|Fiscal Affairs Division|
An Overview of the Governor's
Governor Swifts 2003 budget continues a dedication to fiscal discipline and responsible spending.
Revenues and Spending
Revenues that fund the budget come from five sources:
Chart 1 State Revenue: Where it comes from State government will collect an estimated $23.5 billion in revenues in 2003, about twothirds of which come from income, sales, or other taxes.
Chart 2 Income Tax Rate With the tax cut passed by voters in 2001, income tax rates will continue to be rolled back significantly, dropping to 5.0 percent by 2003.
State government will spend an estimated $23.5 billion in 2003. The five broad categories of spending are shown in Chart 3:
Chart 3 State Spending: Where It Goes
Table 1. State Spending for Fiscal Year 2003 Spending on Health and Human Services, K12 education, and debt service (used for capital spending on infrastructure) comprises more than twothirds of spending.
Due to the tightness in the budget, funding increases are concentrated in only a few agencies. Most agencies will have no increase in funding for fiscal year 2003, and many will have cuts in funding. The table below highlights these changes.
Table 2. Changes in Spending for Fiscal Year 2003
Fiscal discipline begins with a timely and thoughtful budget process. This budget recommendation is submitted on time and in balance, while fully funding the states most critical programs and unavoidable obligations. In addition, it reflects the following continued efforts to limit the budget to budgetrelated matters, and provide state agencies with the muchneeded flexibility that will help them manage through difficult fiscal times:
Constraining spending.The Governors Budget Recommendation reflects the following efforts to reduce spending:
Prudent use of reserves. Massachusetts is fortunate to have substantial Rainy Day reserve funds that were prudently set aside during good fiscal times to help the state manage through bad fiscal times. In Fiscal Year 2002, the Governor recommended using $390 million in Rainy Day funds, but the Legislature, over the Governors veto, enacted a budget that used $772 million. The Governors Fiscal Year 2003 recommendation relies on $750 million in reserve funds, a prudent amount that will allow the state to wean itself off this onetime source of funds gradually as the economy recovers in the coming years.
CONTINUED COMMITMENT TO QUALITY K12
The Swift Administration is committed to a high quality public education system. The landmark Education Reform Act of 1993 mandated increased funding and increased accountability for Massachusetts public school systems, and since 1993 the state has invested over $28 billion in K12 education. With one of the most aggressive funding efforts in the country and the implementation of critical accountability and assessment tools, Massachusetts has been recognized as a national model for education reform. Even with the current fiscal constraints, the Governors Fiscal Year 2003 budget recommendation continues this commitment with $4.3 billion for public education, a $135 million (or 3%) increase in education spending.
The Fiscal Year 2003 budget recommendation for K12 education includes:
This budget proposal also reflects the thoughtful and important recommendations of the Governors Commission on School Readiness to improve state services and programs to promote school readiness. These include comprehensively measuring indicators of school readiness, working with higher education institutions to remove barriers for early education and care providers seeking to continue their education, and developing a core application for services to eliminate the bureaucratic red tape families are forced to navigate in the current child care system.
The Chapter 70 education aid formula determines the amount each city and town receives in state education funding. (Please see Chart 4 for details on Chapter 70 funding over time.) The formula will be changed in several important ways in subsequent legislation. The proposal includes a multiyear plan to increase funding for special education and technology; addresses historical inequities in aid and local contributions; redirects aid toward towns with high enrollment growth; and simplifies the current formula. The Swift Administrations proposal draws on the best ideas that were put forth last year by the Administration and the House Ways & Means Committee. The proposal should, at long last, provide towns and districts with a predictable and equitable formula for this important local aid program.
The Fiscal Year 2003 funding recommendation will enable the Department of Education to achieve the education goals for children K12 set forth by the Swift Administration.
Chart 4 Spending on Education Reform: Chapter 70 Funding Chapter 70 education aid to cities and towns almost tripled from 1992 to 2002, and will continue to increase in Fiscal Year 2003 under the Governors proposed budget.
In response to the terrorist attacks in September, the Swift Administration reevaluated the Commonwealths deployment of public safety assets, particularly the deployment of law enforcement personnel. The costs of the Commonwealths initial response was largely funded from supplemental funds appropriated in Fiscal Year 2002. That commitment to enhanced public safety measures is further reflected in the Fiscal Year 2003 budget recommendation, which includes:
TARGETED ASSISTANCE TO LOWINCOME FAMILIES
Perhaps the most important part of any state budget is funding for our states neediest citizens. Over 43% of the Fiscal Year 2003 budget recommendation is dedicated to fully funding critical health and human services for millions of people across the state. The Fiscal Year 2003 budget recommendation includes the following increases to support the Commonwealths lowincome families:
It is unfortunate that budget constraints often make it necessary to reduce funding in important programs that may help avoid future costs, but do not provide immediate and critical safety net services for lowincome families. In order to fund a portion of the above increases, the Fiscal Year 2003 budget recommendation reduces funding for smoking prevention and cessation programs from $63 million to $19 million, and also reduces funding for certain disease prevention and research.
