Budget Narrative

Governor Patrick's and Lieutenant Governor Murray's fiscal year 2009 budget continues moving Massachusetts forward on a path to change and shared prosperity. The budget makes targeted investments that are critical to promoting economic growth and opportunity and building a better future for the Commonwealth. It also maintains fiscal responsibility, closing a projected deficit through an emphasis on greater efficiency and reform and careful approaches to generating additional revenues.

The Patrick-Murray Administration faced major challenges in building the fiscal year 2009 state budget. The cost of simply continuing to provide state government services based on current program design (without program expansions or new initiatives) stood to exceed predicted tax revenues by well over a billion dollars. This budget gap is the legacy of decades of neglect in making investments needed to achieve the full promise of job creation in Massachusetts; continuing reliance on one-time revenues instead of sustainable funding sources to pay for public priorities; and the fact that there remains much work to be done to reform state government and make it more efficient and cost-effective.

Confronting a large projected structural deficit but also continuing needs for public investment, the Administration developed this budget based on a series of careful choices aimed at addressing our state's highest priorities while also maintaining fiscal responsibility.

The budget makes targeted investments in education, Local Aid, public safety and job creation that are critical to promoting economic growth and opportunity. Investing in the fundamentals of economic expansion will not only build a better future for the people of Massachusetts but also help generate sustainable revenues for the services that families and businesses need. Even with our fiscal challenges, we cannot afford not to make these investments. The cost of inaction would be a less successful and competitive economy and workforce and - on that account - even greater fiscal challenges due to lagging revenues and higher social costs.

These targeted investments are part of a balanced and fiscally responsible budget. The budget curbs unnecessary or unwarranted expenditures through an emphasis on efficiency, performance and reform. It generates additional revenues through improved tax enforcement and greater corporate tax fairness. The budget also protects cities and towns from an anticipated deficit in the State Lottery Fund in fiscal year 2009, plugging this deficit with a portion of the initial licensing fees from three destination resort casinos proposed by the Administration. Though not included in the budget, under the Administration's gaming proposal, additional licensing fees from these casinos would support direct property tax relief for Massachusetts homeowners and local transportation and infrastructure improvements.

Finally, the budget builds on last year's progress in making our state's fiscal blueprint more transparent and user-friendly, containing new details about revenues and transfers and enhancements to make information ADA-accessible.

Targeted Investments

The budget makes targeted investments in education, Local Aid, public safety and job creation that are critical to promoting economic growth and opportunity in Massachusetts and strengthening our fiscal climate in the long-run.

World-Class Education

The Patrick-Murray Administration believes that offering each and every one of our children access to a world-class education is essential to creating broad-based opportunity throughout Massachusetts and strengthening our state's global competitiveness.

The Governor's vision for the next phase of education reform entails building a comprehensive, child-centered public education system starting with universal, high-quality early education and continuing through adult skills training. Investing in the education of our young people would not only enhance opportunity and our state's competitiveness but also reduce social, fiscal and economic costs associated with the lack of a comprehensive education. Indeed, on average, high school dropouts have lower earnings and pay less in taxes, while having higher incarceration rates and imposing higher fiscal costs on government, than their counterparts with high school or college degrees.

The Administration has already begun to implement this next phase of education reform in Massachusetts. Last year's budget contained the strongest investment in education in the history of the Commonwealth, including doubled funding to extend student learning time. The Administration has also proposed a historic investment in public higher education, filing a ten-year, $2-billion bond bill to make long overdue capital improvements at every one of the Commonwealth's state and community colleges and University of Massachusetts campuses. Furthermore, it has convened education, business, community and government leaders as part of the Commonwealth Readiness Project to help develop a comprehensive, ten-year strategic plan to continuously improve public education. In addition, the Administration recently filed Article 87 legislation to create a Secretary of Education, to help coordinate educational policy and build a seamless system of lifelong learning from pre-kindergarten through skills training for adults.

