The House 1 budget we are submitting today, the first of the Cellucci/Swift Administration, defines the vision we have for our Commonwealth over the next four years. It is the spending blueprint that prepares the Commonwealth for the next millennium as well. Its hallmark is a continued emphasis on fiscal discipline and targeted expansion of priorities that are critical to our continued economic and general well-being.

This budget is also significant in that it marks the final year of our seven-year investment in K-12 education reform and the final year of our promise to phase out the Lottery cap by returning all Lottery profits to our cities and towns. It represents the third year of our pledge to expand the state’s MassHealth program which will dramatically reduce the number of uninsured adults and children in the Commonwealth. Together, these programs will account for the majority of our budget’s expansion - as they have in the past.

As we prepare for the next century, we have a unique opportunity to pause and look back at where this state was and marvel at how far we have come. It is also an opportunity to focus on where we want to go during the next four years.

We have come light years since the fiscal crisis of the early 1990s. In eight short years we have turned a $1.1 billion operating deficit into a $2.2 billion operating gain. This remarkable $3 billion swing in the fund balance is testament to years of prudent fiscal management and a commitment to structurally balance every budget since 1991. This Administration will never live beyond its means.

The dramatic resurgence in our economy has also been fueled by an aggressive eight-year tax cutting program which has resulted in 28 tax cuts, worth more than $2 billion to taxpayers.

Revisiting the past is helpful only in that it provides a stark reminder of what can happen when government gets caught up in the euphoria that prevails during a robust economy. There is a tendency for government to try to be all things to all people, and with that mindset, profligate spending is sure to follow. We will stick with what has worked so well for the past eight years. We will continue to maintain strict fiscal discipline. Prudent spending compels us to focus on the basic priorities that most benefit families and communities and that means cutting taxes and stimulating job growth. Government cannot and should not try to be all things to all people. This budget concentrates on doing the basics and doing them well. This means providing good public schools, safe neighborhoods, access to affordable health care, and lower taxes.

This recipe has worked well. Our economy is as strong and vibrant as any in the nation. Our unemployment rate, presently 2.9%, has been at or below 4% for the past several years and we have created 400,000 new jobs since 1991. The state’s Stabilization Fund, or so-called ‘Rainy Day Fund,’ empty in 1991, has a current balance of $1.2 billion - more than enough to see us through any economic downturn that might be around the corner. Our Unemployment Insurance Fund, also empty eight years ago, is now bulging with a balance of $1.7 billion - enough to pay benefits for two and a half years without any additional contributions. These savings accounts are our nest egg for the future.

During this time, we have made a concerted effort to bolster the economies of our cities and towns by providing unprecedented amounts of local aid. In Fiscal Year 1999, cherry sheet appropriations will total $4.2 billion, including returning all Lottery profits to our cities and towns, and funneling $3.3 billion into K-12 education. Since Fiscal Year 1992, direct aid to cities and towns has increased by $2 billion, or more than 100%, and last fiscal year, cities and towns reported a record surplus of $419 million. The fiscal condition of our cities and towns has never been stronger.

Our efforts have not gone unnoticed. Since October 1997, Wall Street has improved our bond rating three times to a respectable AA-.

It would be irresponsible, however, to conclude that the good times will last forever. While it is true that our economy is much more broad-based and diversified than it has ever been, it is also true that we are part of a much more global economy. We cannot assume that the Massachusetts economy will forever be immune to government turmoil and economic instability in Europe and Asia. We have cut taxes and filled the Rainy Day Fund to help insulate Massachusetts workers from inclement economic weather. We cannot, however, rest on our laurels. Our budget priorities for the year 2000 and beyond are clear - we are going to hold the line on new spending in a time of record surpluses. And we are going to cut taxes - including the income tax.

