FY11 Budget Solutions

The Governor’s fiscal year 2011 budget is a balanced and fiscally responsible blueprint.  Estimated fiscal year 2011 spending would grow by only 3% over estimated fiscal year 2010 spending, less than the projected 3.2% rate of growth in tax revenues.


In addition to delivering on many reforms, the Governor has once again proposed a balanced set of solutions that deliver on his commitment for a fiscally responsible budget that mitigates the impact on those most in need.

Of the $2.75 billion budget shortfall, the Administration anticipates that $1.394 billion will be funded with federal stimulus funds that will be required to spend – or lose – in fiscal year 2011.  To close the remaining projected budget gap, the Administration has proposed budget cuts and savings and efficiencies totaling $797 million gross ($670 million net).  The proposal includes $29 million of budget cuts that will be offset by contributions from the State’s independent and quasi-public agencies.  It uses some select tax exemptions and dedicates the proceeds to fund wellness and other programs that will lead to cost savings in the long term.  These solutions, along with a measured approach to the use of reserves and other one time revenues, have allowed the Governor to protect core services while responsibly balancing the fiscal year 2011 budget.


  Line Item Reductions 310
  Mass Health Reductions ($265 million gross) 132
  Line Item Reductions Offset by Quasi-Public Contributions 29
  Debt Restructuring: Smoothing 199
  Federal Stimulus - Education Stabilization Funds 96
  Federal Stimulus - Enhanced FMAP (first 1/2 of FY11) - Tier 3 690
  Extension of FMAP (second 1/2 of FY11) - Tier 2 608
  Rainy Day Funds 175
  Medicare Repayment for Special Disability Workload 160
  Sale of State Land 19
  Trust Fund Reconciliation and Closure 35
  Debt Savings 100
  Administrative Provisions to Facilitate Tax Collections 31
  Limiting Tax Expenditures 136
  Departmental Revenue Increases 33


Non-Executive Branch Agencies

Non Executive FY10 GAA FY10 Estimated Spending FY11 H.2
Judiciary 584,222,928 593,067,928 432,109,302
Committee for Public Counsel Services 168,298,481 201,277,524 167,964,898
District Attorneys 92,646,673 92,646,673 92,646,673
Sheriffs 330,014,575 549,322,234 472,038,027
Other Constitutional 160,270,146 169,840,906 157,306,177
Lottery 82,403,845 82,403,845 82,403,845
Debt Service 2,098,749,596 2,075,076,451 2,071,593,691
Comptroller 17,820,389 19,020,389 13,977,337
Legislature 53,693,944 69,149,257 53,693,944
Total Non-Executive 3,588,120,577 3,851,805,207 3,543,733,894


Agencies outside of the Executive branch including Constitutional Officers, the Judiciary, District Attorneys and Sheriffs, among others comprise $3.5 billion of the fiscal year 2011 budget recommendations.  Some areas of note include –

Executive Branch Agencies

Executive FY10 GAA FY10 Estimated Spending FY11 H.2
EO Adminisrtation & Finance 313,283,351 345,650,435 345,535,161
EO Energy & EnViromental Affairs 209,917,322 204,252,286 197,905,899
EO Health & Human Services 4,749,176,462 4,696,005,290 4,667,934,484
MA Department of Transportation 78,821,155 88,497,769 -
EO Housing & Economic Development 315,125,004 350,285,917 324,456,038
EO Labour & Workforce Develpoment 46,254,384 54,256,983 44,345,299
EO Education 1,890,706,891 1,807,518,661 1,923,903,941
EO Public Saftey 932,767,320 928,545,292 1,072,853,430
Total Executive 8,536,051,889 8,475,021,633 8,576,934,252


Funding for Executive Branch Agencies for programs and services that fall within each of these Secretariats totals $8.6 billion for fiscal year 2011.  Several factors contribute to the varying levels of increases and decreases among them:

There are a few program in the budget that grow over the fiscal year 2010 levels for reasons that include the implementation of specific formulas, increased caseload assumptions and increased utilization. 

Areas of Growth FY10 GAA FY10 Estimated Spending FY11 H.2
Group Insurance Commission 1,049,621,804 1,063,874,301 1,241,596,385
MassHealth 8,922,854,888 9,237,363,684 9,838,236,308
Chapter 70 3,869,847,585 3,869,847,585 4,048,324,258
Local Aid 963,646,140 963,707,803 963,707,803


Fiscal year 2011 will mark the first full year that all employees from the Department of Transportation and the seven Sheriffs Offices will be receiving health insurance coverage from the Group Insurance Commission, a proposal aimed at creating additional savings for these organizations in the long term.  These costs along with the expected growth in the cost of health care for fiscal year 2011, contribute to the growth in the GIC’s budget for fiscal year 2011.
  • MassHealth is the state’s Medicaid program that provides comprehensive health insurance to over 1.2 million Massachusetts residents.  The fiscal year 2011 budget for MassHealth recommends funding to support 3% enrollment growth along with increases to support the Children’s Behavioral Health Initiative, Adult Day Health, Personal Care Attendants, Day Habilitation and Home Health and many other programs offered by MassHealth. 
  • The state provides funding for school aid known as Chapter 70 that is allocated to the 328 school districts by formula.  For fiscal year 2011, Chapter 70 education funding is at an all time high level of $4.048 billion. At this funding level every district is fully funded at foundation; all districts are assured the same level of funding as they received in fiscal year 2010 levels (at a cost of over $90 million), and all stimulus funds from the American Recovery and Reinvestment Act (ARRA) used in fiscal year 2010 to support education are backfilled with State General Fund dollars (at a cost of $172 million).  This represents a significant commitment by the Administration to preserve and increase state funding for the Commonwealth’s school districts.
  • Medicaid Cost Controls and Savings ($265 million gross / $104 million net)

    The Administration’s fiscal 2011 budget includes $9.838 billion for the MassHealth program.  The proposed spending for MassHealth is 6.5% higher than fiscal year 2010 estimated spending of $9.237 billion. The fiscal year 2011 budget continues to fund projected enrollment growth in the MassHealth program of 3%.