CONTINUED COMMITMENT TO ECONOMIC AND
Over the last eight months, the Swift Administration has made great strides in evaluating the existing adult basic education and worker training programs as the initial step toward building a stronger, more integrated system of lifelong learning opportunities in the Commonwealth. We have already taken important steps to strengthen the State Workforce Investment Board, develop consistent performance measures, and launch a new initiative to expand and improve incumbent worker training. The Fiscal Year 2003 budget recommendation takes the next steps in this reform process by consolidating program management, strengthening the statewide network of OneStop Career Centers, adding resources to areas of critical need, and establishing new mechanisms for ensuring interagency collaboration.
Specifically, these recommendations bring together a number of existing employment services within the Division of Employment and Training (DET) to better leverage federal and state funded programs and to consolidate responsibility for guiding OneStop Career Centers. At the same time, these recommendations provide $2 million in additional resources to the Commonwealth Corporation to improve its capacity for driving systemwide reform efforts and managing key strategic initiatives, such as the new Building Essential Skills through Training (BEST) program.
These recommendations draw on the $20 million of surplus revenues in the Workforce Training Fund (WTF), accumulated over the past four years, to provide $10 million for Emergency Training Grants for the unemployed. This new oneyear initiative would be administered by DET, through grants to the OneStop Career Centers. An additional $3 million of the WTF surplus will help fund BEST in Fiscal Year 2003.
On the capital side, the Swift Administration is reexamining capital spending priorities and spending levels to identify opportunities for economic stimulus here in the Commonwealth (please refer to the Capital Outlay section on page 21 for details). The Executive Office for Transportation and Constructions fiveyear capital plan, for example, calls for $20 million of annual spending for the Public Works Economic Development (PWED) grants and the Small Town Road Assistance Program (STRAP). PWED grants are aimed at jumpstarting local economies through construction, reconstruction of existing or newly located public access roads, streets, bridges, sidewalks, lighting systems, traffic control systems, and drainage systems and culverts associated with municipal economic development efforts. STRAP provides small towns with additional capital resources for local road construction costs. Spending is contingent upon the legislative passage of a bond bill filed by the Governor in June of 2001.
The following pages include a summary of state spending, as well as the Commonwealths balance sheets for Fiscal Years 2001, 2002, and 2003. :
FISCAL YEAR 2003 RESOURCE SUMMARY ($000)
The Division of Local Services, within the Department of Revenue, annually notifies cities and towns of the aid and assessments the state will make to cities, towns, and regional school districts in the upcoming year. Originally, these notifications were printed on cherrycolored paper, and therefore were given the name cherry sheets. Cherry Sheet local aid comprises approximately 80% of total local aid; nonCherry Sheet local aid consists primarily of state assistance to localities that is distributed on a targeted basis, as opposed to the more broadbased formula distributions that typify Cherry Sheet distributions.
Fiscal Year 2003 Cherry Sheet Overview
In Fiscal Year 2003, cherry sheet appropriations will total $5.3 billion, providing cities, towns, and regional school districts with a direct local aid increase of $105.4 million, 2% over Fiscal Year 2002 spending levels. This represents the ninth consecutive annual local aid increase. Since Fiscal Year 1993, cherry sheet aid has increased by $2.8 billion, or 112%.
In addition, average annual growth in cherry sheet aid over the past ten years has far outpaced growth in other state spending; cherry sheet aid has averaged an 8.8% increase, nearly double the rest of state spending, which has averaged 4.5% annual growth.
The direct local aid distributed to cities and towns through the cherry sheets comprised 24 lineitem appropriations administered by a variety of state agencies and departments. The largest of these programs, and their Fiscal Year 2003 funding levels, are described below.
The Lottery distribution to cities and towns has grown by 137% since Fiscal Year 1993. In Fiscal Year 2003, the direct distribution of Lottery proceeds to cities and towns will be $778 million. The Governors FY03 recommendations also include language directing the State Lottery Commission to restructure the prize payout rate of lottery games. With a 71 percent win ratio, Massachusetts currently pays out more in Lottery prizes than any other state in the country. Analysis has shown that bringing the Massachusetts Lottery prize payout rate down to 63 percent, in line with the average prize payout rate of the ten highest payout state lotteries, would generate $274 million in additional net revenues. Lottery revenues included in the Fiscal Year 2003 budget recommendation reflect this change, and are used to fund various local aid accounts. Through Fiscal Year 2005, this additional revenue will be appropriated through specific local aid line items in the budget. Beginning in Fiscal Year 2006, the additional revenue will begin to flow directly back to cities and towns through the Lottery aid formula, to be used at their discretion.
