Overview of the Operating Budget Process

The annual budget is a declaration of the Commonwealth’s priorities, given available resources, and a statement on how to allocate the resources to best operate programs and services and meet long-term liabilities.

Developing the annual operating budget is a lengthy process that involves all three branches of government, hundreds of agencies and thousands of stakeholders and residents.

The Constitution and Budget Related Laws

The fiscal year is a commonly used term to describe an annual budgeting period.  State fiscal years start in one calendar year and end in the next. For example, fiscal year 2015 extends from July 1, 2014 to June 30, 2015. In a typical year, state agencies have the authority to spend funding provided for a fiscal year over a 14-month period, after accounting for the two month “accounts payable” period through August during which final payments are reconciled and made for costs incurred before June 30.

The budget planning process for any fiscal year begins before the end of the previous fiscal year. For example, planning for the FY 2015 budget began in July 2013. State agencies develop their budget implementation plans for the current fiscal year with a consideration of “out-years” as well, projecting the costs of current state employees, programs and services for the following fiscal year.

The Massachusetts State Constitution and General Laws outline and govern the budgeting process. The Massachusetts Constitution requires the Governor to present a budget to the Legislature within three weeks of the beginning of the new session in January, which this year is January 22, 2014. State finance law (Chapter 29 of the Massachusetts General Laws) requires the Legislature and the Governor to approve a balanced budget for each fiscal year. In other words, the Commonwealth cannot spend more than it receives in revenue during any single year. During the fiscal year, the Governor cannot approve supplementary appropriation bills that would result in an unbalanced budget.

Funds for the Commonwealth’s programs and services must be appropriated by the Legislature each fiscal year. The final budget is a law known as the General Appropriations Act (GAA). The GAA specifies how agencies and departments may spend their appropriations and allocates exact dollar amounts authorized for a specific period and purpose. The budget also lists major revenue assumptions and reflects the most up-to-date projections for the total amount of resources that can be budgeted against from tax collections, reimbursements to the state from the federal government, and other revenues (fees, penalties) that are collected by state agencies.

Developing Next Year’s Operating Budget: FY 2015 General Appropriations Act

FY 2015 Planning
Department Planning & Secretariat Review
(July-September 2013)
Department and agency staff review their policies and programs, develop spending plans and submit budget requests to their respective Cabinet secretary for review. The Cabinet Secretaries evaluate the requests and develop a secretariat-wide budget. Secretariats and agencies submit FY 2014 spending plans to A&F. Independents, the judiciary and constitutional officers also submit spending plans.
Formal Budget Request
(October-December 2013)
Secretariats and agencies submit FY 2015 spending plans to A&F. Secretariats are assigned a spending cap by the Executive Office for Administration and Finance (A&F) based on projections of available FY 2015 revenues. The consensus revenue number is announced. The Executive and Legislative Branches jointly agree and commit to a single tax revenue projection for the next fiscal year. Both the Governor’s budget and the Legislature’s budget are based off this number. A&F, under the direction of the Governor’s Office, prepares the Governor’s budget recommendations. Secretariat held hearings across the state to solicit input from the general public on programs and services under their jurisdiction. This input was considered by agencies and A&F in the development of their spending plans. 
Governor's Budget
(January 22, 2014)
The formal budget begins as a bill that the Governor submits to the Legislature. According to the State Constitution, the Governor must propose a budget for the next fiscal year within three weeks after the Legislature convenes, which this year translates into the 4th Wednesday of January. In odd years, the Governor’s budget is called House 1 (H.1), and in even years it is called House 2 (H.2). Accordingly, the FY 2015 budget will be filed as H.2 on January 22, 2014.  More detailed information regarding the specific budget development process for FY 2015 can be found later in the Budget Development section.
House Budget
(February-April 2014)
The House Ways and Means Committee reviews the Governor's budget and develops its own budget recommendations. Individual members of the House of Representatives submit budget amendments, which are then debated on the House floor. The bill is finalized after it is debated, amended and voted on by the full House.
Senate Budget
(February-May 2014)
The Senate Ways and Means Committee reviews both the Governor's and the House’s budgets and develops its own recommendation. Individual senators submit budget amendments, which are then debated on the Senate floor.  The bill is finalized after it is debated, amended and voted on by the full Senate.
Conference Committee Budget
(June 2014)
House and Senate leadership assign members to a "conference committee" to negotiate the differences between the House and Senate bills. The conference committee report can only be approved or rejected, so no additional amendments can be made.
(June 2014)
Once approved by both chambers of the Legislature, the Governor has ten days to review it. The Governor may approve or veto the entire budget, or may veto or reduce particular line items or sections, but may not add anything. If the Governor does not act within ten days, the conference committee bill becomes law.
(June 2014)
The House and Senate may vote to override the Governor's vetoes. Overrides require a two-thirds roll-call vote in each chamber.
Final Budget
(June - July 2014)
Once the Governor signs the bill with his recommended vetoes, it becomes the budget for the fiscal year. The final budget is also known as the General Appropriations Act (GAA) or "Chapter (# to be determined) of the Acts of 2014." The new fiscal year 2015 begins on July 1, 2014.

Developing Supplemental Budgets

While the GAA is the primary budget law, it is customary for supplemental budgets to be passed within a fiscal year, typically where unanticipated funding needs are identified for critical items or additional budget legislation is required to implement a funding requirement. A supplemental budget authorizes additional spending above GAA levels. A supplemental budget is similar to the GAA but is generally smaller in size and often contains technical or “corrective” language in additional to increasing funding.  It addresses unforeseen growth, decline in state revenues, additional expenses or savings.  The supplemental budget process is the same as the GAA budget process; supplemental budgets are bills that are filed by the Governor with the Clerk of the House of Representatives, debated and passed by both the House and Senate, negotiated in a Conference Committee and signed by the Governor in order to become law. 

The timeline for supplemental budget legislation is usually shorter since supplemental budgets often provide funding for unforeseen situations that need timely resolution.  For example, supplemental budget funding may be necessary from year to year to ensure that the Commonwealth can pay for unanticipated additional costs for snow and ice removal. When the GAA becomes law, specific assumptions for the winter’s costs for snow and ice removal are in place. As the winter progresses and the Department of Transportation has to manage snow and ice removal, total projected costs may change and additional funding may be necessary.