FY2012 House 1 Budget Recommendation:
Issues in Brief
Deval L. Patrick, Governor
Timothy P. Murray, Lt. Governor
The fiscal year 2012 budget continues the Patrick-Murray Administration’s unprecedented support for cities and towns. The Administration’s approach to fiscal year 2012 continues to give cities and towns tools they need to manage costs, with the overarching goal of preserving local services for residents and taxpayers.
The Governor will file legislation to provide cities and towns across the Commonwealth the tools they need to reign in municipal health insurance costs. This legislation will help municipalities achieve real healthcare cost savings and preserve local services in fiscal year 2012. This could save more than $94 million in year one for those cities and towns that have not joined the state health insurance system.
The proposal is premised on two simple principles: municipalities must be able to achieve material savings in health insurance costs and preserve local services in fiscal year 2012, and labor must have a meaningful role in the process. The proposal will allow municipalities to require expedited collective bargaining to negotiate a new health insurance benefit plan that is equivalent in cost to the state’s health insurance benefits offered through the GIC. If the municipalities and unions don’t reach agreement within a limited period of time, the municipality will be required to go into the GIC or otherwise have health insurance coverage equivalent in cost to the GIC. This legislation is intentionally crafted to delegate many of the details of the process to regulation to facilitate legislative enactment and ensure savings in fiscal year 2012.
The Governor’s proposal also requires that all municipalities have eligible retired local employees enrolled in Medicare as their primary source of health insurance coverage, as this federal program covers a substantial portion of their health costs. (Estimated savings: $15 to $30 million remaining to be saved from requiring municipalities who have not already done so to move eligible retirees to Medicare.)
Aid to cities and towns, or local aid, represents approximately 16% of the Commonwealth’s annual budget. In fiscal year 2012, local aid programs account for $5.05 billion. The recommendation for local aid reflects the Patrick-Murray Administration’s unprecedented commitment to a strong partnership between the state and its cities and towns, even in a very challenging fiscal year.
The Administration’s approach to fiscal year 2012 includes additional tools to support municipalities in managing through this fiscal crisis and beyond, including:
|UNRESTRICTED GENERAL GOVERNMENT AID (UGGA) REDUCTION FY08 - FY12:||($480.8)|
|ENACTED OPPORTUNITIES FOR COST SAVINGS AND REVENUES||$397.2|
|Local pension funding relief||$200.0|
|Join GIC (first year savings reported) *||$44.0|
|Local option meals tax||$97.3|
|Increased Ch.90 Local Road Program Funding by $5M in FY11||$5.0|
|Eliminated exemption on telecommunications poles and wires||$26.0|
|Local option room occupancy tax||$24.9|
|PROPOSED OPPORTUNITIES FOR COST SAVINGS AND REVENUES||$187.8|
|New municipal health plan design proposal (first year savings) **||$94.0|
|Increase Ch.90 Local Road Program Funding for FY12||$45.0|
|Eliminate exemption on telecommunications machinery||$26.0|
|Transfer retirees into Medicare ***||$22.5|
|Electronic posting of procurement notices||$0.3|
|TOTAL OF ENACTED AND PROPOSED SOLUTIONS:||$585.0|
|Value of opportunities for cities and towns
even after accounting for local aid reduction:
|ADDITIONAL REVENUE AND COST SAVINGS INTIATIVES FOR MUNICIPALITIES|
|Chapter 70: Increased state funding over FY08||$265.8|
|Filed new pension reform ($2B) and OPEB ($1B) initiatives:||$3B over 30 years|
|* Based on savings
reported by municipalities who have joined
** ANF adjustment of MTF estimate for municipalities who have not joined GIC.
*** Estimated savings range $15M - $30M for municipalities not currently in Medicare.
Prepared by Molly Bench, Executive Office for Administration and Finance ·
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