Financial Overview

The recommendations included within this document yield a budget that is balanced, honest and fiscally responsible. The Committee's Fiscal Year 2006 recommendations do reflect a continued utilization of one-time revenue sources in order to achieve balance, however, utilization of such sources are nearly $300 million less than those used to balance the Fiscal Year 2005 budget. A continued reduction on the reliance of one-time revenue is a priority of the Committee. Achieving structural balance, which by definition will require the elimination of one-time revenue, will ensure that the Commonwealth's operating budget rests upon a solid foundation. As stewards of the Commonwealth's finances we must remain committed to budgeting for publicly funded programs and services at sustainable levels. Doing so will ensure that the Commonwealth's finances are well-positioned for future economic downturns. In recommending appropriation levels for the upcoming Fiscal Year, we must also remain astutely conscious of the inevitability of the ramifications of the downswings of future business cycles. It was only through such foresight that the Legislature was able to use nearly $3 billion in reserves as a means to avoid even more drastic reductions in programs and services than those that have been required throughout the present fiscal crisis. Maintaining sustainability as a priority ensures that the Commonwealth's finances are readied for future fiscal uncertainties.

As the local economy continues to rebound from the most recent downturn, the Committee anticipates moderate tax revenue growth for the upcoming Fiscal Year. This assumption is reflected in the tax revenue figure used to support a significant portion of the spending recommended in the following pages. These recommendations assume that the Commonwealth will collect $17.1B in tax revenue in the next Fiscal Year, representing an increase of 4.7% over updated projections for Fiscal Year 2005. Additional sources of revenue total $8.7 billion and are generated through federal reimbursements, fees, the state lottery and transfers from off-budget sources.

FY06 Tax Revenue ($ millions)

* Dedicated revenue provides funding for the MBTA, pensions and school building assistance.

Local Aid

The committee recognizes that local government plays a key role in the lives of the Commonwealth's citizens, and shares with the General Court the responsibility for providing important services to the pubic. We are keenly aware that the last four years have been as difficult for municipal government as they have been for the state. We will not, in Fiscal Year 2006, have sufficient revenues to simply restore the difficult cuts made during our downturn, and we are reluctant to focus future increases based on arbitrary historical spending targets rather than through rational and equitable distributions. We are committed to working with our partners in local government in the coming years to improve on the formulas we currently use, and restore rationality to those distributions that lack equity. We view Fiscal Year 2006 as a year of transition, during which we maintain our constitutional commitment to keeping every district at the foundation level of spending, make a significant increase in Lottery local aid, and guarantee level funding of most other local aid accounts.

Ø Provided an additional $100M in Local Aid distribution that would represent an increased investment in cities and towns throughout the Commonwealth.

Ø Provided an increase of $77M in Chapter 70 school aid to meet our constitutional obligations to guarantee that every school district remains at foundation, and that no operating district receives less than it received in FY05.

Ø Level Funded Additional Assistance.

Ø Increased PILOT payments to $15.1M to help meet our obligation to those municipalities which host state facilities, and which have lost tax revenue as a result.

Education

In this budget, the committee continues to honor our commitment to education reform and our constitutional obligation to cherish the interests of every child in Massachusetts . We have learned, however, that one of the lessons of the first phase of education reform is that unrestricted aid does not, by itself, create improvement in schools or districts. Too many students remain in low-achieving, chronically underperforming schools and districts, and it is vitally important that we maintain a relentless focus on turning those schools around. Accordingly, we begin the process in this budget of creating a system, not merely of rigorous accountability, but of focused and intense assistance to underperforming schools provided in a timely fashion using scientifically valid, research-based and replicable strategies for student success. We are also aware, however, that the discussion and debate about the next phase of education reform has only just begun, and we cannot, and should not, attempt to resolve the complexities of that debate in one budget, without a thorough and deliberative legislative process. The coming years will involve intense research, study and dialogue about reforms to the Chapter 70 formula, improvements to the accountability of the system, and the goals for the next decade of educational progress. On this issue, the committee looks forward to working with the chairs and members of the Joint Committee on Education and to draw off their expertise and collective wisdom to appropriately address a truly complex matter. In the interim, the committee will not prematurely decide the scope of education reform, but rather, through this budget, maintain our commitment to funding school building assistance reform, continue to keep every district at foundation spending levels, and make limited, strategic investments in proven programs with a track record of success, including full day kindergarten and adult education.

