For Immediate Release - October 15, 2008

GOVERNOR PATRICK IMPLEMENTS FISCAL ACTION PLAN

Over $1.053 billion in cuts and reforms to close budget gap; unprecedented collaboration across state government helps protect local aid and safety net

BOSTON - Wednesday, October 15, 2008 - Faced with an estimated budget deficit of $1.4 billion, Governor Deval Patrick today started implementing a fiscal action plan to close the gap that includes more than $1 billion in immediate cuts and spending controls across state government, identifying additional revenues and a responsible draw on reserves. The announcement comes as the Administration has revised the state's revenue estimate, on which the budget is built, by approximately $1.1 billion.

"With the economy slowing and state revenue declining, we have to act," said Governor Patrick. "These decisions are not easy. I know there is a good idea or a good person behind every one of these cuts. But we are going to share the sacrifice now so that we can all be stronger when the economy recovers."

The Governor's careful approach to identifying cuts and his call for shared responsibility throughout state government made it possible to preserve key, targeted investments in education, public safety and the safety net included in what was a $28.2 billion budget. Governor Patrick prioritized municipalities and property-tax payers by continuing to fully fund local aid to cities and towns. The Governor also protected veterans' services, domestic violence programs, and services for the homeless and disabled.

Governor Patrick sought and received unprecedented voluntary cuts and contributions to solve the budget gap from entities outside his budget cutting authority including the Legislature, Constitutional Officers, the Judiciary, and quasi-public agencies. These additional cuts and contributions total close to $100 million.

After consulting with the Department of Revenue, economists, former state finance officials, and others, Administration and Finance Secretary Leslie Kirwan submitted to Governor Patrick a consensus revenue estimate reduced by $1.1 billion to account for an expected continued shortfall in revenues for the remainder of FY 2009.

Secretary Kirwan also identified $320 million in projected exposures from anticipated spending obligations. This includes snow and ice removal costs, health and human services caseload exposures, increased debt service and certain public safety costs bringing the total budget shortfall to $1.4 billion.

"The unprecedented uncertainty surrounding the global and national economies complicates our own economic situation here at home," said Secretary Kirwan. "It also suggests an aggressive approach to solving this projected shortfall now, while recognizing that additional solutions may still be needed later in the year should the revenue decline exceed even these significant expected losses."

Governor Patrick's fiscal action plan is a multi-pronged approach to closing the budget gap, while securing the Commonwealth's future.

Spending Cuts and Revenue Adjustments

  • Spending Cuts and Controls

To help close the $1.4 billion budget gap, the Governor is using his statutory authority to make $755 million in cuts across Executive Branch agencies and implement $146 million in additional spending controls. In order to protect local aid for communities and to maintain a strong safety net of services to help struggling families and individuals, the Governor made difficult choices in other areas.

  • Reserves

In addition to cuts and savings, the Governor's plan includes a $200 million draw from the state's "Rainy Day" Stabilization Fund - a prudent amount that leaves $1.6 billion in the fund. The additional draw brings the total use this year to $601 million, which is the same level drawn from reserves in the FY 2008 budget.

  • Additional Revenues and Savings

As part of his fiscal action plan, the Governor has also proposed using $168 million in additional revenues and savings.

In order to protect property-tax payers and hold local aid harmless, the Governor has proposed using $13 million generated by eliminating the outdated telecom tax exemption to offset a $13 million reduction in funds that would otherwise be paid out from the General Fund Supplement to Hold Harmless Lottery Aid.

No city or town will lose local aid from the state. Aid to municipalities will be reduced in direct proportion to the amount of revenue they will receive from the repeal of the telecom tax exemption. Communities that do not receive funding from the telecom tax will not see a decrease in their aid.

The Governor's fiscal action plan also includes $100 million in expected corporate tax settlement payments currently being negotiated at the Department of Revenue, and $55 million in additional TANF (Transitional Aid to Needy Families) funds from the federal government.

Shared Responsibility

In spirit of shared responsibility, Governor Patrick cut his own budget by $1.1 million and secured unprecedented assistance from the Legislature, the Judiciary, constitutional officers and independent authorities in identifying savings and reforms.

These voluntary spending cuts offered total $52 million. Additionally, many of the state's quasi-public agencies have stepped up to offer funds to mitigate the impact of state cuts. Voluntary cuts include:

Legislature, Judiciary, Constitutional Officers:

  • Governor: $1.1 million
  • Legislature: $9 million
  • Judiciary: $33 million
  • Secretary of State: $3.8 million
  • Attorney General: $0.50 million
  • Treasurer: $0.38 million
  • Auditor: $1.05 million
  • District Attorneys: $3.0 million

Independent Authorities/Quasi-Public Agencies :

  • MassachusettsEducational Finance Authority: $2 million
  • Health and Educational Facilities Authority: $2 million
  • MA Water Pollution Abatement Trust: $2.2 million
  • Massachusetts Convention CenterAuthority: $2.5 million
  • MTC/Massport: $0.61 million
  • MassHousing: $9.5 million
  • Mass Housing Partnership: $2.1 million
  • Connector: $0.5 million
  • MassDevelopment: $4.5 million
  • MWRA: $20 million

Reforms and Restructuring

  • Reform State Employee Health Insurance

Governor Patrick also filed legislation today to implement a plan to restructure the way state employees pay for health insurance, which is expected to save $28.5 million for the remainder of FY 2009. The proposal, similar to what the Governor introduced earlier this year, changes employee contributions from a system based on date of hire to a more rational system based on salary levels and affordability.

This reform will reduce contributions for 6,000 state employees, and have no change on contributions for another 16,000 employees. For many other state employees, contribution levels would increase modestly based on salary and affordability.

Updates to Mass.gov

As a resource for residents, Governor Patrick has directed staff to update the state's web site - www.mass.gov - by compiling links and resources that may be helpful in these difficult economic times. In addition, Mass.gov includes information on how residents can help others through volunteer opportunities.

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