Fall 2009 Budget Forum


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We are facing some very difficult budget choices and challenges for Massachusetts for Fiscal Year 2011 (July 2010 - July 2011). Governor Patrick and his administration are holding a series of hearings and forums around the state to get input and ideas from citizens where this presentation is included. To learn more about the hearings and forums, visit www.mass.gov/governor/forums

If you weren't able to make a hearing or forum or want to be prepared before you attend one, this presentation is about 9 minutes long and will give you a basic overview of the budget situation. Please review it, then visit our blog at www.mass.gov/blog/engage to comment and share your ideas.

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  • Fall 2009 Budget Forum

    1. 1. Late Fall, 2009 Online Version Presented by Budget Director LeeAnn Pasquini The Governor’s Community Forums
    2. 2. The FY 11 Budget Challenge <ul><li>We are facing a projected budget shortfall of nearly $3 billion dollars for fiscal year 2011. </li></ul><ul><ul><li>Modest growth in revenue </li></ul></ul><ul><ul><li>Growth in spending demands from Medicaid, caseload-driven programs at Human Services, debt service, and Chapter 70 (K-12 education) </li></ul></ul><ul><ul><li>The “end” of federal stimulus that helped to maintain programs in FY10. </li></ul></ul>
    3. 3. The crisis we face is national <ul><li>Just about one year ago – December 1, 2008 – economists declared that the country entered a recession in December 2007, when economic activity peaked. </li></ul><ul><li>The housing market collapsed when homeowners couldn’t afford the mortgages they’d been given; major financial institutions like Bear Stearns and Lehman Brothers went bankrupt and banks virtually stopped all lending. </li></ul><ul><li>With the credit market in turmoil, the Dow experienced three of the four biggest losses in its history -- on September 29th, October 15th, and December 1st. The only other highest loss came the Monday after the Sept. 11 attacks. </li></ul><ul><li>All of these factors led to a dramatic decline in tax revenues in nearly every state in the nation. Massachusetts saw the first signs of the recession’s impact in September. </li></ul>
    4. 4. The crisis we face is national: Experience of Other States <ul><li>The National Association of State Budget Officers reports that states are currently facing one of the worst, if not the worst, fiscal periods since the Great Depression. States have faced combined deficits of $250 billion for fiscal years 2009-2011 </li></ul><ul><li>Budget cuts, layoffs, furloughs, new revenues, reliance on federal stimulus and “Rainy Day” funds are common among other states. </li></ul><ul><li>42 states cut their fiscal year 2009 budgets by $31.2 billion during the year. </li></ul><ul><li>33 states have or will cut their current fiscal year 2010 budgets by $53.5 billion. </li></ul><ul><li>Early estimates suggest states are facing at least $21.9 billion in budget gaps going into fiscal year 2011. </li></ul>
    5. 5. The crisis we face: $4.0 billion dollar loss in revenue to date $21, 403 (billions) $17,389 Note: estimates are compared to the consensus revenue estimate and do not reflect changes in tax law.
    6. 6. <ul><li>Since the start of the crisis, the Administration has already solved for deficits totaling nearly $9 billion. In October the Governor revised revenues down by $600 million and filed a recovery plan to bring the budget into balance. </li></ul><ul><li>We used a balanced approach of cuts, revenues and rainy day and stimulus funds to close the budget gap. </li></ul><ul><li>Even though we anticipate revenues to start growing in fiscal year 2011, revenue collections historically lag the national economic growth and will remain depressed throughout fiscal year 2010 and likely into fiscal years 2011. </li></ul><ul><li>Because rainy day and federal stimulus funds are running out, our challenge is even greater for fiscal year 2011. </li></ul>The crisis we face: Budget Shortfalls in Massachusetts
    7. 7. BACKGROUND: How do we pay for state services? All Revenue Sources Breakdown of Tax Revenue
    8. 8. BACKGROUND: What do we spend state dollars on? <ul><li>Other spending includes spending for : </li></ul><ul><li>Administration & Finance </li></ul><ul><li>Housing and Economic Development </li></ul><ul><li>Energy & Environment </li></ul><ul><li>Transportation) </li></ul><ul><li>Labor & Workforce Development </li></ul>
    9. 9. Choices Based on Values: Preserving investments in our future Education: In fiscal year 2010, a record $4.037 billion for Chapter 70 education funding, an all-time high reflecting the fundamental importance of education to the health of the state’s economy and the future of Massachusetts children.  Higher Education: This year, the Governor has preserved $970 million in funding for state colleges and universities. Health Care: The Governor protected nation leading healthcare reform, insuring over 97% of our citizens. The budget also provides $65.6 million for the Children’s Behavioral Health Initiative which serves children with severe emotional disturbances and other behavioral health problems.  Workforce Training: In 2010, the Governor also proposed an additional $11 million for the Workforce Training Fund to ensure that business contributions to the fund are used to train workers in the skills that will speed the Commonwealth’s economic recovery and strengthen its long-term prosperity.
