Governor's Message - Governor's House One Budget Revisions

The Honorable Therese Murray, Chair
Senate Ways and Means Committee
The Honorable Robert A. DeLeo, Chair
House Ways and Means Committee
State House
Boston, Massachusetts 02133

Dear Senator Murray and Representative DeLeo:

I am writing in response to your letter of April 4, 2005.

As indicated in my attached letter, the Executive Office for Administration and Finance's revised tax estimate for fiscal years 2005 and Fiscal 2006 is $16.65 billion and $17.50 billion respectively. The new tax estimate for Fiscal 2006 is $164.0 million above the level in House 1.

Based on the State Comptroller's March 1, 2005 certification of MBTA base sales tax revenues, the amount of sales tax dedicated to the MBTA in Fiscal 2006 will be $712.6 million instead of $716.4 million allocated in House 1. This reduction in funding to the MBTA has the impact of increasing available tax revenues to the Commonwealth by $3.8 million.

FAD has researched registries of deeds revenue shortfalls since the Governor's House 1 filing, and I concur that a revision is warranted. The new ANF estimate is $155.8 million. In addition, I agree that miscellaneous revenues at OSE, OSC, and DOR should be restated as indicated in the table below. In summary, these non-tax revenue changes reduce Fiscal 2006 resources by $43.5 million.

The net effect of the Fiscal 2006 increase in tax revenue (including the MBTA adjustment), the change in value of the re-filed DOR bill, and decrease in non-tax revenue is $39.3 million.

We are actively reviewing other non-tax revenue sources but do not have sufficient rationale to make additional changes at this time.

Along with the revised revenue estimates, I am adjusting the following spending estimates and respectfully request you reflect these changes in your own budget decisions:

• Reduce the Long Term Debt account (0699-0015) by $13.4 million to reflect lower-than-projected interest rates on recent new money bond issues.
• Increase Group Insurance Commission funding by allocating an additional $38.9 million to the Premium and Plan Cost account (1108-5200), and an additional $7.3 million to the Retired Municipal Teachers account (1108-5400) to reflect higher-than-forecast healthcare costs.
• Restore $37.2 million to accounts where the Governor proposed in his March 25th letter to continue Fiscal 2005 appropriations into Fiscal 2006.
• Create a new $50 million reserve (1599-2006) for anticipated (but not yet finalized) collective bargaining agreements where sufficient negotiation progress to date makes a preliminary estimate of Fiscal 2006 costs possible.

In addition, please continue to apply the following adjustments to House 1 (as outlined previously in the Governor's March 25th letter):

• Reduce Water Pollution Abatement Trust New Drinking Water Projects Contract Assistance (1599-3838) by $880,140 to $8,238,130 to reflect savings from a recent refunding and lower-than-projected interest rates.
• Reduce Water Pollution Abatement Trust Clean Water Contract Assistance (1599-0093) by $2,119,860 to 53,057,033 to reflect savings from a recent refunding and lower-than-projected interest rates.
• Reduce Capital Projects Reserve (1599-0015) by $24 million to reflect a shift in funding from the operating to the capital budget in Fiscal 2006.
• Reduce TAFDC Cash Assistance (4403-2000) by $2,200,000 to $307,034,813 to reflect updated program utilization data.

The final adjustment, also outlined in the Governor's March 25th letter, is a reallocation of the House 1 surplus to support expenditures as indicated in the attached table.

If you have any questions regarding any these changes, please feel free to contact my staff or me.

Sincerely,

Eric A. Kriss
Secretary of Administration and Finance