In
this Executive Summary, The Senate Committee on Ways and Means provides highlights
of its fiscal year 2004 budget and reviews a number of reforms and restructuring
initiatives we have proposed to bring greater efficiency to the way state government
operates. Each of these reforms, whether comprehensive
or minor in nature, represents a collaborative effort by Senate members and staff
to create an innovative and balanced budget that also protects core services.
Our
challenge was to craft a budget that combines reform and fiscal responsibility
with the government’s mission to provide core services and protect our most vulnerable
citizens. With fewer
dollars to spend on the services and programs provided by state government as
it is currently structured, this Committee has seized the opportunity to change
government where change makes sense. By
responsibly restructuring areas within state government, we can achieve greater
efficiency in service delivery at a considerable savings to the taxpayer. The following are highlights of the reform
initiatives proposed in the FY 04 budget.
Executive
Office of Health and Human Services
Serving
over 1,250,000 people, the Executive Office of Health and Human Services provides
life-sustaining services to the most vulnerable members of the Commonwealth, including
the poor, the ill, and the disabled. Within the secretariat, the fifteen member
agencies work independently to provide services to the specific populations under
their jurisdiction. As it has become clearer
in recent years that multiple agencies are serving many of the same people, but
are not doing so in a coordinated fashion, it has also become clearer that the
current structure has produced a fragmented system that is not providing services
as efficiently and effectively as it should.
Looking
to ensure that Massachusetts maintains its preeminent position as a forward-thinking
provider of health and human services, the committee puts forward in this budget
a reorganization of health and human services focused on increasing coordination
of services and communication between agencies—vital first steps in improving
the quality of care while simultaneously reducing costs.
More
specifically, the Committee’s proposal accomplishes the following:
The greater coordination of services
made possible by this reorganization will crystallize the focus of agencies on
the broader needs of individual clients rather than on the specific services provided
by of a single agency. Each client’s needs
vary, and many require multiple services provided by the state.
This proposal streamlines those services, and addresses each client’s needs
on a case-by-case basis.
The
committee also recognizes that reorganization must be more than just a reshuffling
of responsibilities and lines of authority. Concrete actions must be taken to ensure that
the promises of greater service coordination, improved quality of care, and cost-savings
are realized. To meet these goals, the
committee requires the Secretary to develop standardized service delivery areas
for all agencies, create performance measures to evaluate all programs, and ensure
that regulations are in place protecting client confidentiality while insuring
the ability of agencies to share information necessary for providing services.
The Executive Office is also instructed to report to the legislature on
recommendations regarding reform of the Purchase of Service System, the co-location
of agency offices, the elimination of duplicative licensing functions, consolidation
of abuse investigation operations, and other issues to help further the continued
implementation of this important reorganization proposal.
Executive
Office of Economic Affairs
As
Massachusetts emerges from a national recession, state government must be prepared
to keep up with the demands of a changing economy.
As jobs change, so do the skills and levels of training required to succeed
in a highly competitive job market. It
is our responsibility to reflect the shifting demands of the state’s economy within
the structure of state government. The
restructuring of the newly created Department of Economic Affairs meets this responsibility.
The
Secretary will coordinate statewide policy regarding business and technology,
resulting in a more efficient economic development agenda, and greater communication
between departments and the private and public sector.
One example of improved performance due to restructuring will be in better
coordination of job training programs. Clearer
lines of communication will allow the business and technology cluster to share
information with the workforce training cluster, resulting in training programs
that will meet the needs of existing and emerging industries.
The
Committee’s proposal for restructuring the agencies that fall under the new Executive
Office of Economic Affairs will accomplish the following:
Ø
Place the existing Departments of Economic Development,
Consumer Affairs and Business Regulation, and Labor and Workforce Development
under the new Secretariat of Economic Affairs.
Ø
Coordinate policy within and across the departments of
Business and Technology, Consumer Affairs and Business Regulation, and Labor and
Workforce Development through the Office of the Secretary.
Executive
Office of Environmental Affairs
With
scarce resources to devote to maintaining the Commonwealth’s parks, beaches, forests
and other public places, this proposal seeks to find savings through the elimination
of duplicative functions within the Executive Office of Environmental Affairs.
Protecting the State’s environment is a high priority, but one that can
be done efficiently and cost-effectively by consolidating offices within the Executive
Office.
The
Committee’s proposal for restructuring the Executive Office of Environmental Affairs
will accomplish the following:
Ø
Maintain the Executive Office of Environmental Affairs.
Ø
Create a new Department of Conservation and Recreation
that consolidates the Metropolitan District Commission with the Department of
Environmental Management, and the Department of Fisheries and Wildlife.
The Department of Conservation and
Recreation will provide a comprehensive ecosystem-based approach to state environmental
resource conservation and management. This will provide a big-picture approach to preserving the state’s
resources, rather than isolating and positioning one environmental resource against
another.
Commonwealth
Development Coordinating Council
The
creation of the Commonwealth Development Coordinating Council will greatly enhance
coordination between agencies dealing with issues related to development in the
Commonwealth including economic development.
Under this proposal, the Departments of Transportation, Housing, Environmental
Affairs and Economic Affairs will maintain their independent identities, but will
be advised by and will coordinate policy through the newly formed Council.
The Council will be charged with creating a coordinated policy
that strikes an appropriate balance between development and protection of natural
resources. We specifically call upon the
council to create and implement comprehensive policies and principles to govern
the disposition and reuse of surplus state lands and to develop a long-term, statewide
transportation plan.