There is, however, the temptation to do more and spend more particularly when the economy is healthy. A return to the tax-and-spend mentality of the 1980s would be a blanket invitation for history to repeat itself. For Massachusetts to continue to be competitive with the rest of the nation, we must strictly adhere to the prudent fiscal principles and sound management that have guided our decisions. Maintaining fiscal discipline when our coffers are full is the challenge that we face. Because no one can predict with certainty what lies ahead for our economy, we are prepared to meet this challenge, and we invite the Legislature to join us. We propose to adopt a series of initiatives that will promote fiscal responsibility in the year 2000 and beyond.

One obvious way to make certain that the Commonwealth is adequately prepared for the future is to plan for it. We are recommending that five-year cost estimates be submitted for any proposed program expansion by either the Legislature or the Administration. Additionally, five-year cost projections will also be required for the so-called "Budget Buster" accounts as part of the annual budget submission. These programs account for most of the Commonwealth’s non-discretionary spending, and almost 70% of budgeted expenditures; therefore, this information will be invaluable as we plan for the future.

We are also proposing statutory changes that will oblige the Legislature to certify the existence of sufficient revenue to support any new program expansion. The Executive branch is presently required to meet this standard.

Together with the Legislature, we have wisely replenished the state’s so called ‘Rainy Day Fund’ that, in the event of a serious economic slump, will eliminate the need for costly borrowing or tax increases to keep the state’s fiscal ship afloat. To ensure that this savings account remains sacrosanct, we are recommending that a two-thirds legislative vote be required before these funds can be spent.

Finally, we propose to establish an annual consensus spending cap with the Legislature. Each year the Legislative and Executive Branches agree on an annual revenue estimate that largely shapes our respective budget proposals. We believe that a mutually agreed upon spending cap will significantly curtail excess spending and keep us from repeating the mistakes of the past.

A discussion of our Fiscal Year 1999 budget should begin with the record $1 billion in tax relief that will be afforded to the Commonwealth’s taxpayers. In addition to reducing the tax on dividend and interest income from 12% to 5.95%, we were also able to double the personal exemption on earned income - the single largest tax cut ($600 million) in the Commonwealth’s history. It also enabled us to eliminate the capital gains tax on home sales and provide tax exempt savings for families putting money away for college tuition or retirement. This is the type of government that we espouse - one that doesn’t spend a penny more than it has to, and one that returns excess revenue to its citizens in the form of tax cuts.

The spending blueprint for the current fiscal year mirrors the tried and true formula that brought our economy back from near fiscal insolvency in eight short years. As in the past, the lion’s share of new state spending in Fiscal Year 1999 supports the Commonwealth’s education system, expands health care coverage to children and families, and continues our efforts to sustain our cities and towns. By sharply curtailing spending in the Executive Branch and subsequently reducing the total state workforce, we have been able to strengthen numerous health and human service programs and boost funding for our police, courts, and correctional systems.

This year we will spend $260 million to fully fund the sixth year of Education Reform. By the end of Fiscal Year 1999, virtually every school district in the Commonwealth will be at or above its recommended level of spending per pupil. Fiscal Year 2000, the final year of Education Reform, will be a crucial year as we continue to assess the recent MCAS scores and gauge the impact our efforts and financial support have had on our schools. It will also guide us as we determine what steps should be taken to ensure that our schools are providing the best education possible.

In addition, in Fiscal Year 1999, we successfully eliminated Worcester, Hampden, and Hampshire County governments, further chipping away at the remnants of this 300 year old form of unnecessary government. In Fiscal Year 2000, we will oversee the elimination of Essex County government and begin the process for the takeover of Berkshire, Plymouth, and Bristol Counties in the following fiscal year. By Fiscal Year 2001, we will have successfully eliminated nine of the Commonwealth’s 14 county governments.

Finally, the 1996 Health Care Access Act is fully funded in Fiscal Year 1999. In Fiscal Year 1998, we provided health care coverage to 170,000 additional individuals under our MassHealth program. This fiscal year, we will provide health care coverage to another 100,000 currently uninsured individuals.