The Administration's fiscal year 2009 budget contains $368 million in increased education funding to continue moving Massachusetts forward into the next phase of education reform. Guided by initial analysis from the Readiness Project, the budget focuses on key priorities for improving the Commonwealth's education system so that our students can compete with their peers across the country and around the world.

The Administration will be proposing additional education reforms in conjunction with the final report of the Readiness Project in the spring.

Local Aid and Property Tax Relief

The Patrick-Murray Administration recognizes that the quality of life and cost of living in our individual communities fundamentally determines whether businesses will locate and create jobs in Massachusetts and whether we can retain the talented workforce needed to ensure our state's economic success.

In recent years, a combination of inadequate and unpredictable state investments in our cities and towns and escalating municipal cost pressures - particularly for health insurance for public employees - have driven steep increases in property taxes and reductions in core services. This dynamic is a threat to our state's short- and long-term economic vitality, discouraging businesses and a talented workforce from planting roots in Massachusetts.

The Administration has made it a priority to reverse this dynamic. Despite budget challenges in fiscal year 2008, it did not balance the budget on the backs of municipalities but instead increased Local Aid. This included providing then-record funding for Chapter 70 education aid. The Administration also filed the Municipal Partnership Act, aimed at relieving pressure on property taxes by letting cities and towns join the state health insurance plan (a cost-savings proposal which has become law) and raise revenue from other sources such as a modest meals tax increase and the elimination of an out-of-date phone company tax break.

The Administration's fiscal year 2009 budget continues to prioritize targeted investments in our local communities and property tax relief.

Public Safety

The Patrick-Murray Administration views public safety as a cornerstone of economic growth and opportunity. Safe streets and communities are an essential part of a positive climate for raising a family, pursuing a career or growing a business in Massachusetts. Similarly, we all have a moral and economic obligation to give young people positive and productive alternatives to drugs and gangs.

Taking office at a time of increased incidents of violent crime throughout the Commonwealth, the Administration made public safety a top priority in 2007. In April, it established the Governor's Anti-Crime Council, a panel of key public safety, human services and community and government leaders convened to develop comprehensive proposals for preventing and fighting crime and violence - focusing in particular on the issues of gun and gang violence. The Administration funded new officers on the beat and Shannon Grants, summer jobs and volunteer programs to give at-risk young people alternatives to drugs and gangs. It also filed a legislative package of anti-crime measures to shrink the supply of illegal guns, mandate post-release supervision and re-entry support for all inmates and share information among government agencies to assist at-risk youth.

The Administration's fiscal year 2009 budget builds on this record of vigilant crime prevention and law enforcement efforts to make our communities even safer places in which to live and work.

Job Creation

Job creation has been a central focus of the Patrick-Murray Administration's governing agenda. The core elements of its job creation strategy are to capitalize on our strengths in brainpower and cutting-edge research and development, turning ideas from the laboratory into products made and new jobs created in Massachusetts; to make the Commonwealth more business-friendly; and to vigorously promote every region of our state as great places to do business. The Administration has put this strategy into action by:

Through these and other efforts, Massachusetts added over 20,000 new jobs in 2007 - rising from 49th to 15th in the nation in job creation. This represents significant progress towards Governor Patrick's goal of creating 100,000 new jobs in the Commonwealth.

To help secure our state's economic future, the Administration has also proposed a comprehensive plan to make Massachusetts the global leader in life sciences. This ten-year, $1 billion investment package would enhance our state's already nationally recognized assets in medicine and science and fill gaps in federal funding to support life science progress from the ideas stage through the production stage. The plan would not only create numerous good-paying jobs in the Commonwealth but also spur the development of cures and treatments for disease that will improve the lives of people throughout the world.

The Administration's fiscal year 2009 budget makes targeted, high-yield investments in these and other proven strategies to help spur further job creation in the Commonwealth.