Judicial
Reform
The
severity of this fiscal crisis has presented the committee with the opportunity
to evaluate how efficiently our courts are administered. With the help of the Monan Committee, which
was made up of
experienced management professionals and attorneys who were charged with reviewing
the operation of the courts, this committee proposes a restructuring of the administrative
hierarchy that will greatly enhance the judiciary’s ability to manage resources
and to track the efficiency of each court.
With respect to Court Reform, the Committee proposes
the following:
Ø
Increase the management experience within the administration
of the Judiciary by replacing the Trial Court’s position of Chief Justice for
Administration and Management with a Chief Administrator and Administrative Office
to manage all of the courts. The Chief Administrator will be responsible for maintaining detailed
statistical analyses of the courts, assessing the efficiency and performance of
each court and the equitability of court staffing levels.
Ø
The Chief Administrator will report directly to a judicial council composed
of chief justices from every level of the court system, increasing the accountability
of the Administrative Office.
Ø
Establish a Court Reform
Advisory Board consisting of lawyers, business experts, and experts in public
administration to provide advice and support for administrative and management
reform.
Ø
Restructure court line items to clarify reporting lines,
decrease managerial confusion, and promote discipline in resource and allocation
use.
Ø
Extend Superior Court judge rotation to one-year cycles
rather than the current, inefficient one-month rotation cycles.
This
reform will allow the judiciary greater flexibility in determining how best to
utilize scarce resources and will provide oversight to the authority of the Chief
Administrator, making the Massachusetts’ court system a more efficient and accessible
provider of justice.
The
Committee also offers three major reforms to make the government’s hiring of outside
lawyers more efficient:
Ø
We will require
all government hiring of outside counsel to be approved in advance by the Governor’s
chief legal counsel.
Ø
We will require competitive public bidding for government
hiring of outside counsel.
Ø
We will require the Secretary of Administration and Finance
to issue detailed reports twice a year on all government contracts with private
lawyers.
Higher
Education
While
the Committee believes that the structure of the State’s higher education system
is essentially sound, there are several areas where reform is needed. Gaps in perception and communication have hindered the ability of
the Board of Higher Education and the public higher education campuses to work
together effectively to improve education and training in the Commonwealth.
The Board lacks leverage over the campuses, and the campuses do not always
see the Board as acting in their interests.
Changes
proposed in this budget aim to strengthen the relationship between the Board and
the campuses, and to increase accountability in the system.
The proposed budget reconfigures the Board of Higher Education.
Ø
The total size of the board is kept at eleven, but of
the nine voting members, three will represent the university, state college, and
community college sectors.
Ø
To respect separation of executive and legislative power,
the joint Chairs of the House and Senate Committees on Education will be added
to the Board as non-voting members. The
Committee hopes their presence will aid in the planning and oversight function
of the Board.
Ø
Several measures to improve performance measurement systems
aim to make data more useful, and planning more data-driven.
Under
current law, tuition paid by college students is remitted to the State’s General
Fund while fees become campus revenue. This practice often results in campuses feeling
pressured to raise fees while seeing no cost benefit to raising enrollment.
Ø
Retaining tuition at campuses, even though offset by lowered
appropriations, will make campus revenue more enrollment-sensitive and will in
the longer term help bring more revenue to campuses that are most effective at
drawing in students.
Ø
The Committee recommends that the Board of Higher Education
develop guidelines to restructure student charges. Low tuitions and high fees presently combine
to form a structure under which fees represent the majority of student charges.
With tuition retention in place, barriers to rationalizing the definition
of fees should disappear.
Ø
This budget supports Massachusetts College of Art’s innovative
proposal for greater institutional flexibility. While keeping the college within the umbrella
of the state system, language in the budget lays out a process for Mass Art to
adjust tuition rates, expand out-of-state enrollment, and develop specific performance
goals unique to the college’s unusual position as a publicly-funded art institution.
This pilot program is one way in which the necessity of a reduction in
state-appropriated funds is being turned into an opportunity for new independence
and growth, and the Committee applauds the college’s vision.
Public
Safety
The
Senate Ways and Means Committee budget includes a number of initiatives to improve
public safety services in the Commonwealth.
Ø
To better capitalize on the attainment and distribution
of federal grants, SWM consolidates the Committee on Criminal Justice and the
Highway Safety Bureau to centralize its expertise in federal grant-awarding programs
within the Executive Office of Public Safety.
Ø
Senate Ways and Means incorporates the Office of Homeland
Security within the Executive Office of Public Safety and Homeland Security to
assist the Secretary with policy concerning the safety of Massachusetts’ infrastructure
Ø
We propose the creation of a new state police class in
order to provide the increased security needed in post-September 11th
Massachusetts as well as relief to state troopers currently working extra shifts.
This is a cost neutral proposal.
Ø
The Committee creates a Public Health Emergency Council,
consisting of the Attorney General, the Director of the Massachusetts Office of
Homeland Security, the Secretary of Public Safety, the Secretary of Health and
Human Services, the Director of the Massachusetts Emergency Management Agency
and the Commissioner of Public Health to assess the preparedness of agencies within
the Commonwealth to deal with acts of terrorism involving chemical or biological
agents.
Ø
By implementing a flat bonus structure for future Quinn
bill payments made to state and municipal police officers, and by demanding rigorous
new guidelines as proposed by the Board of Higher Education for criminal justice
programs, the Senate addresses an area of state government in the Quinn bill that
is in need of reform.
Forensic
Reform: A Sensible Way to Test DNA
Massachusetts’
forensic services are suffering from a critical lack of resources. Prosecutors rely on DNA testing for convictions, and our crime labs
lack the capacity to handle the volume of DNA testing that is needed. When testing is held up, cases are thrown out
and public safety is compromised. Due
to the lack of capacity, District Attorneys are also forced to spend precious
resources sending samples to expensive private, out-of-state labs.