There should no longer be any debate as to the impact that tax cuts have had on our economy. We have worked with the Legislature to deliver 28 tax cuts worth over $2 billion in annual tax savings to Massachusetts taxpayers over the past eight years. The result is a burgeoning economy that has spurred business growth and restored investor’s faith in our state.

It is time to restore the faith of each and every citizen of the Commonwealth in our state government by reducing the income tax from 5.95% to its original rate of 5%. In 1990, when the Legislature and state officials raised the income tax rate to pay off the operating deficit of the 1980s, they vowed it would be a temporary hike. Nine years is well beyond most people’s definition of temporary, and the fiscal recovery bonds have been repaid in full. We propose reducing the personal income tax from 5.95% to 5% over three years.

If this budget is, in fact, going to take us into the next millennium we must ensure that our government’s computers recognize the year 2000 when it comes around. We are going to continue our aggressive efforts to ensure that the Commonwealth’s computer systems are Year 2000 compliant. During the past two years we have invested over $80 million in manpower and technology to guarantee that our government is up and running on day one of the year 2000. This past year, we successfully upgraded the Commonwealth’s multi-billion dollar accounting system to ensure that it is Year 2000 compliant.

In keeping with our pledge to make our government as efficient and consumer friendly as possible, we are also proposing to further shrink the size of the bureaucracy. In addition to our promise to eliminate county government, we propose to consolidate and downsize several agencies and functions. We are recommending that the Board of Building Regulations, the Architectural Access Board, and the Department of Public Safety be consolidated and renamed the Department of Public Access and Safety. Consolidation of these agencies and their important functions will greatly enhance our efforts to establish and enforce accessibility and safety regulations and standards for buildings, facility components, and related equipment. Additionally, certain licensing responsibilities will be transferred from the Department of Public Safety to the Office of Consumer Affairs and Business Regulation.

We also recommend consolidating the Department of Environmental Management and the Metropolitan District Commission into a single Department of Conservation and Recreation. Combining the expertise, manpower, and equipment of these two agencies will provide us with a much more efficient and well maintained park system.

We also advocate relocating the Bureau of Special Investigations, which investigates welfare fraud, to the Department of Revenue and transferring the Department of Youth Services from the Executive Office of Health and Human Services to the Executive Office of Public Safety. Incidences of fraud have dropped dramatically as our welfare caseload has plummeted. For this reason, the Bureau’s investigative functions can be better utilized at the Revenue Department’s Child Support Enforcement Division. We also believe that the Department of Youth Services’ mission is more in line with the goals and objectives of our Public Safety Secretariat.

Finally, we recommend convening a special commission to study our adult and juvenile probation and parole systems. Our goal is to develop a more coordinated approach to our criminal offender community supervision system. A less fragmented more unified criminal justice system is another way to enhance public safety and improve the quality of life in our state.

With the passage of the landmark Education Reform Act of 1993, the Commonwealth made an unprecedented seven-year commitment to reform the state’s K-12 education system. During the past six years, we have increased our annual level of spending on K-12 education by $1.6 billion - more money than the increase in the annual net state cost of all the previous so-called "Budget Busters" (Debt Service, Medicaid, Insurance Costs, MBTA Subsidies, and Pensions) from Fiscal Year 1993 through Fiscal Year 1999. Since Fiscal Year 1993, the Commonwealth has allocated over $16 billion to support our public schools, more than it will spend to depress the Central Artery and build the Third Harbor Tunnel. As a result, in Fiscal Year 2000 every school district in the Commonwealth will be at or above its recommended level of foundation budget spending.

Our continued commitment to education is clearly reflected in this budget proposal. It provides $3.5 billion for K-12 public education. Our Fiscal Year 2000 House 1 budget submission represents the seventh and final year of our pledge to reform the state’s K-12 public school system. We are at a pivotal crossroads in our efforts to turn our public schools around and we, like every other parent in the state, will demand accountability from our public schools.