Ø Transferred an additional $93M to the new School Building Authority to address the enormous backlog of projects.

Ø Increased reimbursements for charter school sending districts by $12.4M, in order to allow parents continued choice in selecting the provider of their child's education while helping ease transitional costs for district schools by fully funding the Commonwealth's statutory obligation.

Ø Provided an increase of $2M for Kindergarten grants, including $1M to expand the number of full day classrooms.

Ø Provided $1.1M to establish a certificate of occupational proficiency for vocational school programs.

Ø Provided an increase of $1.5M for Adult Basic Education programs.

Ø Provided an increase of $1M for school intervention and targeted assistance.

Ø Provided an increase of $290K for the Reading Recovery program.

Ø Provided an increase of $250K for classroom behavior and alternative education grants.

Ø Provided an increase of $150K for gifted and talented programs.

Higher Education

The committee believes that the proper goal for the Commonwealth of Massachusetts must be a seamless system of lifelong learning, with public higher education playing a central role in that learning. We recognize the serious harm done by years of budget cuts and the historic instability of the system of public higher education financing in the Commonwealth. We would be less than candid, however, not to acknowledge that the Commonwealth's fiscal picture remains somber, and that the Commonwealth's resources remain limited. However, in recognition of the chronic under-funding of the public higher education system, and the disparity in funding between different campuses of the state and community college system, the Committee begins the process of reinvesting in this valuable segment of our Commonwealth's system of lifelong learning and takes a modest step towards creating a rational, coherent, and stable system for higher education finance by distributing additional funds through a new formula.

Ø Increased by $10.7M the amount distributed to state and community colleges in order to fill 5% of each campus' funding gap, as identified by the Board of Higher Education funding formula.

Ø Provided an additional $5M to the University of Massachusetts .

Early Education and Care

Last spring, the House of Representatives took a historic step in creating a new Department of Early Education and Care to consolidate all programs and services for children from birth through age five and entrance to kindergarten, and to take the first of many steps towards a voluntary, universally accessible pre-school program available to every three and four year old in the Commonwealth of Massachusetts. Resources remain limited, so we cannot promise the quick, immediate achievement of this ambitious goal. Because the education and care of young children is so vitally important to our future, we intend to be deliberative and thoughtful about every policy choice we make. The effort we undertook last spring will take many years to come to fruition, and the committee views Fiscal Year 2006 as a building year. In this budget, we create the new department, give it control of all line items providing early education and care programs and services, and provide funding sufficient to maintain all services currently offered, and to provide modest increases to some accounts. It is our hope that, over the coming year, the new department will develop a sound and effective organizational structure, discover efficiencies in its operation, and begin to accomplish the many duties with which they have been charged in meeting the needs of our youngest and most vulnerable citizens, and ensuring that every child starts school ready to learn.

Ø Established the Department of Early Education and Care by consolidating all items and functions formerly under the Office of Child Care Services (OCCS) with the following programs from the Department of Education: pre-school grants provided through the Community Partnerships of Children, Head Start grants, and the Parent-Child Home Program

Ø Provided an increase of $2.5M to reduce the wait list for child care services formerly maintained by OCCS.

Ø Provided an increase of almost $1.4M to Head Start grants to preserve the high quality of this valuable pre-school program.

Ø Provided a $5M rate reserve for an increase in child care rates.

Ø Provided $1M for a new scholarship program at the Board of Higher Education for early educators and providers who are committed to work in early education and care programs

Health and Human Services

Comprising approximately half of the annual budget, the Office of Medicaid and the seventeen other health and human services agencies provide services to the neediest populations in the Commonwealth. Previous Fiscal Years have caused human service agencies to make difficult decisions and prioritize spending to support direct care services and the highest need clients. The committee remains dedicated to providing resources for preventative and treatment services as well as supports that enable clients to live in the community and be as independent as possible.

Ø Provided $10M at the Executive Office of Health and Human Services (EHS) for a salary increase to over 30,000 contracted direct care workers to address quality and retention with human service providers.