In
addressing this grave public safety concern, this Committee proposes the following:
Ø
The State Police Crime Lab, currently funded as part of
the State Police appropriation, is placed in a new line item under what would
become the Department of Forensic Sciences. This
new Department would also include the Office of the Chief Medical Examiner.
Ø
$1.8 million in additional resources would be dedicated
to reducing the backlog of DNA tests, improving the turnaround time for prosecutors
relying on the tests for convictions.
Ø
A Forensic Science Advisory Board composed of forensic
experts would be charged with advising the legislature how resources might be
streamlined to improve forensic services in the Commonwealth.
Additional
Consolidations and Reform
This proposal
provides the commissioners of the Massachusetts Rehabilitation Commission and
the Massachusetts Commission for the Blind the ability to transfer funds between
line items, allowing for limited resources to be distributed according to need.
The head
injury trust fund will be transferred off budget, thereby freeing the Commissioner
of the Massachusetts Rehabilitation Commission to determine the trust’s funding
levels without further appropriation from the legislature. This will allow the Commissioner and the Mass Brain Injury Association
to decide the best use for these funds.
Under this proposal, DPH personnel
costs currently funded from programmatic accounts will be moved to the Department’s
administrative account. This change will
protect funding allocated for public health programs and services.
The Committee would establish a
blue-ribbon commission to improve the efficiency of and streamline bureaucracy
within highway maintenance and management between the Highway Department, the
turnpike Authority and the Department of Conservation and Recreation.
Faced
with closing a multi-billion dollar budget problem primarily through reductions
in state spending, this committee was required to examine its definition of core
government services. Through the prosperity
that marked the late 1990s, the Senate worked hard to build a more compassionate
state government. We built our public
school system into the national model that it represents today.
We built a health care system that provides coverage to long-term unemployed
and marginally disabled adults as well as universal coverage for children.
We built a first-in-the-nation prescription drug program that provides
our seniors the comfort of knowing they will be able to afford the prescriptions
they depend upon.
The
compassion that embodies these and many other state services and programs is what
defines a core service. These are the services that, if taken away,
will disproportionately harm our most vulnerable citizens. While no area of state government can be held
unaccountable during a fiscal crisis of this size, we must act responsibly and
compassionately now to ensure a government that considers the needs of our most
vulnerable going forward.
Health
Care
This
committee recognizes the need to find creative ways to curb the enormous growth
in Medicaid spending. We identify $550
million in MassHealth savings generated through greater efficiencies in pharmacy
management, care management and by closing loopholes that will ensure Massachusetts
is the payer of last resort. Most importantly,
the savings generated through these efforts will protect the children, elderly,
and disabled who depend on MassHealth for care.
Advancements
made in the field of prescription drugs have been responsible for the effective
treatment of many illnesses, allowing those who depend on them to continue leading
productive lives. At the same time, the
high cost of prescription drugs has placed a heavy burden on the budgets of individuals
benefiting from these medical advances.
Since
its inception, the Prescription Advantage program has provided uninsured senior
and disabled citizens with the means to meet their prescription needs. A decade of strong Senate leadership on the
issue has enabled this program to continue to live up to its promise. For fiscal year 2004, the Senate reinforces
its commitment to this program by proposing a funding level that will make prescriptions
available to the Commonwealth’s most vulnerable seniors.
As
part of our mission to preserve the core mission of government, the Senate proposal
takes the following specific actions to restore and strengthen Prescription Advantage:
Ø
Enrollment in the program is reopened, ending a four-month
freeze.
Ø
The catastrophic out-of-pocket spending cap, which represents
the point after which the state assumes all prescription expenses, is restored
to the lesser of 10% or $2,000 of household income for single enrollees.
Ø
The $20 quarterly deductible currently paid by enrollees
below 188% of the federal poverty level is eliminated.
Ø
The generic drug and brand name preferred drug co-payments
for enrollees below 188% of the federal poverty level are reduced by approximately
25% from current levels to bring them back within the financial reach of this
vulnerable population.
Mindful that the cost
of prescription drugs can place a heavy burden on the state’s and the individual’s
budget, the Senate takes steps to reduce the cost of prescription drug purchases
by directing the Secretary of Health and Human Services to implement a coordinated
prescription drug procurement plan for all state-funded pharmacy benefit plans
including Prescription Advantage, Medicaid and the prescription plans for state
employees. As part of this plan, the secretary will contract
with a non-profit Pharmacy Benefits Manager (PBM).
Using
a non-profit PBM to coordinate drug purchasing for Prescription Advantage results
in savings of over $5 million in fiscal year 2004, with even greater savings expected
as the coordinated procurement plan is fully implemented.
Contracting with a non-profit PBM aligns state and PBM financial incentives
and ensures full transparency surrounding, and disclosure of, PBM revenue streams. In addition, we require the non-profit PBM
to implement measures to improve health outcomes and manage safe and effective
utilization of prescription drugs.
The Committee
creates a four-tiered system for employee contributions to health care benefits,
protecting those at the lowest income levels as well as retirees.
This system creates a savings of $15M in fiscal year 2004, which will grow
in future years as premiums continue to increase.
Addressing
the Uncompensated Care Pool
As
a result of the recent action taken to tighten the State’s Medicaid program, including
the elimination of certain MassHealth programs, the burden on the Uncompensated
Care Pool as currently constituted is destined to reach unsupportable levels.
If left unchanged, the fund’s fiscal year 2004 deficit will exceed $280 million.
The Ways and Means Committee proposes the following:
Ø
Increase available funding for providers to $560 million
by maximizing previously unused federal dollars.
Ø
Create a limited insurance program for the long-term unemployed
who now lack coverage due to recent Medicaid cuts, reducing the current burden
on the Pool.