Recent results from the new statewide MCAS tests show that, for the most part, our students and schools aren’t making the grade. We intend to improve school performance and hold them accountable. While the MCAS tests are only one measure of student performance, they are the measure that we will use to evaluate our schools. We will not make the tests easier, and we will not settle for mediocre schools.

One sure fire way to improve our schools and student achievement is to test all teachers. Parents should expect no less than to have their children taught by qualified and competent teachers. We will not lower our expectations for students, prospective teachers, or veteran teachers. To do so would be the ultimate disservice to our children.

Another way to rebuild confidence in our schools is to guarantee that our investment is spent where it can do the most good - in our classrooms. This year, we are again requiring that school districts spend 90% of all new Chapter 70 money in the classroom. We are also earmarking $20 million for the exclusive purpose of hiring new teachers. Together, these initiatives will enable school districts to hire 2,000 new teachers, which will further reduce classroom size and bring the total number of teachers hired since Fiscal Year 1999 to 4,000. Our pledge to reduce classroom size by hiring 4,000 new teachers is perhaps the single most important step we can take to improve our public schools.

We also propose to fund several initiatives to support teachers and teaching, including $6 million to develop on-line classrooms and technology curriculum and create four leadership academies that will standardize professional development and provide teacher training. Additionally, we will provide $6 million for a teacher and principal mentoring program, which will provide financial incentives to veteran educators who agree to mentor new teachers and principals.

We are also recommending a $24 million increase for early childhood education over Fiscal Year 1999 and $20 million for MCAS assistance grants to provide tutoring for students that scored below the norm. We also propose to spend $41 million in Fiscal Year 2000 for the School Building Assistance Program, which will fund 58 new projects. We are also authorizing the Board of Education to approve 53 new school projects in Fiscal Year 2001. The combined value of these 111 projects is almost $2 billion. Finally, we propose to eliminate entirely the cap on the number of Charter Schools that will be allowed to operate in the Commonwealth.

This past year, Massachusetts was one of 46 states to reach an out of court agreement with the nation’s tobacco companies in the largest civil court settlement in United States history. The Commonwealth’s $7.6 billion settlement will provide us with an annual windfall of more than $250 million beginning in Fiscal Year 2000. We are proposing to deposit this money in a trust fund to ensure that it is used to expand existing health care services and fund new initiatives that will benefit the health and well-being of the Commonwealth’s children, families, and seniors.

During Fiscal Year 2000, we recommend spending $200 million for new initiatives and to expand existing health care programs, including $132 million for our federally reimbursed Medicaid program and $13.6 million for extended benefits for the Department of Mental Retardation’s Turning 22 Program. Additionally, we will allocate another $70 million to the Children’s and Seniors’ Health Care Assistance Fund to expand access to health care insurance for these individuals. Much of this spending will be eligible for federal reimbursement, allowing us to return $80 million to the trust for future use.

We also propose to spend $40 million on new health care initiatives for seniors including a $20 million increase for an expanded Senior Pharmacy Program and $20 million to increase elder services, including home health care, to offset cutbacks in the federal Medicare program. These funds will guarantee that our seniors continue to receive the services, and most important, the prescription coverage to which they are entitled.

We are also petitioning the federal Health Care Financing Administration for an amendment to our existing Medicaid waiver to extend Medicaid health benefits to low-income individuals diagnosed with the HIV infection. Presently, this coverage is only available to individuals diagnosed with the AIDS virus. Recent medical advances in the treatment of this virus in its earliest stages have been remarkably successful, and we propose spending $10 million of the tobacco settlement fund on this initiative. Finally, we recommend spending a half-million dollars to evaluate the effectiveness of our Department of Public Health’s anti-smoking advertising campaign.

When we began the expansion of our MassHealth program under the Division of Medical Assistance two years ago, our goal was to provide accessible and comprehensive health care coverage to low-income children, families, elders, and people with disabilities. In the last two years, MassHealth has expanded and streamlined the program’s eligibility criteria to maximize access for uninsured and underinsured families and individuals. Today, MassHealth also provides health coverage to working families up to 200% of the federal poverty level - $32,000 for a family of four. This fiscal year alone we will provide an additional 100,000 new low and moderate income individuals with health care coverage.