The cherry sheet contains aid for several education programs: Education Reform ("Chapter 70"), School Building Assistance, School Transportation, and other education aid programs. Direct financial assistance distributed to school districts through the Education Reform formula will increase by $100 million, reflecting the Swift Administration's commitment to maintaining investments in education programs. Since Fiscal Year 1993, direct education aid has increased by $2.3 billion, which represents a 147% increase. State spending on direct education aid has consistently outpaced inflation and enrollment growth. Since Fiscal Year 1993, enrollment growth plus inflation has averaged 4.5%, whereas growth in cherry sheet education aid has averaged 10.2%.
School Building Assistance reimbursements, which provide municipalities and regional school districts with financial assistance for the planning and construction of school buildings, will increase by approximately $24 million in Fiscal Year 2003, funding an additional 19 new school projects. Since Fiscal Year 1993, funding for School Building Assistance has increased by 160%, in support of 450 new school construction projects.
The Executive Office of Public Safety administers the police career incentives program, through which the Commonwealth reimburses cities and towns for 50% of the costs associated with providing incentive education programs to police officers. These incentives are offered in the form of salary increases as the officers earn undergraduate and graduate degrees. These recommendations include a $3.7 million increase for police career incentive payments to fully fund the program. State assistance has grown 265% since the programs inception in Fiscal Year 1994.
After a decade of exceptional growth and diversification in the states economy, Massachusetts has now entered a period of slower growth and recession. These factors largely mirrorand are influenced bybroader economic trends in the national economy.
The Slowdown Has Arrived Nationally and in Massachusetts
The longest economic expansion in American history officially ended in March 2001, exactly 10 years after it began in March 1991. The downturn occurred after several years of strong economic growth: Gross Domestic Product (GDP)a broad measure of economic outputgrew more than 4 percent each year from 1997 to 2000 (see Chart 1). In 2001, however, GDP growth slowed considerably to an estimated 1 percent.
Economic growth in Massachusetts generally tracks the national economy, in direction if not in magnitude, as shown in Chart 1. In recent years, however, the state economy has considerably outpaced the nation. In 1999, in fact, Gross State Product (GSP)a broad measure of state economic outputgrew at about double the rate of national economic growth. In the past two years, however, economic growth in Massachusetts had slowed substantially, reaching a 2.2 percent growth rate in 2001. While that rate was low compared to the late1990s, it is still more than double the economic growth rate of the nation in 2001. So far, therefore, it seems that the state is weathering the economic downturn considerably better than it did during the last recession, in the late 1980s and early 1990s, when the downturn in Massachusetts was much steeper than in the nation as a whole.
Chart 1 Economic Growth In 2000 and 2001, economic growth slowed considerably in Massachusetts from its recent peak in 1999. In 2001, the state economy grew by an estimated 2.2 percent.
A second important economic indicator is unemployment. The unemployment rate in Massachusetts generally declined from 1991 to 2000, and has been significantly below the national unemployment rate since 1996 (see Chart 2). Beginning in January 2001, however, the unemployment rate began to rise both in Massachusetts and the nation. The state unemployment rate in December 2001 was 4.2 percent, the same rate as in October. While this rate is considerably higher than the year before, it is still more than a percentage point below the national average.
Chart 2 Unemployment Rates Both state and national unemployment rates rose in 2001 for the first time in several years. The rate in Massachusetts remains below the national level.
Personal income in Massachusetts is another key economic indicator, measuring the sum total of income received by state residents. Chart 3 shows the annual growth rate in personal income since 1980. It shows that personal income in Massachusetts generally rose during the 1990s, and spiked upward in 2000, growing more than 10 percent that year. This spike likely reflects wage and salary growth from the tight labor market before unemployment began rising. In 2001, however, personal income grew at only about half that pace, rising by 5.3 percent. Nonetheless, the rate remained above those in the early 1990s.
Finally, the declining stock market has had a significant effect on the revenues available to state government. When the stock market falls, investors have fewer realized capital gains, since the value of their stocks tend to fall in a bear market. This, in turn, causes state revenues from capital gains taxes to fall. Chart 4 shows how capital gains tax revenues peaked in 2001 at just above $1 billion dollars. The estimate for 2002, on the other hand, is less than half that level, at $425 million. Capital gains tax revenues for 2003 are predicted to be even lower.
Chart 3 Growth in Personal Income: Massachusetts Total personal income grew at over 10 percent in 2000, the fastest pace since 1988. However, income grew more slowly in 2001, back to the rates of the mid1990s.
Chart 4 Revenue from Capital Gains Taxes is Down The decline in the stock market has lead to a sharp fall in capital gains tax revenue, from over $1 billion in 2001 to a projected $425 million in 2002.
The Good News: The State Is Prepared
The slowdown in the state economy will require new responses from state government. Last year, the Governor waived the waiting period that unemployed individuals face before they are eligible for unemployment benefits. Nonetheless, it is important to note that the Massachusetts state economy is in much better shape than it was going into the last recession more than a decade ago. While many factors have contributed to this, two are particularly important: a commitment to fiscal discipline, and important efforts to lower taxes to create a more businessfriendly climate in the state. Because of these forcesand othersthe state is prepared to meet its economic challenges.
