Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2013

Governor's Budget Recommendation FY 2013

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Quasi-Public Entity Reforms

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Governor Patrick    FY 2013 Budget Recommendation:
    Issues in Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor


Under Governor Patrick’s leadership, the oversight authority of the Finance Advisory Board has expanded since 2007, and it is now charged to “promote transparency, public accountability and adherence to best practices by all state entities with respect to investments, borrowing or other financial transactions made or entered into by state entities and involving public funds.”

Last year, following the release of the Report of the Quasi-Public Authority Compensation Review Commission (also known as the Crosby Report), the Legislature adopted several recommendations to promote transparency and best practices at quasi-public authorities. 

In accordance with its mission, the Finance Advisory Board’s activities have included gathering information about the existing debt management practices of the Commonwealth and state entities, acquiring general market and state entity-specific information, establishing emergency regulations to ensure there were no unintentional delays to certain pending transactions, and drafting and adopting comprehensive permanent regulations.

The Governor’s FY 2013 budget proposal would further expand the Finance Advisory Board’s authority to include governance oversight and the ability to coordinate the implementation of best practices by all quasi-public authorities and their boards.  The Board would be renamed as the State Finance and Governance Oversight Board to reflect these changes.  The budget would allow the Secretary of Administration and Finance to hire a limited, dedicated staff to serve the Board, funded by an assessment on all state authorities that manage public funds. 

Crosby Report Results

The Crosby Report made a number of recommendations on compensation terms and conditions, and best practices for setting executive compensation, board training, transparency and oversight at quasi-public authorities.  The Administration has worked with the quasi-public authorities to implement these recommendations.  In addition, eight of the top 10 executive compensation packages have been substantially reduced through renegotiation or personnel changes. 

Statutory Reform

The FY 2012 budget included reforms (listed below) for quasi-public authorities to increase accountability and transparency related to the management of public funds.  In addition, the Executive Office for Administration and Finance has promulgated regulations and additional guidance for implementation.  These new requirements include:

  • Annual audit by an independent auditor, reporting to an audit committee of its governing board and filing the audit with the State Auditor;
  • A separate audit on state funds if received over $500 K, providing transparency of taxpayer support for authorities;
  • Set compensation for management by compensation committee of its board, based on comparable compensation for similar officers in state government as well as the private sector;
  • Prohibit executive pay-outs for sick, vacation and other leave greater than would be allowed for state employees;
  • Prohibit severance pay for executives removed for cause and limiting severance pay to not more than three months salary for early termination without cause; and
  • Prohibit the Commonwealth from subsidizing the pensions and health insurance of state authorities’ retirees, requiring authorities to fund their liabilities.

Proposed Reforms

The Governor’s FY 2013 budget proposal would further expand the Finance Advisory Board’s authority to continue the reform agenda by adding governance in addition to the oversight of financial affairs.  The Board would be renamed as the State Finance and Governance Oversight Board to reflect these changes.  The budget proposal includes the following recommendations:

  • Amendment to various parts of MGL c.6, s.98 to include “governance” as part of the scope of oversight by the Board;
  • Amendment to MGL c.6, s.98 (c) to add to the Board’s activities a convening, training, and dissemination of best practices function, including conducting meetings, conferences, or training sessions, maintaining a website, publishing materials, or any other activities deemed by the board to be necessary to disseminate best practices to state officials, board members and managers of state entities, and the public;
  • Authority to charge an assessment to the Commonwealth and state entities overseen by the Board.  Rates would be set annually by the Secretary, would be held in trust and would be assessed based on debt issued and assets under management; and
  • Authority to hire an Executive Director and limited dedicated staff.

Prepared by the Executive Office for Administration and Finance ·
For more information email: (617) 727-2040

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