Ø
Fully fund free care payments for Community Health Centers
at $28 million.
Ø
Implement a “prospective payment” allocation method, which
will provide hospitals with the advantage of knowing their liability to or from
the Pool at the beginning of each fiscal year.
Ø
Protect the “safety net hospitals” by ensuring that they
receive payment through alternative funding mechanisms, where available.
Ø
Maximize federal revenue by bringing in an additional
$180M in funds.
Ø
Implement responsible management reform initiatives, creating
a more efficient method of determining Pool eligibility
This
is not a long-term proposal. What we have developed is a step toward preserving
a vital safety net for the uninsured, while making it more fiscally responsible
and accountable. The Senate will continue
to work with the House and the Administration to solve the problems with the Uncompensated
Care Pool. This proposal helps maintain
the services depended upon by the uninsured while new solutions are developed.
This
proposal protects our seniors living in nursing homes.
While we understand and support the transition of individuals into community-based
settings, we also recognize that many seniors consider these facilities their
homes.
The
Senate Ways and Means proposal:
Ø
Maintains the bed-hold policy at 20 days.
Ø
Maintains the current clinical eligibility criteria for
nursing home admissions.
Ø
Maintains the use of Aging Service Access Points for nursing
home screening.
Ø
Maintains the “resource first” allowance for the spouses
of institutionalized members.
We
also build on the “Community Choices” program established in fiscal year 2003,
providing $9.2 million in funding to allow seniors to continue to live in their
own homes by increasing the availability of community-based services.
Finally,
we direct the secretary of administration and finance to increase fees collected
by health-related licensing boards, funneling the increased revenue back to the
boards and equipping the Department of Public Health with the resources needed
to enforce compliance with health regulations.
In
fiscal year 2003, the legislature implemented an innovative method to generate
revenues for the Commonwealth’s nursing homes.
By assessing a per-patient fee to each nursing home, which is matched by
the federal government, $290 million in revenue is collected and subsequently
returned to the nursing homes in increased Medicaid rates and will include the
following:
Ø
$50 million to increase
nursing staff wages and to improve staff-to-patient ratios.
Ø
$17 million for capital
costs of nursing homes, prioritizing under-bedded areas, quality-improving projects
and de-institutionalization initiatives.
The
Committee proposes to restore spending that was cut by the Governor relative to
the User Fee spending through the following initiatives:
Ø
$4.1 million for the Extended Care Career Ladders Initiative,
providing grants to nursing homes to establish creative staffing, training and
care giving programs.
Ø
$3 million to support the Division of Health Care Quality
and the health boards at the Department of Public Health, providing funding to
invest in a comprehensive investigative unit to protect patients.
Ø
$6.5 million to provide grants to community health centers,
recognizing their efforts to provide appropriate care at a relatively small cost
to the Commonwealth.
Ø
$2 million for a disease management program for Medicaid
recipients, allowing the division to target at-risk individuals in an effort to
provide better care while at the same time reducing unnecessary and costly hospitalizations.
The
Division of Health Care Finance and Policy has estimated that without a comprehensive
health care plan, the individuals with marginal disabilities and mental illnesses
who were removed from Medicaid in April will further burden the Uncompensated
Care Pool by $160 million per year - a burden that would not be eligible for federal
financial participation.
Ø
We propose to establish a program funded from the Uncompensated
Care Pool at $180M that will cover as many as 36,000 people, half of which will
be reimbursed by the federal government.
The
re-establishment of this program goes beyond simply doing the right thing for
a population in need of basic health coverage.
Transferring the cost of covering the long-term unemployed is a central
component of the Senate’s plan to addresses the crisis surrounding the Uncompensated
Care Pool. By providing a comprehensive
health care program that is reimbursable by the federal government for this population,
we are taking a fiscally and morally responsible step toward solving the crisis
surrounding the Uncompensated Care Pool.
The
Senate provides $6.25M in funding for pediatric hospitals that serve a disproportionate
share of care to MassHealth children
The
programs that are currently paid for from the Children’s and Seniors’ Fund provide
insurance and services for more than 300,000 children and families living in Massachusetts. These services have made the Commonwealth a
national leader in protecting the health care needs of its children, needs that
cannot be ignored because of a downturn in the economy.
This
budget changes the financing mechanism for programs funded through the Children’s
and Seniors’ fund in a manner that protects its benefits and services. If left unaddressed, the Administration would have no option but
to drastically reduce important services built through a decade of strong Senate
leadership.
This
budget also maintains $15.3 million in funding for the Children’s Medical Security
Plan, maintaining a commitment to providing health care services to uninsured
children.
The
Senate Ways Means budget fully funds the methadone program, which provides an
essential service to recovering drug addicts.
We direct the Secretary
of the Executive Office to develop a comprehensive plan in conjunction with corrections
agencies in order to address alcohol and substance abuse prevention and treatment
in the commonwealth.
In
addition, this budget preserves a level of programmatic funding for substance
abuse services administered by the Department of Public Health that will maintain
services at the fiscal year 2003 level.
In a continued exhibition of our commitment to residents
of the Commonwealth most in need of assistance, the Committee protects the state’s
core public health services, preserving a decade of progress achieved within the
field of public health.
Included among the services preserved within this proposal
are the following:
Ø
In addition to funding
$12 million for enhanced based school health services, which provide grant funding
for school nursing resources, the Committee establishes a retained revenue account
for an additional $6 million to be spent from federal reimbursement for these
services.
Ø
The Committee proposes
restoring the funding cut from the Early Intervention program, which allows for
all developmentally challenged infants between the ages of 0 and 3 to receive
comprehensive services from diverse developmental specialists.