    10. 10. Choices Based on Values We should be just as concerned about our commitment to our values as we are about the value of our commitments.  Those values -- creating good jobs at good wages, offering a world-class education to our kids, delivering quality, affordable health care to our residents, protecting and supporting the most vulnerable – those are the values to which we as a Commonwealth are committed.  So as I meet my statutory responsibility to bring the budget in line, I do so according to my moral responsibility to those values.  -- Governor Patrick, October 27
    11. 11. Governing Through a Crisis: Leadership Based on Values <ul><li>Continued emphasis on reforms </li></ul><ul><li>Smaller and more efficient government </li></ul><ul><li>Smart investments lead to long-term stability </li></ul><ul><li>Strong fiscal management with positive outcomes </li></ul>
    12. 12. Governing Through a Crisis: The Reforms Agenda <ul><li>In this crisis, we have changed the way government does the people’s business… </li></ul><ul><ul><li>Pension Reform: established new practices to prevent abuse. </li></ul></ul><ul><ul><li>Transportation reform: a new consolidated agency </li></ul></ul><ul><ul><li>Ethics Reform: partnered with the legislature on sweeping reform to our ethics and lobbying laws </li></ul></ul><ul><ul><li>Education reform: created a Secretary of Education to coordinate education initiatives and launched the Education Readiness project </li></ul></ul><ul><ul><li>Straightforward budgeting: significantly reduced earmarked funding in the state budget and enhanced transparency for the benefit of the public. </li></ul></ul><ul><ul><li>Consolidations of services: IT consolidation to coordinate services, contracting and eliminate duplicative functions. </li></ul></ul><ul><ul><li>Tax equity: closed loopholes and cut the corporate tax rate </li></ul></ul><ul><ul><li>Auto Insurance: reduced rates and improved choices by introducing competition to new companies that have now entered the market </li></ul></ul>
    13. 13. Governing Through a Crisis: A Smaller and More Efficient Government <ul><li>To date, over 1,800 positions have been eliminated, with plans announced for an additional 2,000 based on the Governor’s latest recovery plan for fiscal year 2010. </li></ul><ul><li>The Governor has suspended merit pay raises for managers and has frozen wages since last year. </li></ul><ul><li>The Governor has imposed manager furloughs in both FY09 and FY10. </li></ul><ul><li>The Governor and the leadership of public employee unions have agreed to contract revisions to reduce costs and save jobs. </li></ul>
    14. 14. Governing Through a Crisis: Smart Investments Lead to Long-term Stability <ul><li>Despite fiscal challenges we’re committed to investments in: </li></ul><ul><li>Industries that will create the jobs of the future, including life sciences, clean energy, information technology programs. </li></ul><ul><li>Health Care Reform. </li></ul><ul><li>Our K-12 education system and in our state colleges and universities. </li></ul>
    15. 15. Governing Through a Crisis: Positive Outcomes <ul><li>Balanced budget in FY09 despite worst revenue downturn in generations </li></ul><ul><li>In both FY09 and FY10, using a balanced approach of cuts, revenues and one-time resources to close aggregate $9 billion budget gap. One-time resources help avoid need for even deeper cuts. </li></ul><ul><li>Maintained excellent bond rating and stable outlook </li></ul><ul><li>Protected core priorities (eligibility for state health insurance programs, local education aid) </li></ul><ul><li>Signed on-time, balanced budget for FY10 (many states did not!) </li></ul><ul><li>Rating agency