Budget Narrative

Investing in Our Economy and Our Future

Governor Patrick’s and Lieutenant Governor Murray’s fiscal year 2011 budget proposal keeps Massachusetts moving forward towards a better economy and a brighter future.  It reflects their core belief that, even in a global economic downturn, our values demand that we invest in the people and the needs of the Commonwealth.  The Patrick-Murray Administration’s budget maintains an unprecedented commitment to education, health care and cities and towns as cornerstones of economic prosperity for the Commonwealth. 

Education:  Governor Patrick has been the Commonwealth’s “Education Governor.” He has made record investments in education despite an unprecedented fiscal crisis.  Even before the global recession, he created a Secretary of Education and reorganized state education agencies to promote a coordinated approach to lifelong learning.  Moreover, he proposed and secured the enactment of groundbreaking education reform legislation to expand charter schools, turn around underperforming schools, close the achievement gap, foster innovation in education and strengthen the state’s ability to access up to $250 million in federal “Race to the Top” education funding. 

The Patrick-Murray Administration’s fiscal year 2011 budget builds on these historic achievements in education:

Health Care:  Health care reform in Massachusetts has been a national model for expanding health coverage to virtually all of our residents.  With a sure and steady hand, Governor Patrick has guided the implementation of health care reform with the continuing commitment of the Legislature and a diverse coalition of stakeholders. Over 97 percent of our residents now have health insurance, the highest rate of coverage of any state in the nation.

The Patrick-Murray Administration’s fiscal year 2011 budget maintains this deep commitment to our historic health care reform initiative: 

Cities and Towns:  Governor Patrick has worked tirelessly to strengthen the partnership between state and local government, reduce pressure on property taxes and protect police, fire and other services essential for strong communities.  He has secured the enactment of laws giving cities and towns significant relief on health insurance costs for their employees and new revenue tools to relieve the burden on local property taxes.  In the face of a dramatic fiscal downturn and underperformance of the Lottery, he has protected local aid to the maximum extent possible.  Working with city officials and the former Control Board, the Governor has helped Springfield move from the brink of financial ruin to budget surpluses.  Through the American Recovery and Reinvestment Act’s (ARRA) State Fiscal Stabilization Fund, $21 million has been provided to fire departments and $3 million to police to retain staff.

On top of providing record funding for Chapter 70 education aid for cities and towns, the Patrick-Murray Administration’s fiscal year 2011 budget makes a major commitment to other categories of local aid.

In these highlighted areas and many other areas across the budget, Governor Patrick has preserved funding to bolster our economy, create opportunity and protect the health and well-being of our residents.  These investments are part of his comprehensive economic strategy to speed our recovery and position us for long-term prosperity.  Investments made through the Governor’s comprehensive five-year capital plan are upgrading the Commonwealth’s infrastructure – creating jobs and ensuring that we have the safe and accessible roads and transit, affordable housing and cutting-edge public college and university facilities needed to nurture long-term economic growth. The Governor also launched a groundbreaking life sciences initiative to position Massachusetts as a world-leader in the emerging biotechnology industry and pushed for comprehensive energy and biofuels bills allowing consumers and businesses to save money.  His unprecedented investments in Chapter 70 education aid through the operating budget are empowering the Commonwealth’s most precious economic asset:  its people.

Moreover, Governor Patrick’s successful advocacy in Washington has helped secure significant federal aid through the American Recovery and Reinvestment Act (ARRA) to sustain and expand on his comprehensive economic strategy.  Thanks to these efforts, Massachusetts is estimated to receive approximately $14 billion in total federal recovery act funding, coordinated through the Massachusetts Recovery and Reinvestment Office established by the Governor to ensure accountability and transparency.  Massachusetts was well-positioned to capitalize on this federal aid given the Governor’s proactive economic agenda – and indeed, federal dollars are now maximizing public investments in infrastructure, life sciences and clean energy to create and retain jobs.  These federal dollars are also providing direct assistance to individuals who lost their jobs or health insurance due to the national economic downturn through extended unemployment benefits, a new federal subsidy that pays 65 percent of COBRA health insurance costs and additional federal matching funds that are helping Massachusetts maintain full eligibility for our Medicaid program.

The Administration’s comprehensive strategy is helping to speed economic recovery and pave a path to a more prosperous future for Massachusetts.  Notably, the budget projects $771 million in tax revenue growth in fiscal year 2011 as part of the consensus revenue estimate, helping us make strategic public investments in a fiscally responsible manner.  While this estimate is appropriately conservative, it reflects a consensus view among the Department of Revenue, economists and budget watchdogs that our economy will improve in fiscal year 2011.

 

Fiscal Responsibility and Reform

Governor Patrick and Lieutenant Governor Murray are proposing fiscal year 2011 investments in education, health care, cities and towns and other key areas as part of a balanced, fiscally responsible budget. 

The Record

The Patrick-Murray Administration has a strong record of fiscal responsibility. When – similar to the experience of other states – unforeseeable changes in our economy and tax revenues have suggested the need to modify our course, the Governor has promptly made the necessary decisions to get our budget back into balance.  Indeed, his swift and decisive approach to closing budget gaps in fiscal year 2009 produced a surplus that allowed us to deposit $65 million in the state’s Stabilization Fund at the end of the year to help cushion a prolonged global economic downturn. 

Despite the unprecedented $4 billion drop in state tax revenues since fiscal year 2009, Massachusetts has maintained strong and stable bond ratings – with rating agencies expressly recognizing the Administration’s prudent, effective and conservative financial management.