The state has controlled spending growth. A policy of fiscal discipline has kept government spending to a sustainable rate in recent years. For 2003, the Governor is proposing a 2.7 percent increase in spending (see Chart 5). In more recent years, from 1993 through 2003, spending growth has been constrained to 5.6 percent per year, on average, despite the booming economy. These rates of spending growth contrast with those that preceded the last recession: Annual spending grew by an average of 9.9 percent per year from 1983 through 1989.
Recent spending growth in Massachusetts has also been low compared to national standards. For example, a recent analysis by the Rockefeller Institute of Government compared changes in every states real (i.e. inflationadjusted) percapita spending from 1990 to 1999, using data from the U.S. Census Bureau. It found that Massachusetts had a 16.4 percent total increase in spending during this periodthe ninth lowest in the nation and nine percentage points below the national average.
Chart 5 State Spending Growth Controlling state spending has been essential for maintaining fiscal discipline. Spending will increase 2.7 percent under the Governors FY03 budget recommendation.
The State has built up a healthy level of reserve funds. A direct and positive result of fiscal discipline and strong economic growth has been the states ability to set aside rainy day funds. These reserve funds are set aside in order to be used in an economic downturnsuch as the slowdown we are currently experiencing. The increase in reserve funds in Massachusetts has been significant: the state had less than $60 million set aside in 1990, but $2.3 billion by 2002 (see Chart 6). These funds allowed the state to be considerably more financially prepared than it was before the last recession.
Chart 6 State Rainy Day Reserve Funds Fiscal restraint and a strong economy have led to dramatic increases in the rainy day fund balance, especially in the late 1990s.
With the onset of an economic slowdown in fiscal year 2002, the state has drawn from the rainy day fund to supplement its revenue. In 2002, the state is projected to use $772 million from the fund. In the Governors FY03 budget recommendation, $750 million is proposed.
Massachusetts has a much more competitive business environment. Thanks to 42 tax cuts in 11 years, the state has permanently banished its status as Taxachusetts. The state has also implemented a wide range of financial and business initiatives designed to encourage investment and stimulate economic growth. These include:
The number of jobs is near a record high.. Since December 1991, the state has gained more than a halfmillion jobs (see Chart 7), with the number of jobs rising from 2.8 million jobs to more than 3.3 million jobs in December 2001. While the total number of jobs in Massachusetts has fallen slightly since September 2001, the level is still near its alltime highand significantly higher than the peak during the previous boom, in 1989.
Chart 7 Number of Jobs in Massachusetts The total number of nonagricultural wage and salary jobs in the state increased steadily from 2.8 million jobs in 1991 to more than 3.3 million jobs at the end of 2001.
More people are covered by health insurance. The Commonwealths commitment to providing health coverage to lowincome children, their parents, disabled adults, chronically unemployed adults, and the working poor has brought important results. Since the expansion of MassHealth (our states Medicaid program) in 1997, combined with the strong economy of the late 1990s, a significantly higher share of individuals has health care coverage today than in recent years. Since 1996, in fact, the number of uninsured residents has been cut by 48 percent.
The state has a more diversified economy. Since the last recession, Massachusetts has diversified its industrial mix, with software development and other knowledgebased industries having emerged as growth sectors in the state economy. Moreover, the state has become less reliant on a few large employers because of strong growth among small businesses. For example, between 1989 and 2001 the share of employees in Massachusetts who worked in firms with over 1,000 employees declined by about a fourth, from almost 19 percent to less than 14 percent. At the same time, the share of employees in the small firms (those less than 250 employees) rose. Finally, Massachusetts' exports have grown significantly, reaching $22 billion in 2000 after increasing by 90 percent in the 1990s. This economic diversification will allow our economy to maintain stability in the face of national economic difficulties.
The Capital Budget
The Commonwealths capital budget supports the construction and maintenance of a variety of important public assets that contribute to the economic wellbeing and quality of life we enjoy in Massachusetts. These include:
Sources of Capital Funding
In total, the state has invested over $20 billion in infrastructure improvements over the past ten years, excluding $3 billion invested so far on the Central Artery/Tunnel Project. Funding for these investments comes from four sources, shown in Chart 1 (next page). They include:
Bonds. The main source of funding for capital spending is proceeds from the sale of longterm debt. The state issues two types of bonds. The first is general obligation bonds that are backed by the full faith and credit of the Commonwealth. Debt service on these bonds is paid through the annual operating budget. The second is special obligation bonds, which are backed by and financed through a dedicated revenue stream, such as the gas tax. The Governors proposed budget calls for $1.9 billion in capital funding through the sale of bonds in FY 2003.
Federal funds. Federal reimbursement, especially in the case of state expenditures for transportation improvements, is the second largest source of capital spending. Just over $500 million in federal funds are expected in FY 2003.