To further ensure that every Massachusetts citizen who needs health care has access to it, we are recommending a $132 million increase in Fiscal Year 2000, for the third year of MassHealth expansion. This expansion will enable us to provide another 78,000 individuals with health care coverage. By the end of Fiscal Year 2000, we expect to be providing health coverage to almost a million Massachusetts residents through various state funded health care programs.

This year we also filed legislation to ensure that our Health Maintenance Organizations are providing affordable, accessible patient-driven, not profit-driven health care.

Four years ago, Massachusetts implemented one of the most comprehensive welfare reform programs in the nation. With a work requirement for able-bodied recipients at its core, our reform efforts have reduced the welfare rolls by 40% since 1995. Our unquestionably successful reform program supports our belief that a job is the single most important benefit we can provide to families and children who have literally been trapped on welfare. We believe, with continued support for child care and health care benefits, even more of the state’s welfare recipients can join the workforce.

In Fiscal Year 2000, we are proposing that the required number of work hours per week for able-bodied recipients be increased from 20 hours to 30 hours. We are also recommending that able-bodied parents whose youngest child is between the ages of two and five be required to meet the work standard as well. There is no other state in the nation that completely exempts these individuals from a work requirement. These families are currently subject to the two year time limit. Without the requirement of work, however, their transition off of welfare will be doubly hard. These changes are not only consistent with the federal welfare reform regulations, but also with our belief that work is the most important step toward self-sufficiency.

To ensure the continued success of our reform efforts, we are recommending a $56 million increase in spending to support welfare reform child care needs, including $33 million to support recipients who must comply with the increased work requirements. We also recommend an additional $10 million for job search programs. These supports, coupled with the added income that recipients will receive by working additional hours, will make the transition from welfare to work and ultimately self-sufficiency a reality for thousands of women and children.

We are also increasing funding for the homeless, adding almost $5 million to expand capacity and services at the state’s individual and family shelters, and, for the fifth year, we are including a $15 million reserve to raise the salaries of privately contracted direct care workers who earn under $30,000 per year.

In addition, we are including a $5 million increase to reduce the waiting list for day and residential services at the Department of Mental Retardation and a $2 million increase to support community residential programs for individuals currently residing in nursing homes.

Finally, we are proposing an $8.1 million increase for the Department of Public Health to expand its childhood immunization program, implement a statewide newborn hearing screening program, and expand access for the Early Intervention program.

We are also reaffirming our support for the Commonwealth’s cities and towns by delivering over $4.4 billion in direct local aid, including $34 million in new Lottery funds and $7 million for water quality improvement projects. Our Fiscal Year 2000 budget submission marks the fifth and final year of our commitment to phase out the Lottery cap and return all revenues generated by it to our cities and towns. Lottery aid has grown from $306 million to $670 million since Fiscal Year 1992.

This is the seventh consecutive year in which we will be able to provide rate relief and water quality enhancement funds to over 123 communities. To date, including the $54 million we are requesting today, the state has given over $259 million in relief to cities and towns.

During the last eight years, we have funneled record amounts of local aid to our communities. This year the Commonwealth’s cities and towns will record the largest surplus in the state’s history. Our cities and towns have greatly benefited from our economic turn around and they too are well positioned for the next millennium.

We are committed to improving the quality of life in our Commonwealth. Our citizens should expect that they will have access to affordable health care and that our schools will be among the best in the nation. Our cities and towns should be safe, affordable, and desirable places to live and raise a family.

