Leslie A. Kirwan, Secretary for Administration and Finance
Testimony before Joint Committee on Federal Stimulus Oversight

March 19, 2009

Chairman Pacheco, Chairman Linsky and members of the Joint Committee:

Good morning, and thank you for the opportunity to testify about recently enacted federal economic recovery legislation and its impact on Massachusetts.

The Administration very much welcomes the creation of this committee, as one of a number of measures to promote our shared goals of maximizing federal economic recovery funding for Massachusetts, and putting that funding to work as effectively as possible, with the transparency and accountability that the public deserves.

In this spirit, we congratulate your on your appointment to this committee and look forward to working in partnership with you to serve as thoughtful and responsible stewards of these newly available federal funds.

We all know that these are very difficult times for families, businesses and communities. Individuals are losing their jobs, their homes and their retirement savings. Companies are closing their doors. No part of our economy has been spared.

Additionally, as more people turn to state government for help in weathering difficult economic times, state government has less with which to help them. We continue to wrestle with balancing two budgets at one time - recalibrating this year's budget in light of the economic downturn, and planning next year's budget. This task is made all the more difficult by the fact that the fiscal situation remains highly volatile, deteriorating even since January.

The Administration has launched a comprehensive recovery plan to respond to these challenges and provide immediate and long-term relief for the Commonwealth.

Our plan calls for investing in immediate job creation and a strong social safety for economically vulnerable citizens - and also in initiatives that strengthen our long-term economic competitiveness. Furthermore, on many different fronts, we have proposed reforms to state government aimed at delivering services more efficiently and bolstering confidence in the public sector.

Federal economic recovery funds are a fundamental piece of this plan. As my team will describe in more detail, these funds - to be distributed through many different programs and mechanisms - are the source of, or provide significant support for, these types of investments.

Massachusetts is exceptionally well-positioned to capitalize on the opportunities presented by the American Recovery and Reinvestment Act of 2009. The federal bill's priorities are well-aligned with our own state priorities, reflected in the work that we have done together over the past two years to build a better Massachusetts.

The federal bill prioritizes funding for infrastructure, just as we have over the past two years in enacting new bond authorizations and launching new five-year capital plans and an accelerated bridge program.

It provides new resources for wind, solar and biofuels, favoring states like ours that already have a framework for investment in place.

The federal legislation offers grants to expand broadband to un-served and under-served areas, which will augment funding provided through our own broadband bill that was enacted in the last legislative session.

The bill provides new funding for NIH and NSF grants and efforts to migrate patient health records to an electronic format, complementing our own groundbreaking life sciences initiative and the health care cost containment efforts enacted as part of Chapter 305 last year.

And education is a centerpiece of the federal recovery bill, just as it is a centerpiece of our collective policy agenda - whether through the Governor's Readiness Initiative, our partnership in prioritizing education funding in state budgets, or new investments in higher education through bond bills.

Massachusetts was also well ahead of the curve in mobilizing to put newly available federal funds to use quickly and with maximum transparency.

Back in December, the Governor convened a number of task forces to identify projects throughout the state that would be ready to start in six months or less. We have appointed a Director of Infrastructure Investments, Jeffrey Simon, to help select and oversee these projects and have launched a website for tracking the money, project by project. We will soon file legislation to ensure compliance with the new federal recovery legislation and position the Commonwealth to secure the maximum benefit from this bill.

Through these efforts, federal funds will quickly be put to work in Massachusetts. Just last week, the Governor announced the first federal recovery funds for statewide road and bridge projects - of which $153 million will be committed to "shovel-ready" projects advertised for bid within the next 120 days.

Similar announcements will surely be forthcoming in the next weeks and months, but I do want to provide some context about the pace.

Putting federal funds to work quickly and responsibly is a top priority for the Administration, and we are mobilizing accordingly. By the same token, in many instances, we need to wait for federal decisions and actions - for example, the adoption of federal regulations - before we can access and spend federal stimulus funds on behalf of the citizens of Massachusetts.

Collaborating closely with other states and professional organizations, we also continue to seek guidance and a clear understanding of how some of the federal funding streams will work - so we can be sure of what we have to spend and how we need to spend it.

So we will move as quickly as we can, but please understand that our pace is affected by the need for federal action in many instances - and the imperative in all instances to be thoughtful, careful and transparent.

This federal legislation will help us enormously. But it is just as important to understand what it will not do.

Federal economic recovery funding is not a panacea. It will not relieve us of the need to make tough choices like cutting spending - or of the need to identify additional, responsible sources of recurring revenues, as we have included with our budget and transportation proposals.

Our immediate fiscal problems are just too large to be solved simply with federal stimulus funds. We are facing an enormous decline in state tax revenues - at least a $2 billion drop within the current fiscal year, with essentially no growth expected for fiscal year 2010. Furthermore, while some federal stimulus funds can help balance our operating budget - for example, enhanced Medicaid matching funds will help limit cuts to state health care spending - other stimulus funding streams are more focused on creating jobs than plugging budget holes.

Furthermore, as the Governor testified last week, one-time federal relief is not a solution to inherited structural budget deficits. Our fiscal challenges actually began before the economic crisis, and they will continue after the crisis - unless we make some of the hard choices about spending and revenues that have been all too easy to "put off" during better economic times. In our budget blueprints and our Transportation and Economic Security Plan, we have proposed reforms, savings and revenues that will not only build a bridge to a better economy but also make us fiscally stronger when the economy improves.

On this account - again paraphrasing the Governor - we urge you to treat this not just as a moment of challenge but also a moment of opportunity, so we can together make decisions today that make the Commonwealth as strong as possible in the future.

Thank you again for the opportunity to testify.