Operating revenues. A portion of annual state surpluses, when available, is dedicated to pay for capital projects. The Governors proposed capital budget includes almost $300 million in operating revenues for capital projects.
Thirdparty reimbursements. These funds are received from Commonwealth authorities. Examples include an annual reimbursement from the Massachusetts Water Resources Authority to offset watershed land protection costs, and Massachusetts Port Authority funding of the Central Artery/Tunnel project. Over $100 million in thirdparty reimbursements are expected in FY 2003.
Chart 1 The Sources of Capital Expenditures Bond proceeds fund about twothirds of the $2.8 billion in proposed capital spending for FY2003, while federal funds and operating revenues are also significant sources
Uses of Capital Funding
The uses of capital funding can be divided into six categories:
Transportation ($1,899 million) includes state and local roads and bridges, and the Central Artery/Ted Williams Tunnel project.
Economic development ($299 million) includes convention centers, local libraries, local parking garages, and cultural facilities such as the Massachusetts Museum of Contemporary Art.
Infrastructure ($238 million) includes such things as state colleges, universities, prisons, and state owned buildings.
Environment ($130 million) includes acquisition of open space and the construction and maintenance of state parks, forests, rinks, pools, golf courses, and playgrounds.
Housing ($102 million) includes the development and maintenance of publicly owned housing units.
Other ($120 million) includes information technology to upgrade state computer systems, and public safety expenditures for vehicles and equipment for state police and other public safety agencies.
Capital Plans and the Bond Cap
The Swift Administration remains committed to the fiscally responsible management of the Commonwealths capital spending needs. This discipline is manifest in the fiveyear capital spending plan process coordinated through the Executive Office for Administration and Finance (EOAF) and the Administrations adherence to an overall bondsupported spending cap. As the economy slows, however, the Administration is also reexamining capital spending priorities and spending levels to identify opportunities for economic stimulus here in the Commonwealth.
The fiveyear capital spending plan process was implemented in Fiscal Year 1992 in response to outstanding debt burdens that, from Fiscal Years 1987 to 1991, had increased an average of 20% each year. The plan sets forth the total amount of bondfunded capital spending that the Commonwealth can undertake in each of five successive years as determined by existing legislative authorization and projected debtservice requirements. The annual spending total is divided among oversight agencies and designated departments based on spending plans approved by the Secretary of Administration and Finance and monitored by the Fiscal Affairs Division. Spending under the plan is divided among seven program areas: transportation, infrastructure, the environment, information technology, housing, economic development and water treatment, and public safety. Although approximately $9.3 billion in bondfunded capital spending is authorized but unissued under current law, the capital plan limits spending of general obligation bond funds to $1.2 billion per year in Fiscal Years 2002 through 2006. Furthermore, of this $9.3 billion in authorized but unissued debt, $1.8 billion is not general obligation debt and not subject to the cap, leaving $7.5 billion in capital authorization to support $6 billion in estimated capital spending over the next five years.
Strategic Review of Capital Financing and Cap Reallocation
So that the Commonwealth may be best positioned to maximize the effectiveness of its capital investments over the next several years, EOAF has been undertaking a comprehensive strategic review of the Commonwealth's capital planning practices. This review entails an examination of how capital spending priorities are established and financed, as well as whether or not there are additional or alternative planning tools that might be useful for determining the prioritization of capital investments and the resulting cap allocation process. This review also included an investigation of whether the capital spending cap is set at the appropriate level given such factors as historical patterns of capital spending and finance; the growth in the depth and breadth of the Massachusetts economy over the past decade; the need to invest in the infrastructure to assure a base for continued future growth; and preservation of the longterm viability of existing assets. As a result of this study, the Administration determined this past spring to increase the annual cap from $1 billion to $1.15 billion. In addition, the ramping down in annual capital spending for the Central Artery/Tunnel project generated an additional pool of unassigned cap. In tandem, these two sources yielded $1.25 billion in additional Commonwealth capital resources over the fiveyear period Fiscal Year 200206.