Ø Created a $12M transitional assistance reserve for employment service and child care programs in order to address transitional assistance reform in conjunction with federal reauthorization.

Ø Provided $5M in additional funding for the Department of Transitional Assistance (DTA) to provide emergency shelter services for homeless individuals.

Ø Funded the Healthy Start program at $16M, which would serve over 6,500 women.

Ø Funded the Children's Medical Security program at over $21M, which would serve over 30,000 children and adolescents.

Ø Provided $1M in funding for the new Autism Division housed at the Department of Mental Retardation (DMR), which would create a support network and resources for families with autistic children that will enable these children to remain in their homes.

Ø Provided an additional $879K for the Sexual Assault Nurse Examiners (SANE) program, which would extend services to approximately 400 more victims in need of examination.

Ø Provided $1M in new funding to establish a Pediatric Sexual Assault Nurse Examiners (SANE) program, which would serve approximately 700 children under the age of 12.

Ø Provided $46.4M for the Division of Substance Abuse Services at the Department of Public Health (DPH) to guarantee full federal Substance Abuse Prevention and Treatment block grant funding in FY06 for over $40M.

Ø Provided $132.6M for the Lemuel Shattuck Hospital , Mass Hospital School , Tewksbury Hospital and Western Mass Hospital , which would enable these public hospitals to continue their mission of providing acute and chronic medical care to individuals for whom community facilities are not available or access to health care is restricted.

Ø Provided over $3.5M for the Department of Youth Services (DYS) to enhance staffing levels, which would improve youth assessment and monitoring practices, and expand psychiatric and emergency coverage.

MassHealth

The committee continued its commitment to helping low-income citizens of the Commonwealth obtain quality health care by including a $364M increase in MassHealth growth over projected FY05 spending. Overall, the committee proposes a total of more than $7.3B for MassHealth programs to fund a projected 1.3% increase in the MassHealth caseload, which will support nearly 1 million members in FY06. This will fully fund all MassHealth programs for the entire Fiscal Year. At the same time, this budget restores vital MassHealth benefits, including inpatient outliers and coverage for elderly and disabled immigrants.

Ø Included funding for a projected 1.3% increase in the MassHealth caseload, which would support nearly 1 million members.

Ø Continued funding for the MassHealth Essential program at FY05 levels, which would support 43,000 long-term unemployed individuals. $9M is also included to provide benefits to elderly and disabled immigrants.

Ø Provided over $44M for the Insurance Partnership program, which would provide health insurance subsidies to more than 7,500 employees working in small businesses.

Elder Affairs

The committee maintains its commitment to meeting the needs of the Commonwealth's elders by supporting many valuable programs run by the Department of Elder Affairs. The committee understands the heavy financial burden that the ever-increasing costs of prescription drugs place on individuals who depend on them to continue leading productive lives, and recognizes the importance of providing uninsured senior and disabled citizens with the means to meet their prescription needs. This budget, therefore, maintains funding for the Prescription Advantage program to provide prescription drug benefits for seniors and some disabled until the implementation of Medicare Part D on January 1, 2006, and to subsidize member benefits who would otherwise receive lesser benefits under Medicare Part D.

Ø Provided more than $90M to maintain the Prescription Advantage (PA) program until the implementation of Medicare Part D on January 1, 2006, and to subsidize PA member benefits who would otherwise receive a lower amount of benefits under Medicare Part D.

Ø Included $96.5M for maintenance of the home care program, which provides supportive services for activities of daily living to frail elders, allowing them to remain in the community.

Ø Included $38.5M for the enhanced community options program to fully support the FY06 caseload of nearly 4,000 seniors per month.

Ø Included a $700K increase in funding for elder abuse and protective services.

Ø Included more than $1M for the coordination of support services required to make congregate housing a viable housing option for frail residents of 819 congregate housing units.

Ø Provided $7M, a $500K increase over FY05, in grants to local councils on aging to provide a variety of services and programs to elders.

