A Message from the Governor

To the People of Massachusetts:

Our Administration submits this budget proposal for the coming fiscal year at a time of immense challenge and uncertainty for our Nation and our Commonwealth.

Our economy faces its most significant downturn since the Great Depression.  Tens of thousands of people in Massachusetts have lost their jobs as business activity slows down.  Thousands more have lost their savings or home equity to turmoil in the markets.  Credit is tightening, and foreclosures are rising.  People are anxious about the future.

Emergency Recovery Plan

As a result of this general deterioration in the economy, state government faces a rapidly changing fiscal outlook.

For the second time within the current fiscal year, we have had to reduce our estimates of state tax receipts by nearly one billion dollars.  Thus, we must now wrestle with balancing two budgets at one time – one balanced for fiscal year 2010, and another for the current fiscal year, recalibrated to adjust to shrinking revenues.

Our fiscal year 2010 budget proposal, the additional actions we take to close new gaps in the fiscal year 2009 budget, and the series of policy initiatives we are filing or pursuing in connection with these fiscal blueprints together comprise our Emergency Recovery Plan.  This Plan provides a blueprint for the Commonwealth to deal with the current economic crisis and pave the way toward a stronger and brighter future.

Making the Hard Choices

We have made the hard decisions involved in cutting spending and finding savings.  These are unavoidable given the magnitude of our economic challenges.  In some cases, these choices are painful.  In others, they further a continuing agenda to reshape government to more efficiently and effectively carry out its mission.

Some of our budget savings reflect the continuing work of modernizing government – especially in health care, as we shift to new models of payment and care that emphasize outcomes, prevention and alignment with other payers.  Moreover, in collapsing almost 850 budget line-items into 480 line-items, we are giving agencies the flexibility to manage within tighter budgets and protect priorities to the maximum extent possible.

In difficult times, there is no escaping the need for difficult choices.  Some worthwhile programs have gone without funding.  Others have experienced severe reductions.  No one’s priorities have been spared.  For example, our initiative to hire new community police officers has not been funded, and the recession will slow our timeline for new investments in our education Readiness Project.  Individuals, families, businesses and government at every level will feel the impact.

Responsible New Revenue Options

As has been done here and in other states during previous fiscal crises, we are making appropriate use of additional revenues to offset the need for deeper cuts.

We are using state Rainy Day funds and temporary increases in federal matching funds for state Medicaid spending to balance our budgets.  With these cash infusions, we can limit the impact of some spending cuts.  Without them, many cuts would be calamitous.  We do recognize the danger of over-reliance on one-time resources in balancing budgets.  For that reason, we are also proposing budget reforms to curb the longstanding practice of building ongoing spending commitments on the shaky foundation of volatile capital gains revenues.

Cuts in aid to cities and towns are unavoidable in today’s circumstances, but we have made it a priority to limit the pain.  At $3.948 billion, current Chapter 70 funding for public schools is at an all-time high.  Though cut during the last economic crisis, we have maintained the current level of spending in both fiscal year 2009 and fiscal year 2010.  Proposals for federal education aid raise additional hope for ultimately reaching foundation levels of spending next year.

We have also limited the amount of cuts to unrestricted aid for cities and towns in fiscal year 2010 – with the use of revenues from a modest one percent increase in state meals and hotel room occupancy taxes.  Cities and towns and property taxpayers would receive additional help to weather the current fiscal storm, through other proposals I am filing to untie the hands of local communities to capture savings and raise revenues within their reach.

We are proposing other dedicated revenues as well.  Candy, sweetened beverages and alcoholic beverages are currently exempt from the state sales tax; we propose to remove that exemption both to steer our children towards healthier choices and to support public health programs.  Extending the Bottle Bill to non-carbonated beverages will promote recycling.  We propose to consolidate 201 separate motor vehicle registry fees into 40, decreasing some and raising others – some of which have not been updated for nearly a decade or more.  These fees will be used to support funding in the budget for important transportation needs.

These and other tools have helped us preserve many important services, despite our fiscal challenges.  As indicated earlier, we are continuing existing funding for Chapter 70 in both fiscal years 2009 and 2010.  We will continue to enroll people in affordable, high-quality health insurance programs without the types of enrollment caps and benefit cuts that were imposed during the last fiscal crisis.  Veterans’ services have been protected.  And numerous other services were spared reductions that would have compromised their ability to help citizens who depend on them.

An Opportunity to Make the Commonwealth Stronger

All economies are cyclical, and we will cycle out of this downturn in time.  Meanwhile, a fellow governor in another state likes to say that “a crisis is a terrible thing to waste.” I share the sentiment.  Now is a moment not just of challenge, but also of opportunity.  We want to seize the opportunity to confront issues that have been avoided in ordinary times, and make our Commonwealth stronger in the long run.

Building on already-launched efforts to reform our transportation and criminal justice systems and state pension and ethics rules, the Emergency Recovery Plan we announce today lays out a far-reaching reform agenda aimed at making government at every level more efficient, responsive and effective.

New opportunities for municipal revenues and cost-savings will help cities and towns deal with both immediate cuts as well as enduring fiscal challenges.  An Article 87 proposal and other legislative language will transform the face of state government – consolidating homelessness services to carry out a more robust “Housing First” strategy; starting to replace fragmented information technology and energy purchasing operations with more streamlined approaches; and replacing administrative silos within Secretariats with “shared services.” Reforms to how we budget for volatile capital gains revenues and address retiree health care costs will likewise put the state on sounder fiscal footing for the future.

We are clear-eyed about the magnitude of our current challenges and what they mean for ordinary people throughout Massachusetts.  But with the fiscal framework we outline today – and most importantly, with the resilience and spirit of community that lives within the people of Massachusetts – we remain confident in the Commonwealth and our future.

A Partnership with the Federal Government

In partnership with the new Obama Administration and our congressional delegation, we have been working hard to help shape a federal economic stimulus package.  While it will not be enough to avoid all of the hard choices we as a Commonwealth have to make, we anticipate significant federal resources to jump-start our economy and cushion some of the personal and fiscal impacts of the recession.

We are laying the groundwork to spend an anticipated infusion of federal resources wisely and effectively – to create jobs quickly and rebuild our infrastructure through new construction projects, protect our gains in education and preserve key state investments in health care and other priorities.  We are also putting billions of our own dollars into capital projects to put people to work, and aggressively courting businesses to locate and grow in Massachusetts.

Together We Can

We wrestle with this task understanding that behind every budget line item is some person’s best chance, or only chance.  That is particularly the case in an economic downturn, as citizens who have lost their jobs, their health insurance or their homes rely on government to help them through to a better day.  We also understand that balancing the budget takes multiple tools, not “one-size-fits-all” solutions.

I look forward to working with the Legislature and our other partners in government, business and community leaders, and each and every Massachusetts resident, to build a bridge to our bright future . . . because I still believe that Together We Can.

Sincerely,

Deval L. Patrick

Governor