The Administration targeted this $1.25 billion in additional funding toward priority areas such as Housing, eGovernment, infrastructure improvements at Commonwealth facilities, including court houses, public health and mental health hospitals, and institutions of higher education, roads and bridges, and a number of public safety projects and improvements. Thus, the Administration committed an additional $150 million to the Housing cap, $30 million annually, to spur production of both public and private housing stock; an additional $180 million, or $36 million annually, toward new investment in information technology and innovative projects intended to improve and streamline business transactions for clients of state services; an additional $220 million committed to the Chapter 90 road and bridge program; an additional $150 million, $30 million annually, committed to constructing, improving, and maintaining state facilities; and an additional $102 million for open space protection and other environmental initiatives. Cap allocations are summarized in the table below (note that Total Uses exceeds the $1.15 billion bond cap because Transportation and Economic Development include spending not subject to the cap):
Pending Bond Authorization
The Administrations efforts to use the capital budget to help reinvigorate the Massachusetts economy have been hampered by the delay in enactment of several bond bills pending in the Legislature. The Administrations $460 million housing bond bill, filed February 6, 2001, has not yet reached the Governors desk, and has been pending in a legislative conference committee since September. The Governors $220 million request for additional Chapter 90 authorization to support road and bridge construction, filed May 9, 2001 has seen no legislative action. The Governors $1.55 billion omnibus bond authorization request, filed June 7, 2001, which included much needed authorization for the Division of Capital Asset Management, the Information Technology Division, the Executive Offices of Public Safety, Transportation, Administration and Finance, and Environmental Affairs, has likewise received limited legislative attention. In addition, this past November, the Governor filed a $13 million bond bill to recapitalize two economic stimulus loan programs that provide muchneeded capital for small and mediumsized Massachusetts business: the Massachusetts Capital Access Program and the Economic Stabilization Trust. As a result of this legislative inaction, many critical projects that would otherwise have gone forward have been halted due to a lack of sufficient bond authorization.
Fiscal Year 2002 Fiscal Year 2006 capital plan highlights: Major components of the Central Artery/Tunnel project are planned for completion in Fiscal Year 2003. The connection of the Massachusetts Turnpike (Interstate 90) to the Ted Williams Tunnel is scheduled for opening by the end of calendar year 2002, significantly improving traffic flow to and from Logan airport. The initial opening of Interstate 93 northbound is scheduled for early 2003. Vehicle traffic will then cross the Charles River via the new Leonard P. Zakim/Bunker Hill Bridge.
Independent of the CA/T project, the Executive Office of Transportation and Constructions (EOTC) capital investment plan focuses on economic stimulus, safety, minimizing traffic, and environmental quality throughout the Commonwealth. The aim of the plan is to continue the fiveyear trend of leading the nation with the lowest fatality crash rate. Over the last tenyears, the Commonwealth has spent an average of $138 million per year on replacement, rehabilitation and repairing bridges throughout the state. MassHighway is in its second year of a fiveyear commitment to spend at least $400 million on the Statewide Road and Bridge program. In Fiscal Year 2001, the department exceeded that commitment by spending approximately $449 million on the Statewide Road and Bridge program.
In the past two years, the Administration has awarded in excess of $29.5 million in Public Works Economic Development (PWED) grants, aimed at jumpstarting local economies through construction, reconstruction of existing or newly located public access roads, streets and bridges, sidewalks, lighting systems, traffic control systems, and drainage systems and culverts associated with municipal economic development efforts. The fiveyear capital plan calls for $20 million of annual spending for PWED and the Small Town Road Assistance Program (STRAP). STRAP provides small towns with additional capital resources for local road construction costs.
New authorization needed: Four transportationrelated bond bills await further legislative action: $220 million in additional Chapter 90 bond authorization to support the additional cap allocation for this critical local road and bridge program, filed by the Governor this past May; $40 million in new Public Works and Economic Development (PWED) grant authorization, filed June 7th; $150 million in additional CA/T bond authorization consistent with the October 2001 CA/T finance plan, filed September 17th; and a terms bill filed November 21st to allow the state Treasurer to issue $205 million in notes in anticipation of a $205 million contribution from the Massachusetts Port Authority toward the CA/T project, pursuant to Chapter 235 of the Acts of 1998. To carry forward with the transportation capital spending plan through Fiscal Year 2006, the Governor will likely file a transportation bond bill in the spring of 2002. This bond bill will include authorization for federally aided and nonfederally aided highway related projects, as well as funding for marine transportation facilities, airport related upgrades, and for regional transit facilities.
Fiscal Year 2002 Fiscal Year 2006 capital plan highlights for the Department of Capital Asset Management (DCAM) include:
New authorization needed: The Governor requested $315 million in new authorization for DCAMM in the omnibus bond bill filed June 7, 2001. This $315 million request, still pending before the Legislature, includes $177 million for state and community colleges, as well as the University of Massachusetts system; $120 million for public health and mental health hospitals, group care residences, the Soldiers Homes, and other facilities within the Executive Office of Health and Human Services; and $18 million for other stateowned buildings.
Fiscal Year 2002 Fiscal Year 2006 capital plan highlights: The Economic Development cap typically funds grants for offstreet parking projects, such as those planned for Worcester at Union Station and Medical City, for Amherst, New Bedford, and for the regional transit authority in Lowell; library construction grants through the Board of Library Commissioners; Massachusetts Historical Commission grants through the Secretary of State; and Energy Conservation Improvement grants, administered by the Division of Energy Resources to promote energy savings in public schools. Other major economic development initiatives receiving funding include development of a conference center in Brockton; renovation of Memorial Hall in Plymouth; the Devens Commerce Center, in partnership with the Massachusetts Development Finance Agency; construction of a new facility for the Basketball Hall of Fame in Springfield; major expansion of the Massachusetts Museum of Contemporary Art in North Adams; and major renovations to MacMillan Pier in Provincetown.
