

2. Spending restraint and "9C" authority

In the face of a potential decline in state tax revenues and increasing stresses in some areas of the budget, we must preserve state resources to meet the highest priority needs of our citizens - including maintaining a strong safety net for those of limited means.

To ensure that there are sufficient resources to meet the most pressing needs of our citizens, I am using my veto authority to reduce spending by $122.5 million. While many of the budget items that I have eliminated or reduced have merit, our present fiscal challenges require increased restraint. With these vetoes, the final budget reflects reductions in various investments sought by the Administration as well as by legislators. The Administration will also employ spending and management controls throughout the year to restrain spending and preserve resources for our highest priorities.

Finally, in legislative language included in the final fiscal year 2008 supplemental appropriation bill, I am asking the Legislature for expanded "9C" authority to be able to make equitable spending reductions during the year if and when needed based on the actual performance of tax revenues. Expanded 9C authority would permit any needed spending cuts to be distributed responsibly across all of state government, minimizing disproportionate impacts in particular areas. Granting that authority now, before the end of the legislative session, enables us to respond quickly in the event of a serious downturn.

3. "Shared responsibility" health care solutions

Health care reform has been an exceptional success, with nearly 340,000 adults and children newly enrolled in health coverage since this historic initiative began. However, rising enrollment and expenses for state-subsidized health insurance programs are straining the state budget, with the projected costs of providing coverage for low-income families through MassHealth and Commonwealth Care in fiscal year 2009 exceeding resources currently available in the budget. These programs are fundamental components of our safety net and will become even more important in an economic downturn.

Thus, I am asking health care reform stakeholders to make modest additional contributions towards providing coverage to low-income residents through these programs. The fiscal year 2008 supplemental appropriation bill includes a package of increased contributions from employers, providers, insurers and the state totaling $130 million. This package will help pay for the costs of state-subsidized health insurance in fiscal year 2009 and maintain the spirit of shared responsibility for sustaining health care reform. These increased contributions from other stakeholders join contributions already made by consumers through higher enrollee premiums and co-payments for Commonwealth Care.

4. Additional revenue

The Administration has identified departmental revenues that we anticipate coming into the General Fund in fiscal year 2009 and that have not yet been counted in the budget. We will apply those revenues to help solve known and identified budget gaps.

5. Reserves

A combination of higher-than-projected revenue collections during the past year, the spending controls imposed by the Administration in April, and our efforts to responsibly close the books on just-finished fiscal year 2008 have produced surplus funds.

In legislative language included in the final fiscal year 2008 supplemental appropriation bill, I am proposing to deposit $20 million from these surpluses into a new fund for potential emergency energy needs for vulnerable residents.

I am also proposing to deposit $100 million in the state's Stabilization Fund. This deposit will put the Stabilization Fund in a stronger position to help meet the fiscal challenges that lie ahead. These funds could be used to help address any remaining fiscal year 2009 budget shortfalls after all other budget solutions have been employed - without depleting the Stabilization Fund beyond what is already contemplated in the budget.

Together, these steps constitute a proactive and flexible fiscal management plan for fiscal year 2009 - with spending reductions and health care reform solutions serving as essential immediate steps, and with other budget tools available for use in the coming months as we receive more information about actual economic and fiscal trends.

In summary, therefore:

  • I am reducing appropriation amounts in items of section 2 of House 4900 enumerated in Attachment A of this message by the amount and for the reasons set forth in that Attachment;
  • I am disapproving, or striking wording in, items of section 2 of House 4900 also set forth in Attachment A, for the reasons set forth in that Attachment;
  • I am disapproving those sections of House 4900 itemized in Attachment B of this message for the reasons set forth in that Attachment; and
  • Pursuant to Article LVI, as amended by Article XC, Section 3 of the Amendments to the Constitution of the Commonwealth, I am returning sections 8, 11 and 12, 94, and 107 with recommendations for amendment. My reasons for doing so and the recommended amendments are set forth in separate letters dated today which are included with this message as Attachments C, D, E and F.

I approve the remainder of this Act.

Respectfully submitted,

Deval L. Patrick

This information provided by the Executive Office of Administration and Finance.