Ø
The Ways and Means Committee
has increased the annual amount for Early Intervention services that third party
insurers would be responsible for paying from $3,200 to $4,100.
The difference, an amount currently assumed by the state as the payer of
last resort, could be redirected to pay for services that have been reduced due
to budget cuts.
Ø
Funding is preserved
at a level that will cover existing services provided through the Healthy Start
program, which allows all women under 225% of the federal poverty level to receive
pre-natal care as well as case management towards obtaining MassHealth.
Ø
Funding is restored for
a Community-Based Suicide Prevention initiative, reinforcing our commitment to
this crucial service launched in fiscal year 2002.
The Senate also continues to support the programs that
provide screening, education and outreach in order to combat the spread of preventable
diseases.
Ø
Funding is provided at
the level spent in fiscal year 2003 for AIDS prevention, treatment and supportive
services. With this funding, certain HIV
medical services not available under medical insurance will remain available,
as will support services and substance abuse treatment.
Ø
Partial funding is restored
for Hepatitis C Mitigation and the program is set in statute, maintaining a commitment
to a program that was created and prioritized within the Senate.
Ø
Funding for combating
prostate cancer and breast cancer is preserved within the Department of Public
Health at a level that will maintain awareness efforts as well as screening for
low-income men and women.
Ø
As stated earlier, we provide $2 million for a disease
management program within the Division of Medical Assistance for Medicaid recipients,
targeting at-risk individuals as well as those currently diagnosed in an effort
to provide better care while at the same time reducing unnecessary and costly
hospitalizations.
Local
Aid
The
state is nearly two years into a fiscal crisis that has been marked by severe
and sustained drops in tax revenue, matched by a concerted attempt to shield cities
and towns from this prolonged revenue crisis.
Ø
In fiscal year 2002, as the extent of the revenue problems
started to become apparent in the fall, state leaders opted to rely heavily on
reserves to minimize cuts and defer tax increases.
Ø
In fiscal year 2003, the revenue declines meant even $1
billion in tax increases could not prevent deep cuts in many areas of state government,
but to the extent possible, the major categories of local aid were protected.
Ø
Even after the passage of the 2003 budget, tax revenue
continued fall below estimates, and the Legislature granted the Governor authority
to reduce local aid, so long as no district was cut below foundation level in
Chapter 70 aid.
Ø
The Governor chose to reduce lottery and additional assistance
money, but avoided cuts to Chapter 70, in the hope that tax revenue would recover
slightly in the end of the year.
In
fiscal year 2004, the state has run out of ways to protect local aid.
The legislature and the administration have concluded that local aid cuts
must be part of the budget package. The Committee has made cuts that are spread
fairly across the Commonwealth, while we continue to pursue innovative ideas and
initiatives that will lessen the burden on our communities.
Ten years ago, a fiscal
crisis precipitated the court judgment in McDuffy v. Robertson that the
State was failing in its Constitutional responsibility to support education. In response, the Legislature crafted the foundation
budget to define in law the resources needed for adequate school funding, and
over the next seven years set about bringing every district in the state to foundation.
In
this fiscal crisis, the State has attempted to protect education funding, in particular
those districts in which there exists no margin of above-foundation spending. $2.912 billion in the fiscal year FY04 budget
is needed to make up the difference between foundation and required local spending.
Another $227 million is distributed to cities and towns across the state
to assure that no district experiences a cut in Chapter 70 aid of more than 15.5%. In total, $3.139 billion is distributed in
direct aid to school districts. This appropriation
is $120 million less that the FY03 appropriation.
The
Committee recommends that $661 million in lottery proceeds and $378 million in
additional assistance be distributed to cities and towns as unrestricted revenue. These distributions represent across the board
cuts of 6.23% ($69 million) from 2003 levels, or 15% ($184 million) relative to
the original fiscal year 2003 lottery and additional assistance appropriations,
prior to mid-year emergency spending cuts.
The Committee
recognizes that the proposed local aid cuts represent the sharpest challenge in
a decade to cities and towns struggling to balance the needs of school children
with demands for local services and reasonable property taxes.
To
help districts cope with cuts, the Committee recommends a number of offsetting
savings and new revenue:
Ø
Recognizing the continued need to ensure public safety,
the Committee has recommended a new $40 million appropriation dedicated to offsetting
losses in state aid for local fire, police, and emergency medical services.
Revenue for this program will be generated by a “first responder” surcharge
on premiums for homeowner insurance and commercial multiperil policies.
Ø
A $7 million education aid shortfall reserve creates a
way to ameliorate financial problems.
Ø The
budget adjusts the charter school tuition formula by excluding capital costs in
the calculation of average spending. This
change brings charter school tuition in line with actual operating costs of sending
districts.
Ø The
elimination of mandatory tuberculosis testing for school employees, which experts
agree has no impact on the incidence of tuberculosis, cuts out an unnecessary
cost of districts.
Ø The
Committee is working with members of the Senate to review unnecessary and costly
state mandates, and will recommend a broader municipal relief bill in the coming
weeks.
Ø A
Senate working group would be established to develop legislation to reform local
contribution requirements associated with Chapter 70 and to assure that similar
communities get similar aid from the State. The Committee charges this group with the responsibility to recommend
legislation by September 15, 2003.
Education
Ø
Every school district is funded at the foundation budget
spending level as defined in Chapter 70, maintaining a decade-long commitment
to Education Reform.
Ø
The Senate Ways and Means Committee remains committed
to academic support services for students at risk of failing the MCAS, funding
a $45 million grant program for a range of tutoring, out of school time, and summer
programs.