New authorization needed: The Governor requested $85 million in new authorization for Economic Development, consisting of $75 million for grants for local public libraries and $10 million for historic preservation grants, in the omnibus bond bill filed this past June 7th. On November 28th, the Governor filed a $13 million capital outlay bill to replenish two economic stimulus loan programs that provide muchneeded capital for small and mediumsized Massachusetts business. This legislation, likewise pending in the Legislature, includes $10 million to recapitalize the Economic Stabilization Trust, and $3 million to recapitalize the Massachusetts Capital Access Program.
The Massachusetts Convention Center Authority (MCCA) and the Boston Redevelopment Authority (BRA) are jointly developing the Boston Convention and Exhibition Center in South Boston. The 1.6 million square-foot facility will include approximately 516,000 square feet of contiguous meeting space on one level, 160,000 square feet of additional meeting space, and a 41,000 square-foot ballroom, as well as banquet and lecture halls. The BRA has acquired the site, construction commenced in the spring of 2000, and completion is expected in spring 2004. This project is being jointly financed by the City of Boston and the Commonwealth. The Convention Center Act, as amended, authorizes the Commonwealth to issue up to $694.4 million of special obligation bonds for the purposes of the Boston Convention and Exhibition Center ($609.4 million), the Springfield Civic Center ($66.0 million), and the Worcester Convention Center ($19 million). Debt issued to finance the convention center projects will not be a general obligation of the Commonwealth. Debt service on the bonds is to be paid from receipts of convention center fees on hotel rooms in the cities of Boston, Cambridge, Springfield, West Springfield, Chicopee, and Worcester, car rentals in the city of Boston, parking at the convention center facilities, site-seeing tours in the city of Boston, and sales and meals taxes within a finance district near the Boston Convention and Exhibition Center.
Fiscal Year 2002- Fiscal Year 2006 capital plan highlights: The Swift Administration will continue its support of the array of programs that preserve and protect the environmental assets of the Commonwealth.
The Executive Office of Environmental Affairs (EOEA) capital spending program encompasses a wide variety of activities ranging from open space acquisition to hazardous waste cleanup to infrastructure and facility maintenance to resource preservation and protection. EOEA has allocated $60 million to preserve open space, and $72 million other spending, including an unprecedented portion for maintaining park and recreational facilitiesparks, beaches, rinks, pools, fish hatcheriesas well as infrastructureroadways, bridges, dams, seawallsunder the jurisdiction of the Department of Environmental Management, the Metropolitan District Commission, and the Department of Fisheries, Wildlife, and Environmental Law Enforcement. This fiscal year, EOEA has reenergized its investment in parks by focusing on major visible and visitordriven improvements that will expand and enhance outdoor opportunities and experiences for Massachusettss residents and tourists. EOEA devotes additional cap toward resource protection and pollution prevention activities, as well as to clean up environmental hazards throughout the Commonwealth. EOEA also contributes $4 million of its yearly cap toward the Seaport initiative, which supports an array of economic development and harbor revitalization projects as approved by the Seaport Advisory Council.
New authorization needed: The Governor requested $750 million in new authorization for Environmental Affairs agencies in the omnibus bond bill filed this past June 7th. This $750 million includes $259 million for open space acquisition and protection; $206 million for state forests, parks, and reservations; $161 million for resource protection, watersheds and biodiversity; and $124 million for hazardous waste clean up and other public protection measures. This $750 million new authorization request assumed deauthorization of over $375 million of Environmental Affairs current authorization, as proposed in the Governors capital account reauthorization/deauthorization legislation also filed last June 7th and likewise pending in the Legislature. Absent new authorization, funding for open space protection programs, such as the Agricultural Preservation Restriction program and SelfHelp and Urban SelfHelp municipal grant programs, as well as infrastructure improvement, the Watershed Initiative, and Community Preservation will be depleted as of June 30, 2002.
Fiscal Year 2002 Fiscal Year 2006 capital plan highlights: The Department of Housing and Community Development (DHCD) typically devotes approximately 60% of its capital allocation to public housing modernization efforts, primarily to support local housing authority improvements to their stateaided programs. Another 35% of DHCDs capital budget supports efforts to expand private homeownership and rental opportunities, including the Housing Innovation Fund, which promotes alternative and special needs housing, and the Housing Stabilization Fund, which supports neighborhood redevelopment efforts to preserve and rehabilitate private housing stock. The final 5% supports community development and public infrastructure, targeted to areas unlikely to attract private investment, for example, repairs to sidewalks, water and sewer lines, and demolition projects.