Fiscal Responsibility

These targeted investments are part of a fiscally responsible budget. The Patrick-Murray Administration did not resort to rigid, "one size fits all" solutions to close a projected budget gap of well over a billion dollars. Rather, it pursued a balanced approach to balancing the budget, putting taxpayer dollars to their most efficient and effective uses and identifying careful approaches to generating additional revenues.

Savings

First and foremost, the Administration attempted to close the projected budget gap and pay for targeted investments through savings in state programs. It curbed unnecessary or unwarranted state expenditures through an emphasis on efficiency, performance and reform. This spending restraint achieved $479 million in gross budget savings ($344 million in net budget savings).

This reform would reduce contributions for 6,000 state employees - and for another 16,000 state employees, contribution levels would not change. For many other state employees, contribution levels would increase modestly based on salary and affordability. In the aggregate, these reforms would reduce system costs by $51 million in fiscal year 2009, better positioning the Commonwealth over time to continue to provide comprehensive health insurance to state workers.

The budget also includes other reforms aimed at making government at every level more efficient, effective and accountable and laying the foundation for cost savings.

Revenues

The budget includes a careful and fiscally responsible approach to generating additional revenue to close the budget gap, pay for targeted investments in our future and improve our structural budget climate.

Measures like these enabled us to balance the budget and make targeted investments in our future without having to use an excessive amount of reserves. While the Administration was unable in one year to reverse an established pattern of using one-time revenue sources, the budget proposes and implements a formula for the responsible and measured use of reserves. This formula calls for using reserves only to the extent needed to protect against lower-than-average revenue growth.

The resulting use of $369 million in reserves will prevent harmful cuts in the event of slow revenue growth while also guarding against using reserves to fund unsustainable program expansions. This limited use of reserves would preserve $1.85 billion in the Stabilization Fund to protect the state in the event of a serious fiscal downturn. This would still leave Massachusetts with one of the largest Rainy Day funds in the nation. Moreover, if revenues do grow at the five-year average, then this use of reserves would not be needed to support contemplated spending.

Transparency

The Patrick-Murray Administration is deeply committed to making the operation of state government more transparent - and information about state government more accessible - to the people of Massachusetts. Opening up state government empowers the public to participate in shaping our collective priorities and to hold government accountable for delivering on those priorities.

As recognized recently by the McCormack Graduate School of Policy Studies and the Massachusetts Budget and Policy Center, "Massachusetts made dramatic progress towards a more transparent budget process over the past year." Last year's budget contained a number of changes to improve the transparency and accessibility of state financial information:

In submitting its fiscal year 2009 budget, the Administration is taking further steps to make it easier to find and understand key information about state finances, including:

Conclusion

The Patrick-Murray Administration's fiscal year 2009 budget is an important and fiscally responsible step forward on the path to change and shared prosperity for Massachusetts. Still, achieving the full promise of a better, stronger Commonwealth will clearly take much more work.

Our state's many policy challenges have developed over decades, and they cannot be solved overnight. Likewise, while the choices embodied in this budget would improve our fiscal climate in subsequent years, it will take continued effort to build a truly sustainable fiscal framework that can help accomplish the progress and change our state needs. Along these lines, health-related budget costs are a source of particular concern, as they already comprise 45 percent of state spending and are growing at unsustainable rates. Further collaboration between the Administration, Legislature and other stakeholders to identify sensible and effective ways to rein in these costs is critical to ensuring the success of our state's historic health care reform legislation and preserving sufficient resources to invest in other pressing public priorities.

The Administration looks forward to working with the Legislature to enact a fiscally responsible fiscal year 2009 budget that continues to move our state forward on the path towards change and shared prosperity - and move our state's finances towards long-term sustainability.

Program and Policy Highlights

Education

Local Aid

Public Safety

Economic Development and Housing

Health and Human Services

Energy and Environment

Transportation

Labor and Workforce Development

Other Branches of Government

Judiciary

Constitutional Officers

District Attorneys

Independent Agencies