Ø
As was promised in the fiscal year 2003 budget, this year’s
proposal includes $22 million for scheduled first year payments for school construction
projects.
Ø
Class size reduction grants are maintained at $18 million
to assure the continuation of efforts to bring small classes and individualized
attention to children in kindergarten through third grade in high-poverty schools.
Ø
An increase in funding for educational services in institutional
settings will help rectify long-standing inadequacies in the quality of educational
programs at Division of Youth Services facilities.
Ø
The Committee also provides funding for full-day kindergarten
grants to preserve progress in expanding access to full-day kindergarten.
Municipalities
have argued for years that the state should take a larger role in the funding
of special education costs. Some 17% of
students in Massachusetts are in special education programs some part of the time,
though most of these students require limited intervention.
For
a relative handful of students, severe or multiple physical, mental or emotional
disabilities require intensive services. Costs
of these programs can run as high as $195,000 a year for a single child.
This
budget includes funding for reimbursement system passed in fiscal year 2001 budget
known as the special education “circuit breaker.”
It reimburses a share of costs over a threshold of $28,000: districts are
responsible for all costs up to $28,000, but above that amount, the state will
pay the 75% of costs.
Ø
In light of fiscal constraints, the Committee recommends
a funding level of $115 million, some $20-25 million below the projected costs
of the full 75% reimbursements. This funding level represents a commitment of $45 million in new
money.
Ø
The adoption of a “placement neutral” formula will remove
any financial incentive to place children in any particular program and allow
the needs of the child to be central in selecting an appropriate placement.
Ø
Subject to pro-rating in fiscal year 2004, 100% of costs
above the $28,000 threshold will be reimbursed for children placed in a district
by the state, including state wards, residents of Department of Social Services
group homes, and the children of homeless families placed in temporary housing
by the Department of Transitional Assistance.
Ø
A tuition freeze on out of district special education
placements offers temporary relief to districts struggling with cuts to their
budgets, with reasonable exceptions made for programs that in fiscal year in 2003
charged less than the full amount they were permitted to charge.
The
growth of Community Partnerships for Children (CPCs) since 1995 has expanded access
to and the quality of pre-school programs across the state. Through local input and a focus on the needs of working families,
Community Partnership Councils have been a success in many ways.
At
the same time, the parallel existence of CPCs administered by the Department of
Education and services funded through the Office of Child Care Services (OCCS),
with different eligibility rules for parents, different funding structures, different
ways of setting priorities, but many of the same child care providers, hampers
efficient and rational allocation of funds.
Aware
of both the strengths of the local structure of CPCs and the problems of inconsistent
policy at the state level, the Committee knits a compromise:
Ø
Community Partnerships funding remains at the Department
of Education, but is overseen by a council made up of the Commissioner of Education,
the Commissioner of the Office of Child Care Services, and the Commissioner of
Public Health (to bring in a perspective which includes Early Intervention for
young children with developmental delays).
Ø
This same council, drawing on input from a range of knowledgeable
people in child care, education, and the community at large, will develop recommendations
on how to best streamline all public funding for child care and education at the
state level, reducing administrative cost and inefficiency while preserving local
input and educational quality.
Ø
The council is charged with reporting back with recommendations
to guide future reform, including the possible creation of a permanent Board of
Early Education and Care.
The Committee
recommends keeping adult basic education grants at the Department of Education
rather than transferring them to the Board of Higher Education. The Department of Education has done a good job developing a performance-driven
funding structure to reward those programs, which are most effective at teaching
English, literacy, and other skills critical to socio-economic status.
The
Senate Ways and Means Committee believes that the heart of a strong public higher
education system relies on local control of institutions.
To this end, this budget preserves line item funding for campuses and rejects
the suggestion that control over campus funding should be centralized in the Board
of Higher Education.
This
budget recommends $103 million in cuts to higher education campuses in proportional
12% cuts. Another $130 million in line item reductions
offsets tuition revenue, presently remitted to the state, which becomes general
revenue of campuses. The State will continue
to fund fringe benefit costs of employees whose salaries are paid from retained
tuition.
The
Committee recommends level funding for scholarships to preserve access and affordability
at higher education campuses.
While
the State’s public libraries are an integral part of the learning process, we
believe that they serve a purpose as a separate entity from learning institutions. The Senate maintains the independence of the
Board of Library Commissioners and maintains funding for libraries and library
services, including full funding for the Talking Books programs for the blind.
Human
Services
“Each
child represents either a potential addition to the productive capacity and enlightened
citizenship of the nation or, if allowed to suffer from neglect, a potential addition
to the destructive forces of a community…. The interests of the nation are involved
in the welfare of this army of children, no less than in our great material affairs.”
Theodore Roosevelt, 1909
Ø
The account designated for family health services, which
includes funding for rape crisis centers, family planning services and the gay
and lesbian teen violence initiative, has been fully funded in this budget.
Ø
Ways and Means preserves funding for domestic violence
programs at the Department of Public Health, where they have been established
and are effectively administered.
Ø
The Committee also proposes the creation of a trust fund
dedicated to Family Health/Domestic Violence programs, available for DPH to distribute
without further appropriation to organizations through a grant application process.
Ø
Programmatic funding for teen pregnancy services is recommended
at a level that will allow for current year services to continue.
Ø
An increase in the fee charged to tobacco retailers and
wholesalers will restore a reduced level of funding for tobacco control programs.
Ø
Unclaimed state lottery prizes will be directed to the
Department of Public Health for a program to treat compulsive gamblers.
Ø
Funding for the Healthy Families newborn home visiting
program, which helps to prevent child abuse, is provided at a level that will
support all families currently receiving services as well as new parents under
the age of 18. This program has been proven
to reduce incidences of child abuse and repeat pregnancies.