New authorization needed: In order to continue support of the Housing Innovations Fund, the Housing Stabilization Fund, housing authority renovation grants, and community development action grants, DHCD needs new authorization as proposed in the Governors $460 million housing bond bill filed February 6, 2001. This legislation included bond authorizations totaling $350 million for public housing renovation, remodeling, reconstruction, redevelopment, and hazardous material abatement; $25 million for community development action grants; $35 million for the Housing Innovations Fund program, to support the creation and retention of alternative forms of rental and privatelyowned housing, including singleroom occupancy units, limited equity cooperative housing, transitional housing for the homeless, and battered womens shelters; and $50 million for the Housing Stabilization and Investment program, for the acquisition, preservation, and rehabilitation of affordable housing, including foreclosed and distressed properties.
Fiscal Year 2002 Fiscal Year 2006 capital plan highlights: The Information Technology Divisions (ITD) fiveyear capital spending plan reflects a number of key initiatives necessary to maintain smooth business operations within the Commonwealth as well as a number of innovative projects intended to improve and streamline business transactions for clients of state services.
Internal Operations. In an effort to maximize state government efficiencies through technology, ITD is planning for a new, electronic state accounting system; coordinating the consolidation of state governments disparate email systems into a unified, MassMail system; enhancing the capability for exchanging realtime data among the public safety agencies; and developing an intranet/internetbased system that will allow human service providers to electronically enter service delivery information.
Electronic Government Initiative. In an effort to streamline interactions between businesses, citizens, and state government, ITD will sponsor a number of electronic government projects. This year, the Commonwealth launched its new portal, Mass.Gov. The goal of the initiative is to present a single face of government through an intentionsbased, enterprise portal that maximize the functions and information that can be accessed online. Government services can be accessed 24 hours a day and seven days a week from the location most convenient to the customer. Thus, for example, a citizen interested in purchasing a house could go to the Commonwealths web page at www.Mass.Gov, click on the home and health icon, and access the full list of home ownership and affordable housing programs available, rather than search through a directory for the agencies that run the states many housing programs. Motorists will be able to perform most RMV transactions online, as well as access information regarding compulsory insurance for their car, all by clicking on the icon of a vehicle on the Commonwealths enterprise portal.
New authorization needed: The Governor requested $300 million in new authorization for the Information Technology Division in the omnibus bond bill filed this past June 7th. This $300 million includes $135 million to support improvements to and implementation of new major information technology systems statewide; $95 million for the EGovernment Initiative, including further development of the Commonwealths enterprise portal; $30 million to complete the public safety statewide wireless communications network; $25 million for a second data center; and $15 million to complete the conversion of state agencies onto a single email system, the MassMail Initiative.
Fiscal Year 2002 2006 capital plan highlights: The Executive Office of Public Safetys (EOPS) fiveyear capital plan reflects a $45 million investment in public safety infrastructure improvements, largely dependent upon pending authorizations. The plan includes $3.4 million for the purchase of a State Police helicopter, which will complete a 5year overhaul of the State Police Air Wing. The plan also calls for: $25 million for the final construction phase of the Firefighter Training Academy campus at Stow; $9 million for the development of a State Police mobile data terminal network; $6 million for facilities and equipment upgrades at the Department of Fire Services; $1.5 million for the enhancement of the State Police crime labs; and $1.1 million for infrastructure upgrades at various EOPS facilities.
New authorization needed: The Governor requested $60 million in new authorization for the public safety capital initiatives in the omnibus bond bill filed this past June 7th, including $25 million for the firefighter training facility in Stow; $19 million for installation of mobile data terminals in police cruisers; $8.5 million for deferred maintenance at facilities throughout the Executive Office of Public Safety; and $7.5 million for specialty equipment and facility maintenance at the Department of Fire Services.
PRIVATE ACTIVITY VOLUME CAP
Federal tax law allows the Commonwealth and its agencies to issue a limited amount of taxexempt debt for the benefit of certain private activities. At no cost to the taxpayer, the low interest rates provided by such taxexempt financing are used for student loans, firsttime homebuyers, multifamily housing, and economic development. In December 2000, Congress adopted a 50% increase in the statewide limit on taxexempt debt issuance for private activities, the "private activity volume cap," from $50 per capita to $75 per capita, phasedin during 2001 and 2002.
This measure, combined with modest population growth, resulted in an increase in the Commonwealth's private activity volume cap of $88 million for 2001 and another $82 million for 2002. This increase has enabled the expansion of the bonding capacity for three large Commonwealth quasipublic authorities authorized to issue taxexempt bonds: the Massachusetts Educational Financing Authority (MEFA), which supports student loans at Massachusetts colleges; the Massachusetts Housing Finance Authority (MHFA), which supports multifamily housing and firsttime buyer programs; and the Massachusetts Development Finance Agency (MDFA), which supports a variety of economic development projects.
For 2001, the Governor allocated $9 million of this increase specifically for purposes of supporting new housing programs. For 2002, while the allocation of volume cap will continue to support the taxexempt issuance capacity for MEFA, MHFA and MDFA, EOAF is reviewing the impact of the increase in private activity cap on the Commonwealths overall capital spending strategy, including how it may most effectively be targeted to stimulate economic recovery and meet other important capital spending priorities.