For Immediate Release - July 13, 2008

Governor Patrick Signs $28.1 Billion Budget

Five point spending plan takes steps to ensure fiscal stability in challenging economic times: includes $122.5 million in vetoes; Expansion of emergency 9C authority; Health care reforms based on shared responsibility



BOSTON - Sunday, July 13, 2008 - Governor Deval Patrick today signed into law a $28.1 billion FY 2009 state budget -- which includes $122.5 million in vetoes - as a part of a five-point plan aimed at ensuring long-term fiscal stability during a time of national economic uncertainty. In addition to vetoed spending in the FY 2009 Budget, the Governor is filing a companion budget package that includes expansion of emergency 9C powers to prepare for a potential decline in state tax revenues and increasing stresses in some areas of the budgetas well as a number of targeted amendments to health care reform law to place this national model on more sound financial footing.

"In recognition of evolving fiscal and economic circumstances, I am proposing a five-point plan to manage state finances through these challenges," said Governor Patrick. "This plan is proactive, balanced and flexible, and designed to ensure that state government can meet the highest priority needs of our citizens in challenging economic times. It will both provide and preserve resources for making key investments in our economy and maintaining a strong safety net for our citizens."

"Through this budget we have been able to invest in key initiatives to improve the common good of the Commonwealth, while also keeping an eye on the bottom line," said Lieutenant Governor Timothy Murray. "It strikes a prudent balance between our fiscal responsibilities and our governing priorities."

A Plan for Responsible Fiscal Management

Spending Restraint and Expanded 9C Authority

The budget includes increased savings, efficiencies, and new revenues that were part of the Governor's initial House 2 budget. Even with these budget-balancing initiatives, the Administration recognizes that tough choices need to be made to ensure that important long-term investments can be supported within the context of a fiscally responsible budget. As part of a multi-pronged approach to balancing the budget, the Governor has vetoed a total of $122.5 million in spending - a level close to three times higher than last year's budget.

While many of the budget items eliminated or reduced have merit, our present fiscal challenges require increased restraint. With these vetoes, the final budget reflects reductions in various investments sought by the Administration as well as by legislators. The Administration will also employ spending and management controls throughout the year to restrain spending and preserve resources for our highest priorities. A list of all vetoes is attached.

While the Massachusetts economy has so far outperformed the struggling national economy, experts project that worsening national economic circumstances, including rising energy costs, could cause state revenues to drop below budgeted estimates. Those same deteriorating circumstances portend increasing stresses on state programs to meet the needs of our citizens. This is particularly so for safety net services which play a fundamental role in protecting the well-being of the people of Commonwealth in difficult economic times.

As part of the companion budget package, the Governor is asking the Legislature for expanded "9C" authority to be able to make equitable spending reductions during the year if and when needed based on the actual performance of tax revenues. Expanded 9C authority would permit any needed spending cuts to be distributed responsibly across all of state government, minimizing disproportionate impacts in particular areas. Granting that authority now, before the end of the legislative session, enables us to respond quickly in the event of a serious downturn.

The Governor has also amended an outside section to the budget that would increase pensions for retired teachers and state employees that will provide an average $10-per-month increase in their retirement benefits. The amendment would limit the increased benefit to retirees with annual pensions of $40,000 or less. At a time when fuel and energy costs are on the rise, even a limited increase will help retirees living on a fixed income. At the same time, the Governor's amendment will ensure that this increased benefit is limited to those retirees most in need.

"This blueprint is a proactive and flexible fiscal management plan for fiscal year 2009," said Secretary of Administration and Finance Leslie Kirwan. "The plan includes spending reductions and health care reform solutions which serve as essential immediate steps to ensure fiscal stability in addition to other budget tools available for use in the coming months as we receive more information about actual economic and fiscal trends."

"Shared Responsibility" Health Care Solutions

In addition to the expanded 9C powers, the Governor is also proposing a number of targeted amendments to health care reform law to place this critical program on more sound financial footing. Health care reform has been an exceptional success, with nearly 340,000 adults and children newly enrolled in health coverage since this historic initiative began. However, rising enrollment and expenses for state-subsidized health insurance programs are straining the state budget, with the projected costs of providing coverage for low-income families through MassHealth and Commonwealth Care in fiscal year 2009 exceeding resources currently available in the budget. These programs are fundamental components of our safety net and will become even more important in an economic downturn. Thus, we are asking health care reform stakeholders to make modest additional contributions totaling $130 million towards providing coverage to low-income residents through these programs.

The five-point plan also includes responsibly closing the books on fiscal year 2008, the identification of departmental revenues anticipated in FY2009 that can applied to solve known and identified budget gaps, and responsible use of surplus funds from FY2008 through deposits in the stabilization fund and the creation of a new fund for potential emergency energy needs for vulnerable residents.

Targeted Investments, Savings and Responsible Revenues

The FY 09 budget also makes key investments essential to the long-term growth and sustainability of the Commonwealth including: $360 million in increased education funding to continue moving Massachusetts forward into the next phase of education reform; a 5.17 percent total increase in Local Aid over last year's budget; targeted, high-yield investments in proven strategies to help promote job creation and economic growth in Massachusetts including $25 for the Life Sciences Investment Fund; and an $80 million increase in funding for public safety through the Executive Office of Public Safety.

"This budget reflects the strong partnership between the Administration and the Legislature on a number of shared priorities - including education funding, economic development, and public safety," said Governor Patrick. "These investments will expand opportunity and improve the quality of life for the people of the Commonwealth."

Budget Transparency

Continuing the Patrick Administration's focus on transparency in budgeting, the budget has been restated in a more user-friendly format, consistent with the format used in the Governor's budget released in January. The final budget along with detailed supporting materials can be found at www.mass.gov/gaa.

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