Ø
We establish a retained revenue account with the objective
of increasing federal reimbursements and providing on-going training to social
workers at the Department of Social Services, who represent the front-line in
the fight against child abuse and neglect.
Over the past decade,
the Senate has committed itself to reducing the welfare caseload by getting people
back to work. The Senate recognizes that the true achievements
made since the implementation of welfare reform are found in the number of people
who have escaped poverty and achieved economic independence.
In the midst of a global recession, we continue to stress the importance
of education and job training.
Ø
This budget continues the Senate’s support of a responsible
welfare policy by not extending the work requirement to parents
with children between the ages of 2 and 5. Instead, the Senate again proposes to allow education and training
to count towards the work requirement.
Ø
We also require that time remaining to complete an education
and training program be considered in determining whether or not to grant time-limit
extensions.
The fiscal crisis has left an increased number of individuals
and families without permanent housing. While the Senate’s long-term priority is to develop programs that
keep people from becoming homeless, our most immediate concern is to ensure that
people have a temporary place to stay in cases where they do lose their homes.
As part of the Senate’s commitment to both preventing homelessness and
protecting those without homes, the committee recommends the following:
Ø
We continue our commitment to helping the homeless by
fully funding family homeless shelters and level-funding individual homeless shelters.
Ø
We require the Department of Transitional Assistance to
track applications and denials for family shelters. This will provide the Department with information on which families
are falling through the cracks, allowing for informed decisions to be made on
how best to fix this problem.
Ø
We provide the Department of Transitional Assistance the
flexibility to allow the individual homeless to be cared for in transitional housing
rather than in emergency shelter beds.
As
we continue to struggle with what experts are calling the states’ worst fiscal
crisis since the Great Depression, the need to preserve the fiscal health of the
Commonwealth has taken center stage in 2004.
Charged with reconciling a gap between the cost of existing state services
and projected revenues losses that reached nearly $3 billion, the Ways and Means
Committee had to make many difficult decisions with the full understanding that
each has a real and lasting impact on the people of Massachusetts.
As
a state in difficult fiscal times, we are not alone.
The majority of states in the nation are grappling with similarly difficult
decisions as they deal with a global economic downturn that has crippled conventional
revenue streams. According to a survey
by the National Conference of State Legislatures, 41 states are estimating an
aggregate shortfall in fiscal year 2004 of some $80 billion, and Massachusetts
is only one of 19 states looking at gaps exceeding 10% of their budgets.
In
this section devoted to the Commonwealth’s fiscal health, we examine the factors
that led to Massachusetts’ current fiscal condition, as well as the steps proposed
by this Committee to resolve the fiscal year 2004 problem.
We also discuss a series of initiatives proposed by the committee to ensure
that Massachusetts’ fiscal health will remain strong in years to come.
Historical
Overview: What got us here?
The
state budget relies on funding from three main sources: state taxes, reimbursements
and payments from the federal government, and non-tax revenue from sources such
as the state lottery, the tobacco settlement and various fees and fines.
While
non-tax revenues have remained relatively consistent from year to year and federal
reimbursements increase with growing costs in health care, state tax revenue has
not yet recovered from a precipitous drop that began in the summer of 2001. Between fiscal years 2001 and 2002, tax revenue
fell by approximately $2.4 billion, or 14% of the state’s total tax revenue.
The most significant and painful losses were felt in capital gains revenues,
which fell by approximately $900 million in that period of time.
State
Spending Versus Revenue, 1990-2002
“The Commonwealth
is in the midst of its worst fiscal crisis in more than half a century. Despite
tax increases and difficult spending cuts, the state remains in the grip of an
enormous structural mismatch between revenues and expenditures that will require
many more painful decisions in the months ahead, and many years to overcome fully.”
- Mass Taxpayers Foundation, State Budget ’03: The Perfect Storm…Unleashed, February 2003
The
Fiscal Year 2004 Approach
The
bottom line of the Senate Ways and Means budget is $22.558 billion; after adding
back in spending for newly transferred off budget - higher education tuition retained
at campuses ($130 M), convention center funding ($44 M), and the head injury trust
fund ($6 M), the adjusted bottom line is $22.738 billion.
In
its budget proposal for fiscal year 2004, the Committee on Ways and Means has
taken a balanced and transparent approach to resolving a projected gap of $2.7
billion between revenues and spending. This
gap was closed in five ways: spending reductions, revenue increases, use of reserves,
the sale of assets, and property transfers to the pension fund.
Ø
Annualization of cuts implemented part way through fiscal
year 2003 through the Governor’s emergency 9C powers, named for section 9C of
the state finance law, netted some $600 million in fiscal year 2004 savings.
In limited areas, services are restored to pre-9C levels, but in most cases,
they are not.
Ø
Division of Medical Assistance costs are reduced by some
$550 million, counting the full year impact of some fiscal year 2003 savings,
better pharmacy and care management, and
other measures.
Ø
Local Aid distributed through Section 3 is reduced by
$189 million versus fiscal year 2003 spending.
With the cost of the foundation budget for schools growing every year,
the reduction from maintenance levels is approximately $220 million. Cuts to maintenance-level spending on Department
of Education grants and reimbursements eliminate another $122 million in support
for school spending.
Ø
Other cuts impact nearly every part of the budget.
Ø
Finally, the Committee proposes the restructuring of several
agencies, most notably the Executive Office of Health and Human services.
Although initial savings will be relatively small, restructuring promises
both savings and better services in future fiscal years.
Ø
Closure of corporate tax loopholes in legislation signed
into law in March protects some $144 million in tax revenue that would otherwise
be avoided by nimble accounting.
