Governor Patrick Releases Fiscal Year 2011 Budget Recommendation
Makes investments to build stronger, better Commonwealth; holds line on spending while making tough cuts
Facing a $2.7 billion budget gap in FY11 as a result of the continued global economic downturn, the Governor once again proposes a balanced set of solutions, including nearly $800 million in cuts, federal stimulus funds, modest one-time resources and some additional revenues. The $28.2 billion budget restrains spending to 3 percent over FY10 estimated spending - less than the 3.2 percent growth in tax receipts the state is expected to see in FY11.
"Despite the challenges and tough choices we face, our budget keeps faith, as best as possible, with our commitment to help the people of Massachusetts weather these hard times and build a lasting recovery," said Governor Patrick. "This budget is about people, not just numbers or line items, and for that fundamental reason proposes to invest in jobs, education, health care, and services for the most needy."
"We have put together a responsible plan and recommendations for the FY11 budget, reflecting our administration's values and strong commitment to residents of the Commonwealth to maintain stability today and invest in long-term growth for our future," said Lieutenant Governor Timothy Murray.
Commitment to Investing in a Stronger Commonwealth
The Governor's budget preserves programs and services the Administration has worked hard to protect over the past 18 months, when the economy first started to decline. Continued investment in these critical areas will help create jobs and foster future economic growth. The Governor's budget includes the following investments:
- Provides a record high $4.048 billion in Chapter 70 funding, ensuring that no school district receives less funding than it did in FY10 and fully funding foundation;
- Level funds state and community colleges, including the University of Massachusetts, at $969 million, while reducing the use of federal stimulus funds needed to support this level of investment;
- $1 million increase for universal pre-kindergarten;
- $500,000 increase for programs that support kids up to the age of three;
- $500,000 increase for early childhood mental health grants.
The Governor's budget continues to support the Commonwealth's successful first-in-the-nation health reform. The budget preserves eligibility for state health insurance programs and devotes additional resources to enroll new residents. The budget also supports critical public health programs for residents. Specifically, the budget provides:
- $838 million for Commonwealth Care to provide coverage to over 170,000 adults, including an additional $75 million for Commonwealth Care Bridge to cover over 26,000 immigrants who live and work here legally, and pay taxes into the system;
- $2.5 million for health care outreach and enrollment grants supported by the Commonwealth Health Connector;
- $20.6 million for Domestic Violence Services at the Department of Children and Families;
- $8 million increase in the Department of Veterans' Services. The budget also held veterans' services harmless from any reductions in fiscal years 2009, 2010.
- Level funding for Clubhouses within Adult Mental Health appropriations, continuing to serve the approximately 8,000 people who use these services.
The Governor's budget maintains his support for the Commonwealth's cities and towns. Together with other cost-controls and revenue tools the Administration and Legislature have provided and the Governor proposes in FY11, this means there will be less pressure to raise property taxes and increase burdens on families and seniors.
- Level funds Unrestricted General Government Aid at $936 million;
- Level funds Regional School Transportation at $40.5 million;
- Level funds Payment in Lieu of Taxes at $27.27 million;
- Level funds school lunch programs at $5.4 million.
Other budget highlights include:
- Tuition and fee waivers, and Welcome Home Bonuses for National Guard men and women level-funded at $4.7 million;
- Most public safety agencies are level-funded or slightly increased;
- Maintains state funding for local housing agencies at $62.5 million to support 240+ agencies in their efforts to provide housing to the lowest-income individuals, seniors, and families in the state, especially those most affected by the economic downturn;
- Maintains funding for the Massachusetts Rental Voucher Program (MRVP) at $32.7 million, supported by an $8 million contribution from the Massachusetts Housing Finance Agency;
- Funds summer jobs for at-risk youth at $3.7 million, providing the opportunity for over 2,000 young people to have summer jobs.
Managing Tough Choices
In order to preserve these key investments, the Governor made difficult choices in other areas of the budget. After accounting for anticipated federal stimulus funds that are required to be used to solve the FY11 budget shortfall, cuts are the largest component of the Governor's budget solutions, totaling $797 million. Cuts include:
- $56 million cut to adult dental services covered by MassHealth;
- $9 million reduction to the Department of Transitional Assistance Employment Services program;
- $5 million reduction to the Quinn Bill program;
- $1.5 million reduction to one-stop career centers;
- $3.2 million reduction to state parks.
Amid these cuts, the budget offers more flexibility for agencies to manage their budgets by consolidating 644 line-items into 542 line-items.
Continuing his call for shared sacrifice among all state government partners, the Governor includes in the budget nearly $28.6 million in contributions from state entities to offset some cuts and preserve important programs and services.
