Governor's Budget Reforms and Ends Structural Deficit

By contributor,

Governor Deval Patrick’s proposed $30.5 billion FY12 budget is a fiscally responsible document designed not only to be a balanced budget but also to remove structural deficits from this and future budgets. The budget proposes spending that is about $570 million less than current FY11 spending.

The Governor’s FY12 budget is built on revenues that are finally starting to grow as the economy improves. In her remarks to the MMA’s Annual Meeting on Friday, January 21, DOR Commissioner Navjeet K. Bal recounted just how far revenues had fallen. In FY08, the state collected record revenues of $20.888 billion. The original FY09 budget was built on an anticipated revenue collection of $21.4 billion, but the actual collection was more than $3 billion less, $18.259 billion. The FY12 budget is built on a revenue estimate of $20.5 billion, still less than was collected in FY08.

State expenditures have outstripped revenues ever since the economic collapse. Federal stimulus funds and draws on the state’s rainy day fund reduced fiscal pressures on the FY10 and FY11 budgets. The proposed budget calls for a cut in unrestricted local aid of $65 million, which reflects the lack of federal stimulus funds and only a $200 million draw on the rainy day fund.

At the same time, in a separate bill, the Governor’s healthcare related proposals to require all cities and towns to either join the GIC or institute a program of equivalent value and cost by July 1, 2011, combined with requiring eligible municipal retirees to be moved in to Medicare, if not already done, would save cities and towns an a estimated $120 million annually and encourage greater municipal control over healthcare related expenditures. (By itself, Medicare enrollment by the 60 percent of communities not currently enrolled would save $15 to 30 million.)

In addition, the Governor has proposed increased state support for public schools through Chapter 70 funding; bringing his support to $3.99 billion, or a $139.3 million increase from the current FY11 budget, and the highest level of state funding in history. Additionally, he’s proposed an $80 million increase for the special education circuit breaker.

The budget would also boost Chapter 90 funding for local roads and bridges by $45 million – bringing it to an all-time high of $200 million. And, of great interest to those exploring regionalization, the budget would provide $9.7 million to pay for a competitive regionalization and efficiency grant initiative.

The Governor’s proposed FY12 budget would also remove the property tax exemption on telecommunications equipment and save cities and towns an estimated $26 million; would establish a new municipal procurement program; and, for the long term, proposes an extensive new round of pension reforms estimated to save municipalities $2 billion over 30 years in pension costs and $1 billion in reduced retiree health benefits for new employees over the next 30 years.
Robert G. Nunes
Deputy Commissioner & Director of Municipal Affairs