Hospitals and the Uncompensated Care Pool

The committee recognizes that hospitals not only play a vital role in the Massachusetts health care system but are a driving force behind the Commonwealth's economy and workforce capacity. In acknowledgement of the crucial need for hospitals to stay viable, this budget continues the committee's dedication to funding the uncompensated care pool, while providing additional disproportionate share payments to high public payer acute care hospitals and pediatric specialty hospitals. At the same time, the committee included funding for measures to reduce the financial burden on hospitals, such as the reinstatement of MassHealth coverage for acute hospital patients whose stays exceed twenty cumulative acute days and continued support of the Distressed Providers Expendable Trust Fund.

Ø Reinstated MassHealth coverage for patients that exceed twenty cumulative acute days in a hospital, which reduces the financial burden on hospitals for treating patients that require more comprehensive care.

Ø Included $56M for Community Health Center free care payments, up from $39.9M in Pool Fiscal Year 2005, maintaining this funding source within the CHC financing structure.

Ø Funded disproportionate share payments to high public payer acute hospitals and pediatric specialty hospitals and units, keeping the House's commitment to funding these vital safety net institutions.

Ø Continued the House's support of distressed providers by including funding for the Distressed Providers Expendable Trust Fund in FY06.

Ø Supported the continuation of MCO intergovernmental transfers to BMC and CHA in FY06 at the same amount as the FY05 actual payments, which is estimated to be $688M.

Ø Authorized PAC of FY05 funding to maintain the Pool Audit Unit within in the office of the Attorney General to serve as a watchdog over Pool charges and payments and provide the Commonwealth more accountability and data on what is driving the costs of free care.

Housing and Community Development

Lack of affordable housing has been a consistent challenge for the Commonwealth and recent economic challenges have resulted in an increased need for housing supports. While it is not plausible to restore funding to levels prior to FY00, the committee is committed to providing vouchers and other services to alleviate immediate housing crises as well as fostering more permanent housing solutions.

Ø Provided $2.5M to continue the Residential Assistance for Families in Transition (RAFT), which would provide a one-time payment to families to assist in transitioning from homeless shelters to permanent housing.

Ø Provided $2M in increased funding for the Massachusetts Rental Voucher Program to provide additional vouchers to eligible families and individuals.

Ø Provided $700K in increased funding for the Alternative Voucher Housing program to provide additional vouchers to non-elderly persons with disabilities.

Ø Provided $180K in increased funding for the Housing Services Program, including the housing consumer education centers, which provides support services and activities to prevent at-risk families from becoming homeless.

Public Safety

The committee continues to make investments in public safety by protecting citizens and communities through activities that promote and support prevention, preparedness, response, recovery, education and enforcement. While the fiscal climate demands prudence, the societal climate requires us to be prepared and respond to unexpected crises. In this budget, the committee has enhanced its commitment to many public safety agencies in an effort to achieve long-term goals.

Ø Provided $208M for state police administration, including salaries for the 77 th and 78 th recruit classes and $2.3M for directed patrols.

Ø Provided $400K in increased funding to the Intensive Parole for Sex Offenders program, which has maintained a zero percent recidivism rate since inception in 1996.

Ø Created a $1M retained revenue account that would allow the state police to bill for security at private events and utilize those revenues for overtime costs.

Ø Provided $4.4M to support the 79 th new police class.

Judiciary

Overall, the committee recommends an appropriation of $630M for the supreme judicial court, trial court department, committee for public counsel services and other smaller judicial agencies. This recommendation represents a $43M increase over Fiscal Year 2005. Along with providing sufficient resources to maintain the operation of the court system, the committee's proposal to increase funding for civil legal services ensures that the disadvantaged population of the commonwealth would not be forgotten and will have the necessary civil legal support available to navigate a complex and sometimes overwhelming court system.

Ø Funded CPCS at $120M, supporting all known costs associated with the private bar advocate program.

Ø Provided $800K for Alternative Dispute Resolutions programs in the trial court to help alleviate case backlogs.

Ø Fully funded civil legal services at $9.1M.

Ø Continued funding for the permanency mediation program, which provides specialized alternative dispute resolution services in care and protection cases, adoption and termination of parental rights trials.

Ø Increased funding by $1.2M for the community corrections programs. These programs work in collaboration with public safety agencies to enforce community supervision sanctions as an alternative to incarcerating offenders.