Additionally, the Governor's budget achieves significant savings from taking advantage of a strategic opportunity to refinance the Commonwealth's debt. The state's debt service costs have an abnormally high spike during FY11, due to the way in which prior administration's structured their borrowing. At the same time, costs for refinancing to "smooth" our debt service are low due to low rates and can be fully offset by refunding other high-interest bonds. This debt refinancing strategy complies with the Commonwealth's existing debt affordability policy and is part of a comprehensive plan to address budget shortfalls and preserve critical services and programs.
Responsible Fiscal Leadership
The Governor's FY11 budget builds on his record of strong fiscal management that has been recognized by the rating agencies in their affirmation of the Commonwealth's strong bond ratings. In addition to holding the line on spending, the budget reduces the structural deficit for the second straight year since the fiscal crisis hit in FY09 by reducing the reliance on one-time resources by 38 percent since FY09.
Through fiscal discipline, the Governor was able to minimize the use of the state's Stabilization Fund. The budget proposes only a $175 million withdrawal from the Fund, significantly less than what was used in FY09 and FY10. In addition to protecting the Fund balance at $450 million, Secretary Gonzalez will use his authority to dedicate any additional revenue collected in FY10 to help replenish the Fund.
The Governor's budget again includes a proposal he filed last year that would cap the amount of capital gains revenue the state budget relies on. Under his proposal, capital gains receipts in excess of $1 billion would be deposited into the Stabilization Fund, protecting the state against future economic declines.
"The Governor's budget recommendation for FY11 is a product of the same fiscal leadership the Governor has exercised throughout his Administration," said Administration and Finance Secretary Jay Gonzalez. "It is fiscally responsible; it prioritizes reform, efficiency and shared sacrifice in holding the line on spending; and it continues to invest in a brighter future."
Other Budget Solutions:
The budget includes federal recovery funds that are required to be spent in FY11, including remaining funds to support education and anticipated expanded federal Medicaid reimbursements.
The Governor's budget does not include any broad-based tax increases. Given the challenges of balancing the budget during a prolonged economic downturn, however, the Governor's budget limits certain tax expenditures that will generate savings and additional revenues in FY11. They include:
- Temporarily limiting the Film Tax Credit (saving $75 million);
- Temporarily limiting the Life Sciences Tax Credit (saving $5 million);
- Repeal of the aircraft sales tax exemption (saving $4.2 million);
- Repeal of the sales tax on candy and soda and dedicate revenues to the Health and Prevention Fund (generating $51.7 million);
- Repeal of the increase to the sales tax exemption on smokeless tobacco and cigars (saving $15 million).
The Governor's budget is also supported with $20 million from the expanding Bottle Bill, applying the 5-cent recycle deposit to plain and flavored water, coffee-based drinks and sports drinks. These revenues would be dedicated largely to recycling, and water and sewer rate relief.
These and other proposals will help protect key priorities and provide a more stable and sustainable funding base in the long-term.
Changing How State Government Works
Governor Patrick's far-reaching agenda continues with the filing of his FY11 budget. Following up on the landmark Pension Reform bill he signed into law last year, the Governor has proposed another set of changes to modernize the system and ensure it is fair to taxpayers and public employees, and is fiscally sustainable over the long-term.
The Governor proposes to consolidate parole and probation services under the Executive Branch. This change will enhance public safety by replacing the current fragmented oversight structure with a more efficient and accountable system for supervising offenders. The Governor has also filed legislation to increase the use of electronic monitoring and home confinement for those awaiting trial as a cost-effective alternative to pre-trial incarceration, where appropriate.
The FY11 budget also realigns how state government purchases and manages energy, moving from separate decision-making by multiple agencies to centralized procurement by the Clean Energy Center. State and local governments and quasi public agencies spend a combined $750 annually on energy costs. With full participation by cities and towns, the Governor's proposal has the potential to save taxpayers tens of millions of dollars.
The Governor is also directing his Cabinet secretaries and their agency heads to go back to all state contractors to seek a three percent decrease in their existing contracts and to trim at least three percent from new and anticipated contracting.
The Governor has signed into law several reforms over the last three years that are reflected in the FY11 budget, including an overhaul of the state Transportation System, County Sheriff reform, Information Technology Consolidation, and others. He has also signed into law ethics reform, which he continues to build on by including an outside section in his FY11 budget that would prohibit state agencies from hiring outside lobbyists to lobby other state agencies.
For more information on the Governor's FY11 budget, please visit www.mass.gov/budget/governor.
If you have ideas on how to improve the budget, let Governor Patrick know at www.mass.gov/governor/forums.