Ø
Adjustments to the abatement process and the amount of
interest due on refunds save another $28 million.
Ø
Increases in fees and assessments – many of which have
not been revised in a number of years – account for $625 million, which constitutes
the bulk of new revenue. Court fees retained
for administrative costs will help offset state spending cuts. Other fees, notably registry of deeds fees,
support the state’s general fund.
Ø
Stabilization fund use is restricted to $175 million,
or $375 million less than is budgeted in fiscal year 2003, and some $500 million
less than the Committee’s projection of total transfers likely to be needed to
close out the current fiscal year.
Ø
This transfer will leave a cushion of approximately $100
million in the Stabilization Fund. Future
payments to the fund associated with surplus property and provisions of Chapter
4 related to taxes owed by corporations will add to the fund balance going forward.
Use
of Stabilization Funds(Includes Transitional Escrow in FY02)
Ø
The state must close the gap between spending and revenue,
but must also do so in a thoughtful manner rather than in a rush of panic.
When community health centers and schools are closed, then buildings are
sold, employees find other jobs, and institutional memory evaporates.
Re-creating programs in the future is expensive and time consuming. Without the use of reserves many of these programs
could be lost.
Ø
Although the economic downturn seems endless, revenue
will eventually return to growth, and the restructuring of services will return
future savings. The challenge in the interim
is to bring state services in line with long-term trend revenue while protecting
core services that, if eliminated, would be very difficult and expensive to rebuild
from the ground up.
Ø
By developing
a streamlined process for expedited sale of state surplus property, the Ways and
Means budget frees up $40 M in one-time revenue for the budget and cuts the cost
of maintenance of surplus property nearly in half. The proposal has been crafted carefully to
keep local input central to the disposal process.
Ø
This budget draws
on $40 million from the sale of surplus property, but the Committee has worked
with the Division of Capital Assets Management and Maintenance to identify a total
of nearly $200 million in surplus property that could be sold to reduce upkeep
costs and generate revenue. Amounts above
$40 million will be deposited in the Stabilization Fund.
Ø
The Committee
proposes to transfer ownership of two of the Commonwealth’s valuable assets -
the Hynes Convention Center and the Boston Common Parking Garage - to the pension
fund. This would permit a pension appropriation
$145 million lower than would otherwise be necessary.
Among
the Committee’s most far-reaching reforms is the redefinition of a balanced budget
to include all minor funds. In the past,
minor fund spending has represented $1 billion in line items appropriations outside
of any statutory mandate that spending match revenue. From now on, total spending in the budget must not exceed available
revenue.
This
change in the definition of a balanced budget is not a step towards closing the
gap. What it does accomplish is to require that
budgeting be more transparent moving forward.
No longer will minor fund deficits be able to grow into the hundreds of
millions with no formal check on the system and no clear responsibility on the
part of the state to resolve persistent mismatches between revenue and spending.
In combination with the balanced budget
measure, the Committee recommends an adjustment to how the amount of tax revenue
that may be spent in the budget is capped. The
present system, designed to moderate cyclical volatility in tax revenue, actually
has the opposite effect: because the cap is set at the level of prior year taxes
plus a small growth factor, it tends to follow the same boom and bust patterns,
only a year later, of the revenue it seeks to stabilize.
The
following chart approximates how the current revenue cap would have operated had
it been in effect in the late 1990s. As
taxes rose in the late 1990s, the cap would have risen in step, providing little
or no moderating influence.
Comparison
of Current and Proposed Tax Caps
By
comparison, the cap proposed by the committee would have been lower and more stable
in the late 1990s, and would not have crashed abruptly in 2003, a year after the
downturn in revenues.
The
Committee aims to improve upon last year’s efforts to stabilize the budget cycle
in order to minimize the trauma of future cyclical declines in tax revenue.
What
Happens Next: How steps taken now will affect future fiscal years
Although
the Committee proposes extensive structural reforms, responsible change in some
areas of state government requires further consideration.
A number of studies included in this budget lay the groundwork for reform
in future years:
Ø
The Committee would establish a blue-ribbon commission
to improve the way highway are managed and maintained between the Highway Department,
the Turnpike Authority and the Department of Conservation and Recreation.
Ø
The Executive Office
of Health and Human Services is instructed to report to the legislature on recommendations
regarding reform of the Purchase of Service System, the co-location of agency
offices, the elimination of duplicative licensing functions, consolidation of
abuse investigation operations, and other issues to help further the continued
implementation of this secretariat’s proposed reorganization.
Ø
A court reform advisory board will assess how to allocate
funding more equitably, addressing long-standing disparities in staffing levels
at different courts.
Ø
The complexity of the Chapter 70 reform and the many competing
demands for school funding and property tax relief demand attention.
A Senate working group is directed to recommend legislation by September
15, 2003. It is the aim of the Committee to push for
legislation this fall that will start to address disparities in required local
school spending and Chapter 70 aid to similar communities.
Ø
A study of recreational facilities will address how the
state can provide enjoyable and safe activities for children, youth, and adults
at reasonable cost.
Ø
The Committee is aware of other areas -- local mandates
and the exponential growth in debt service for school building assistance among
them -- that will require further consideration. The Committee anticipates addressing these matters in the near future.
In
conclusion, the Committee has attempted to close a $2.7 billion gap with a reasonable
mix of spending reductions through generating greater efficiencies and reducing
expenditures, new non-tax revenue consisting of mainly fees and assessments, the
sale and transfer of assets, and the limited use of reserves. In a challenging climate, the Committee has attempted to close the
budget gap firmly yet not hastily, remembering always the responsibility the state
has to educate the young, protect the vulnerable, and improve the quality of life
in Massachusetts through doing together what we cannot accomplish alone.