assessment of fiscal management is strong: </li></ul><ul><li>“ Effective management during the strained economic times, with a willingness and ability to promptly identify and close gaps trough the use of both new revues and spending reductions. </li></ul><ul><ul><ul><li>- Moody’s 11/3/2009 rating report </li></ul></ul></ul><ul><li>“… expectation that the Commonwealth will continue to address economic and revenue weakening in a manner consistent with its demonstrated sound financial practices </li></ul><ul><ul><ul><li>- Fitch 11/4/2009 rating report </li></ul></ul></ul><ul><li>“ Strong and conservative budget management practices, with swift action to restore balance after identifying revenue shortfalls in the past year.” </li></ul><ul><ul><ul><li>- S&P 11/4/2009 rating report </li></ul></ul></ul><ul><li>“ Strong ‘Financial Management Assessment’…indicates that practices are strong, well-embedded and likely sustainable…” </li></ul><ul><ul><ul><li>- S&P 11/4/2009 rating report </li></ul></ul></ul>
    16. 16. The Crisis Ahead in Fiscal Year 2011: Three Factors driving projected $3 billion budget shortfall <ul><li>1. Total revenue collections </li></ul><ul><ul><li>Increases in revenues expected to be modest </li></ul></ul><ul><li>2. Service demands </li></ul><ul><ul><li>Top demands are Medicaid, caseload-driven programs at Human Services, debt service, and Chapter 70 (K-12 education) </li></ul></ul><ul><li>3. Nearly $2.1 billion of one-time resources that will end in FY11 </li></ul><ul><ul><li>Enhanced FMAP ends mid-FY11 </li></ul></ul><ul><ul><li>Only $561M left in state Stabilization Fund, and may be needed for FY10 </li></ul></ul>
    17. 17. <ul><li>If you laid off every Executive Branch employee funded from the operating budget, over 36,000 positions, you would still be short by nearly $900 million. </li></ul><ul><li>You would need to eliminate the departments of Mental Health, Public Health, Developmental Disabilities and Children and Families to achieve $3 billion in cuts. </li></ul><ul><li>If you cut every dollar spent on Early Education and Care, Higher Education and Elementary and Secondary Education (not counting C.70 aid) you would only be half way to cutting $3 billion. </li></ul><ul><li>You would need to cut C.70 (K-12) education aid to cities and towns by approximately 72% to achieve $3 billion in cuts. </li></ul><ul><li>If you completely eliminated every dollar the state spends on public safety including Corrections, State Police, Sheriffs and other community supports, you would only be half way to cutting $3 billion. </li></ul>What Would it Take to cut $3 billion more?
    18. 18. <ul><li>Given the stark choices we need to ask what fundamentally we want government to do and how we pay for it. </li></ul><ul><li>The Administration is required to present a balanced budget to the legislature for fiscal year 2011 on January 27 th . </li></ul><ul><li>It’s important that we engage you in the outcome and that you engage your neighbors in a conversation about the choices we face. </li></ul>The Fiscal Year 2011 Crisis we Face: Our Biggest Challenge
    19. 19. Let’s Discuss <ul><li>What are the fundamental services you believe your government should provide? Could you rank those that you feel are most important? </li></ul><ul><li>Facing a multi billion dollar problem, what services would you cut? </li></ul><ul><li>Other than cuts, what are your ideas on efficiencies and how we might better provide services for less? </li></ul><ul><li>How should we pay for public services? Do you support additional revenues and if so, which ones? </li></ul>
    20. 20. Let’s Discuss <ul><li>www.mass.gov/blog/engage </li></ul><ul><li>www.mass.gov /governor/forums </li></ul>