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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 A&F. The spending plan typically includes staff, expenditure and revenue estimates for the current fiscal year (FY 2014) as well as the agency’s anticipated staffing additions or deletions, expenses and receipts for the next fiscal year (FY 2015) 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 they will spend the funds appropriated for the current fiscal year. Agencies also reflect any changes that may be necessary to their operating budgets, whether savings or increased costs, as a result of projects and investments in the five-year capital plan.
Spending plans for FY 2014 were approved in September 2013 after A&F budget analysts carefully reviewed all spending and revenue projections. These approved plans then served as the base for developing the FY 2015 budget.
FY 2015 Budget Development
In developing budget recommendations for FY 2015, 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 took into account changes in laws, regulations and policies that impact their programs and services for the next year. Based on A&F’s projections for revenue and available budgetary resources, agencies were asked to focus on developing spending plans for FY 2015 with an emphasis on controlling or preventing spending growth over projected FY 2014 levels.
Legislative changes of note for FY 2015 include:
- Affordable Care Act (ACA): For the FY 2014 budget, agencies projected how the January 1, 2014 implementation of the federal ACA law would impact their spending and revenue in the second half of the fiscal year. In FY 2015, agencies projected full-year impacts.
- Raise the Age: In the fall of 2013, the Governor signed legislation that remands youthful offenders under age 18 to custody of the Department of Youth Services (DYS) rather than the Department of Corrections (DOC).
- Family Child Care Collective Bargaining: FY 2015 represents the first full year of costs from the unionization of the family child care system at the Department of Early Education (EEC).
- Transportation Reform: The FY 2014 budget and accompanying legislation passed in 2013 meaningfully reformed the state’s transportation finance structure and called for investments in FY 2014 and the years beyond to stabilize MBTA finances, fund critical projects and redirect payroll costs from the capital budget to the operating budget. FY 2015 represents the second year of this reform, requiring additional investment to pay for key priorities contained within the legislation.
These plans were submitted to A&F and served as the base for the Governor’s FY 2015 budget recommendations. After reviewing reported agency costs for FY 2015 and consulting its long-term financial model of sustainable growth levels, A&F established spending parameters that were necessary to balance the state’s budget. Following the submission of spending targets, A&F worked with each secretariat to assess the impact of reductions and identify which cuts would be most challenging for agencies to implement. A&F sought to mitigate these reductions to the greatest extent possible. A&F also sought proposals for reforms and additional cost-saving initiatives from state agencies; many of these initiatives are included in the Governor’s FY 2015 budget.
The Administration, the Senate and the House held the annual Consensus Revenue hearing on December 11, 2013. The three branches received testimony from the Department of Revenue (DOR) and other economists regarding tax revenue expectations for FY 2014 and 2015. The expert testimony forecasted continued growth, albeit modest, in revenues and continued improvement in the Commonwealth’s economic outlook.
Fiscal Year 2015 Post-Budget Release Process
In preparation for the start of FY 2015 on July 1, 2014, A&F will 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 successfully identified areas where reductions to programs and services may be necessary or where they may capitalize on efficiencies. The implementation planning process helps to ensure that all necessary steps are completed by the beginning of FY 2015 to ensure that agencies will be able to operate at expected funding levels.
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