Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2013

Governor's Budget Recommendation FY 2013

FY 2012 Update


In July 2011, the Governor signed into law the FY 2012 General Appropriations Act (GAA) – Chapter 68 of the Acts of 2011. The FY 2012 budget authorized spending $30.597 B, which was estimated by the Executive Office for Administration and Finance (A&F) to be $750 M less than FY 2011 projected spending after accounting for expenditures in FY 2011 from federal stimulus sources on items (primarily K-12 school aid and higher education) that would typically be supported by the operating budget. This reduction based on the FY 2012 GAA provided for the largest percentage decrease in spending in over 20 years.

FY 2011 Year-End Supplemental Funding for FY 2012

Similar to most fiscal years, total FY 2012 spending was increased in October 2011 upon the adoption of the “year-end” FY 2011 supplemental budget, which authorized $380 M ($376 M for budgetary spending) in FY 2011 appropriations (known as Prior Appropriations Continued or “PACs”) to continue to be expended into FY 2012. The year-end FY 2011 supplemental bill (Chapter 142 of the Acts of 2011) also provided additional supplemental appropriations for FY 2012 in the amount of $36.8 M.

FY 2012 October Revenue Revision

On October 17, 2011 the Secretary of Administration and Finance announced the increase of projected tax revenues above the FY 2012 consensus revenue estimate of $20.516 B by $395 M, to $21.010 B. This increase in tax estimates accounted for the January 1, 2012 income tax reduction of 0.05% (triggered by actual tax collections exceeding statutory tax benchmarks established under 2000 legislation). The Secretary also noted that roughly $71 M of such tax revenue was not available for budgetary purposes because it was one-time tax settlements in excess of $10 M that had been received by the state through September 30, 2011 and which, under FY 2012 budget reforms, were required to be deposited directly into the state’s rainy day fund. Finally, the Secretary announced that he was lowering the estimates for FY 2012 non-tax revenue by a net $26 M. The result of these changes was to increase net budgetary resources in FY 2012 by $298 M.

FY 2012 Tax Projections, Original vs. October 17 Revised
Dollars in millions
Original Consensus: 20,615
Revised Forecast: 21,010
Increase in Forecasted Revenues: 395
Tax Settlements (above $10 M): (71)
Reduced Non-Tax Revenue Estimates: (26)
Net Increased Budgetary Resources: 298

 

On October 17, 2011 the Governor filed FY 2012 supplemental legislation totaling $161.2 M, with a cost to the state of $131.6 M after accounting for additional federal reimbursements. The supplemental funding was needed to support urgent funding needs primarily for state health care and safety net spending and other obligations, such as the costs for emergency response to storms. On November 11, 2011 the Governor signed into law Chapter 171 of the Acts of 2011, in which the Legislature partially adopted the Governor’s supplemental funding proposed, in an amount of $51.9 M. On November 22, 2011 the Governor signed into law a bill authorizing expanded gaming in the Commonwealth (Chapter 194 of 2011) which provided $5.5 M in supplemental funding for expanded oversight.

Finally, A&F currently projects roughly $303 M in net additional expenditures, including $187 M for new Delivery System Transformation Initiative payments approved in the recent Medicaid waiver by the federal government and other cost exposures, like caseload increases and other costs that cannot be avoided (e.g., snow and ice removal, additional one-time tax settlements to the stabilization fund and other potential costs). The state would receive close to $100 M in new revenues to support these projected costs, primarily from the federal government. The $303 M of net additional expenditures also takes into account expected reductions in spending in certain areas that A&F anticipates. Based on the FY 2011 PACs, supplemental funding adopted to-date and other funding contingencies we are planning to address, total estimated spending in FY 2012 is projected to be $31.375 B, or 2.4% above FY 2011.

FY 2012 Estimated Spending
Dollars in millions
FY 2011 Spending 30,636
FY 2012 GAA 30,597
FY 2011 Prior Appropriations Continued (PACs) into FY 2012 380
Supplemental Budget - Chapter 142 of 2011 37
Supplemental Budget - Chapter 171 of 2011 52
Expanded Gaming - Chapter 194 of 2011 6
Net ANF Contingency Expenditures 303
FY 2012 Estimated Spending 31,375
FY 2012 GAA - % Change from FY 2011 Spending -0.1%
FY 2012 Estimated Spending - % Change from FY 2011 2.4%

 

FY 2012 One-Time Resources

Based on current revenue and spending assumptions, ANF estimates that total FY 2012 one-time resources used to support the budget total $620 M. Of this amount, the largest is $202 M in FY 2011 resources used (via PACs) to support ongoing expenditures in FY 2012. These PACs are treated as one-time resources since the funding with which they are supported (FY 2011 year-end surplus) is not recurring, while the FY 2012 costs associated with these expenditures continue for the state into FY 2013. Not all of the $380 M in PAC funds were treated as one-time, since many of these items were intended to be one-time expenditures only and not treated as ongoing. PACs for non-recurring spending or one-time purposes are estimated to total $173 M.

FY12 One-Time Resources
Dollars in millions
Budgetary Resources:
FY11 Resources Used to Support Ongoing FY12 Costs: 202
Stabilization Resources: 185
Abandoned Property: 85
Delay FAS 109 Deduction: 46
Trust Fund Resources: 43
Sale of Assets: 12
Non-Budgetary Resources:
Quasi Public Contributions: 26
Commonwealth Care Reserves: 21
TOTAL FY 2012 ONE TIME RESOURCES 620

 

The next largest one-time resource in the FY 2012 budget is $185 M in Stabilization Fund reserves. A total of $200 M was authorized in the original FY 2012 GAA; however, A&F only projects at this time that $185 M is needed to ensure that the budget remains balanced. Other one-time resources include $85 M in one-time unclaimed property proceeds; $46 M from the delay of FAS 109 corporate tax deductions (that would otherwise be effective in tax year 2012); $43 M in non-recurring surplus funds from non-budgetary trusts; $26 M of resources from quasi publics to help support costs for ongoing programs and services that would otherwise be supported in the operating budget; $21 M in surplus resources from the Commonwealth Care Trust Fund; and $12 M in projected revenues from the sale of state assets authorized in the FY 2012 GAA.


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