These strong endorsements of our state’s finances from bond rating agencies speak to Governor Patrick’s record of pursuing a balanced approach to budgeting.  This balanced approach has emphasized spending restraint.  The Governor has not hesitated to make difficult cuts to state spending when needed. Emphasizing the importance of shared sacrifice during extraordinarily challenging times, he has secured unprecedented contract revisions from our state employee unions, reduced the size of the state workforce and asked state employees to contribute more to their health insurance.

The Governor has also delivered reforms to change the culture on Beacon Hill, generate immediate and long-term savings for the state and bring integrity back to state government.  While prior Governors have talked about many of these changes, Governor Patrick, working with the Legislature, has delivered.

Fiscal Year 2011

For fiscal year 2011, Governor Patrick continues to take the same balanced, fiscally responsible approach to meeting the demands of state government in an economically challenging time.  Fiscal year 2011 budget solutions include spending discipline, reforms, one-time resources, revenues and prudent debt refinancing strategies.

Spending Discipline:  The Governor’s fiscal year 2011 budget continues to maintain spending discipline.  Under his fiscal blueprint, estimated fiscal year 2011 spending would grow by only 3 percent over estimated fiscal year 2010 spending, less than the projected 3.2 percent rate of growth in tax revenues.  Besides “use or lose” federal recovery funds, budget savings and efficiencies are the largest category of solutions to closing an estimated $2.75 billion budget gap in fiscal year 2011.  State operating budget savings are in part facilitated by $30 million in contributions from independent authorities to fund college scholarships, health care outreach and enrollment grants, Soft Second homebuyer mortgage relief, assistance to small businesses and other important state initiatives.  Governor Patrick first asked the state’s independent authorities to contribute to the state’s budget needs in the spirit of shared sacrifice in fiscal year 2009.  They contributed again in fiscal year 2010, and the Governor has secured additional assistance from them in this budget.

Reforms:  Governor Patrick’s far-reaching reform agenda continues with the filing of his fiscal year 2011 budget.

Budget Reforms: Governor Patrick secured line-item transferability language in prior budgets to give state agencies greater flexibility to better manage within constrained budgets by allocating funds where most needed.  Moreover, in fiscal year 2009 and fiscal year 2010, the Commonwealth received a Government Finance Officers’ Association Distinguished Budget Presentation Award for making state policy decisions transparent and accessible to the public through its budget materials.  The Governor’s fiscal year 2011 budget contains additional budget reforms to promote sound fiscal management and transparency.

One-Time Resources:  As state tax revenues are expected to grow due to projected improvement in the economy – and Governor Patrick continues to exercise care and restraint in spending – we have been able to reduce the total amount of one-time resources used to balance the budget in fiscal year 2011 by 24 percent when compared to fiscal year 2010 and 38 percent compared to fiscal year 2009.  Through fiscal discipline, we are able to minimize the use of the state’s Stabilization Fund – its most flexible reserves.  The budget proposes a modest $175 million withdrawal from the state’s Stabilization Fund, an 87 percent decrease from fiscal year 2009 and a 30 percent decrease from fiscal year 2010.

The budget includes a total of $1.297 billion in enhanced federal Medicaid matching funds, generated throughout fiscal year 2011.  These resources reflect Governor Patrick’s success in securing increases in federal matching funds through December 31, 2010 in the federal recovery act last year – and the expected enactment of a six-month extension of this relief as part of pending federal legislation.  This approach is consistent with our actions last year in filing our fiscal year 2010 budget proposal while the federal recovery act was pending.  In the unlikely event that Congress ultimately decides not to extend enhanced Medicaid matching funds, the Administration would re-file House 2 based on revised federal revenue projections (just as we re-filed House 1 last year based on updated state tax revenue projections).  The budget also includes $96 million in remaining federal recovery act stabilization funds, which are used to fully protect higher education from budget cuts.

Revenues:  The budget does not include any broad-based tax increases. Based on a thorough, multi-agency examination of state tax exemptions, it proposes limiting select exemptions to provide sufficient resources to meet public priorities.  This includes retaining existing film and life sciences tax credits, but capping the financial benefit they provide at levels calibrated to ensure Massachusetts remains a leader in both fields.  The budget also repeals sales tax exemptions for candy and soda and ends the exemption of cigars and smoking and smokeless tobacco from the cigarette excise tax rate enacted by the Legislature in 2008.  These measures promote public health and generate revenues that are dedicated to health care and wellness programs through the Commonwealth Care Trust Fund and the Commonwealth Health and Prevention Fund.  Furthermore, the budget expands the Massachusetts Bottle Bill to include recycling of water, flavored water, coffee-based drink and sports drink bottles, providing incentives and resources for recycling.

Debt Refinancing:  Governor Patrick’s fiscal year 2011 budget achieves significant savings from taking advantage of a strategic opportunity to refinance the Commonwealth’s debt in a measured and prudent way.  Our debt service costs have an abnormally high spike during fiscal year 2011.  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 – as part of a comprehensive plan to address budget shortfalls – is designed to maintain our strong bond ratings.

Separately, despite fiscal pressures, the Governor’s fiscal year 2011 budget maintains the current state employee pension funding schedule (while pursuing the previously mentioned additional reforms to the system).  As the schedule anticipates, we will work collaboratively to develop a strategy to adjust the pension funding schedule starting in fiscal year 2012 to address recent investment losses. 

 

Fiscal Year 2011 Program and Policy Highlights

Education

Local Aid

Public Safety and Security

Economic Development and Housing

Health and Human Services

Energy and Environment

Transportation

Labor and Workforce Development

Administration and Finance

Other

Judiciary
Constitutional Officers
Independent Agencies