    MassHealth Program Spending
    FY10 GAA FY10 Spending Plan FY11 Maintenance Percent growth in Maintenance from FY10 Spending Plan FY11 Spending Plan Spending Reductions from FY11 Maintenance Percent Growth in FY11 Fianl Spending from FY10 Estimated Spending
    8,926 9,237 10,097 9.3% 9,838 (259) 6.5%


    In order to manage spending growth at MassHealth and to achieve the $9,838 billion final spending number MassHealth is required to due some targeted spending reductions from the maintenance budget. The savings in the fiscal year 2011 H.2 budget total $265 million (gross), or $132 million (the $132 million net number only includes reimbursement at 50%, if enhanced FMAP were to be included the total state share would be $104 million) and can be categorized into the following; appropriate discipline on rates, program integrity, service restructuring and other initiatives (see below for a chart that highlights that amount in each savings category):

    Categories FY11 Gross Value FY11 Net Value (50% Federal Medical Assistance Percentage) FY11 Net Value (Enhanced Federal Medical Assistance Percentage) FY11 Net Value (State Share)
    Rates (174) (87) (19) (68)
    Program Integrity (23) (11) (2) (9)
    Sevice Restructing (58) (29) (6) (23)
    All Other (11) (5) (1) (4)
    Total Savings (265) (132) (29) (104)


    Notes: Savings total does not tie with amount in chart above due to IT transfers of $4.5M and investments of $10.5M.

    Rates - All providers have experienced rate reduction or freezes in the past year and a half due to the extreme fiscal pressures that the state and the overall economy have encountered. The providers highlighted above for fiscal year 2011 savings have experienced minimal or no rate-related cuts.

    Program Integrity - Program integrity measures are changes that tighten and strengthen operations at MassHealth. Program integrity measures can include billing changes, changes in the redetermination process, cost avoidance and third party liability recoveries and other items that contribute to efficiencies in the program.

    Service Restructuring - Service restructuring includes changes in the way that MassHealth delivers some services. The most notable service restructuring is for the MassHealth adult dental program.  The MassHealth Adult Dental program will only cover preventative and emergency services and it will no longer cover restorative dental services.  This change will not impact children or intellectually disabled members with active cases through the or intellectually disabled members with active cases through the Department of Developmental Services.

    All Other - This item is a “catch all’ for the Administration’s other reductions that did not fall into one of the above categories. The most significant savings in this category is related to member cost sharing. The only additional cost-sharing is a $1 increase in co-payments for generic drugs (this will not be applied to antihyperglycemics, antihypertensives and antihyperlipidemics, which are used to manage and treat long-term chronic medical conditions).

    The Administration’s budget also proposes a couple of revenue solutions to help offset increases in spending. Revenue initiatives include restructuring payments for prescription drug coverage in managed care plans to achieve higher drug rebate revenues, and expanding the Health Safety Net payer surcharge to Managed Care Organizations serving MassHealth and Commonwealth Care members to generate additional funding for MassHealth and Commonwealth Care.

    In order to achieve the savings and revenue proposals highlighted above there are some moderate investments in the MassHealth program.  The investments amount is $10.5 million gross or $5.25 million net (the $5.25M net number only includes reimbursement at 50%, if enhanced FMAP were to be included the total state share would be $4.1 million) for enhancements to UMASS’s pharmacy online processing systems (POPS) and additional resources for program integrity measures.

    Reductions Offset by Quasi-Public Contributions

    Since fiscal year 2009 the Patrick – Murray Administration has partnered with our Independent and Quasi-Public agencies to provide for nearly $90 million in funding to help preserve vital programs and services that would have otherwise been suspended or cut during this fiscal crisis.  For fiscal year 2011, many of these agencies have once again stepped up to help preserve important programs and services for the coming fiscal year.

    Reductions Offset by Quasi-Public Contributions
    Quasi Program Preserved Total Contribution
    University of Massachusetts Scholarship 3,500,000
    University of Massachusetts State Library 125,000
    University of Massachusetts Collins 541,000
    Connector Authority Enrollment Grants 2,500,000
    MA Convention Center Authority MOTT 5,000,000
    class="text">MassHousing Authority MVP 8,000,000
    Mass Housing Partnership Soft Second 2,000,000
    Mass Development Finance Authority Mass Cultural Council 3,000,000
    Mass Development Finance Authority Office of Small Business 700,000
    Mass Development Finance Authority Permitting Office 335,000
    Mass Tech Collaborative STEM 500,000
    Mass Tech Collaborative HED Broadband 275,000
    Mass Tech Collaborative MOITI 300,000
    Massport Authority MOITI 300,000
    Mass Tech Collaborative Innovation Initiatives 500,000
    Mass Education Finance Authority McNair Scholarship 1,000,000
    TOTAL   28,576,000


    Debt Restructuring:

    Debt service on outstanding long-term bonds is a significant portion of the Commonwealth’s operating budget.  As part of the comprehensive plan to address fiscal year 2011 budgetary shortfalls, the Administration proposes a two-part debt refinancing strategy.  The first part is to refinance $200 million of fiscal year 2011 amortizing principal to smooth the fiscal year 2011 debt service spike.  The second part is to refinance an additional $100 million of fiscal 2011 principal to achieve budgetary relief, if necessary.