Spending Plan & Budget Proposal Development

The Executive Office for Administration and Finance (A&F) is the state agency responsible for preparing the Governor’s budget recommendations and for oversight of the annual budget enacted by the Legislature, known commonly as the General Appropriations Act or the GAA. Under state law, every state agency is required to annually prepare a budget for review and evaluation by the Secretary for A&F. The spending plan typically includes staff, expenditure and revenue estimates for the current fiscal year (FY 13) as well as the agency’s anticipated staffing additions or deletions, expenses and receipts for the next fiscal year (FY 14) based on the assumption that they will maintain the same level of services and programs from one year to the next.

In July of each year, after the GAA is signed into law by the Governor, agencies present spending plans to A&F to identify in extensive detail how funds appropriated for the current fiscal year will be spent. These spending plans reflect each agency’s plans to operate their programs and services for the current fiscal year. Agencies are also requested to reflect any changes that may be necessary to their operating budgets, whether savings or increased costs, that will result from projects and investments made through the five-year capital plan.

For FY 2013 most state agencies were funded with modest increases above FY 2012 levels. This required that many state agencies continue to find ways to account for increased costs within their budget, particularly for such items as collectively-bargained wage increases, mileage increase and inflation in fuel and leasing costs. Agencies submitted their FY 2013 plans to A&F for review in August 2012. Spending plans were approved in September 2012 after A&F budget analysts carefully reviewed all spending and revenue projections. These approved plans then served as the base for then developing the FY 2014 budget.

FY 2014 Budget Development

In developing budget recommendations for FY 2014, agencies incorporated projected costs for the programs and services they operate, such as anticipated changes in staffing, caseload growth or increases in fixed costs such as fuel and energy costs.  Agencies also take into account changes in laws, regulations and policies that will impact programs and services for the next year. Based on revenue projections and other changes that A&F projected for available budgetary resources, agencies were asked to focus on developing spending plans for FY 2014 with an emphasis on controlling or preventing growth in spending over the projected FY 2013 spending levels.

Two new legislative changes of note for FY 2014 were the federal Affordable Care Act and Massachusetts’ 2012 Health Care Reform Law (Chapter 224 of the Acts of 2012). Agencies were required to include within their FY 2014 budget projections how each of these laws would affect their spending and revenues in the upcoming budget year.

On December 4, 2012 Governor Patrick announced budgetary spending reductions and other fiscal measures necessary to address a $540 M budget shortfall in FY 2013. (This is described in greater detail in a later section). This introduced another challenge to the FY 2014 budget development process since state agencies were required to adjust their approved spending plans for the current and corresponding budgets for FY 2014 based on these announced reductions.

After reviewing reported agency cost in FY 2014 and consulting A&F’s long-term financial modeling of sustainable growth levels, A&F established spending parameters that would be necessary in FY 2014 to balance the state’s budget.  Agencies were required to submit proposals that would ensure that total spending fell below FY 2014 reported costs. These plans were submitted to A&F and serve as the base for the Governor’s FY 2014 budget recommendations.

Throughout the fall and early winter, A&F continued to work with agencies to develop their spending proposals. Agencies were given the opportunity to review and revise the line items, make reform and re-organization proposals and other changes necessary to live within budgetary parameters and meet core requirements of state government. Following the submission of spending targets, A&F worked with each secretariat to assess the impact of reductions and identify which cuts will be most challenging for agencies to implement. A&F has sought to mitigate these reductions to the greatest extent possible.

On December 12, 2012 the annual Consensus Revenue hearing was held by the administration, the Senate and the House.  The three branches received testimony from the Department of Revenue and other economists regarding the amount of tax revenue that could be expected for FY 2013 and 2014.  The expert testimony forecast revenues continuing to grow and a recovering economy. At the same time, the economists also warned of slowing growth in the national economy, most notably as a result of the “fiscal cliff” resulting from triggered budget cuts and tax increases at the federal level. .

For the third straight year, A&F established an Inter-Secretariat Budget Team (ISBT) to identify and develop additional cost-saving proposals.  The ISBT team members were selected from across the secretariats and were charged with developing innovative ideas that would help to mitigate budgetary reductions and improve how government works. This team worked with A&F throughout the FY 2014 budget process and will continue their work after the submission of the FY 2014 budget to ensure timely implementation of the approved solutions.

Fiscal Year 2014 Post-Budget Release Process

In preparation for the start of FY 2014 (July of 2013), A&F will continue to work with agencies to develop implementation plans well ahead of the beginning of the fiscal year. As part of the budget development process most agencies have successfully identified areas already where reductions to programs and services will be necessary or where they may capitalize on efficiencies. However, due to the complexity of some recommended programmatic changes, in some cases agencies have not yet been able to determine exactly how they will restructure programs to live within recommended funding levels. The implementation planning process led by A&F helps to best ensure that all necessary steps are completed by the beginning of FY 2014 to ensure that agencies will be able to operate at expected funding levels.