In Fiscal Year 1999, we invested $8 million in after-school programs and have begun a series of initiatives in cities across the Commonwealth. Working cooperatively with city mayors including Boston Mayor Thomas Menino, Pittsfield Mayor Gerald Doyle, and New Bedford Mayor Frederick Kalisz, we will provide organized after-school programs for at-risk children in at-risk neighborhoods. This fiscal year, we are proposing to increase spending for after-school programs by $12 million.

Since 1991, we have taken a hard-line against crime and criminals and the results have been dramatic. The crime rate, including violent crime, is at its lowest level in years. We have implemented strict sentencing guidelines including mandatory sentences for certain violent crimes and drug offenses, and convicted felons are serving longer sentences. To ensure that these trends continue, we propose increasing funding for our state District Attorneys and our state police including $3.5 million for a new state police graduating class and $800,000 in matching funds for a federal grant that will allow us to deploy more state police to community policing programs.

In 1992, we declared a statewide emergency in response to the growing number of domestic violence incidents in the Commonwealth. We have made enormous strides in our efforts to protect women and children and remain committed to eradicating this serious problem. We are proposing a $5 million expansion for domestic violence prevention and intervention programs in Fiscal Year 2000.

Finally, we are requesting $1.5 million to expand the Executive Office of Environmental Affairs statewide recycling program and support our Year 2000 goal of recycling 46% of the seven million tons of trash produced each year in the Commonwealth. We also propose adding $1 million for the Agricultural Preservation Restriction program to protect an additional 400 acres of Massachusetts farmland from future development.

Our House 1 budget plan calls for spending $20.4 billion in Fiscal Year 2000. Our decision to place the tobacco settlement money in a permanent trust will ensure that this largess is protected and used for its intended purpose - to reimburse the Commonwealth for the costs of treating smoking-related illnesses and fund health care related programs. Total spending, including off-budget transfers, represents a 2.5% increase over anticipated Fiscal Year 1999 spending, or 4.9% over our Fiscal Year 1999 House 1 budget submission. As in past years, the majority of this increase - $370 million - supports funding for Education Reform, aid to cities and towns, and full funding of the Health Care Access Act. The remainder of state government is projected to grow by approximately $126 million, or less than 1% in Fiscal Year 2000.

Our tax and departmental revenue projections for both Fiscal Year 1999 and Fiscal Year 2000 are conservative. It remains our contention that a conservative revenue assumption is called for, given that most economic forecasters project a slowdown in the economy in the second half of this year that will continue into the next year. We believe that this fiscally prudent course is one that does not overreach, providing a guarantee that we won’t have to renege on our commitments if revenues do not meet our expectations. This budget assumes base tax growth in Fiscal Year 1999 of 5.6%, and base tax revenue growth in Fiscal Year 2000 of 3.9%.

Recent economic indicators show that the Commonwealth is in a secure position to withstand the effects of a downturn in the regional, national, or international economies. Our economy is more broadly based and diversified. The emergence of high-tech manufacturing, financial services, research and development, and the health care industry provide us with a safety net in the event of a large-scale economic slowdown. The strength of the Massachusetts economy lies not only in the diversity of our business base, but in the skill level of our workforce and the prudent fiscal course we have charted. We are well positioned for the future. We cannot, however, hide our heads in the sand and ignore recent upheavals in foreign markets that may yet have an impact on our own economy. Our future economic well being depends on our ability to keep state spending down and spur economic growth.

We believe that the budget we are filing today will keep Massachusetts on a steady course through Fiscal Year 2000 and beyond. It remains true to the core beliefs that will shape this Administration. We will work closely and cooperatively with the Legislature and will never lose sight of our objectives - to maintain fiscal stability in the economy and the confidence of the Commonwealth’s citizens in their government.

We look forward to continued cooperation and a productive debate with the Legislature during the Fiscal Year 2000 budget process. We are steadfast in our determination to produce a budget that is fiscally prudent, balanced, and does not spend a penny more than is necessary.

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Executive Office for Administration and Finance
Fiscal Affairs Division
State House, Room 272
Boston, MA 02133
(617) 727-2081


Last updated on January 27, 1999

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