[statecom-discuss] Fwd: Preliminary Analysis of the Governor's FY 2008 Budget

[Gracegrnrnbw at aol.com]

> Dear ones - I have put together somewhat of an alternative budget - the 
> below is accurate but gives you less of a sense of examples - 
> For instance he expanded property tax relief from senior to anyone below that 
income - but it appears to include only home owners NOT renters.
He seeks to cap welfare spending and change language so he can cut the 
clothing allowane (remember tons of folks are illegally denied welfare so he has 
ensured there will be no money should they finally get access and really, its 
like 40% of the poverty level!)
He says he is putting money back into education - I checked during my run and 
it would take $500 million to get us back to 2001/2002 funding levels 
(correcting for inflation - he is proposing $200 million.
He says he is protecting cities and towns - last year, the projected 
additional money for that line item was a mere 250+ million, he is proposing 112 
million - about an average of 300,000 per community -   of course that will be 
pro-rated for bigger and smaller communities - so its almost nothing no matter 
what size the budget....

Here's a broader analysis

> Greetings,
>  The proposal released yesterday by the Governor is a bare-bones budget. 
> Faced with a budget gap of close to one billion dollars there were three options 
> for balancing the budget: reducing spending; finding new revenue; and using 
> reserve funds. The budget proposed yesterday employs all three strategies.
>  The House One budget includes modest new initiatives, such as expanding 
> community policing, funding a longer school day for interested schools, and 
> expediting permitting to make it easier for the state to attract new businesses. 
> There are also several areas in which funding levels appear to be below the 
> cost of providing the same level of services provided in FY 2007. Finally, 
> this budget does not provide the resources to restore many of the deep cuts in 
> higher education, public health, environmental protection, and other areas 
> where the tax cuts of the 1990s forced deep spending cuts during the recession.
>  On the revenue side, the budget calls for reforms that would significantly 
> improve the fairness and efficiency of the Commonwealth’s corporate tax 
> system. These proposals would make it much harder for corporations to shift money 
> around among subsidiaries to take advantage of loopholes that allow them to 
> pay less in taxes than companies that do not engage in these aggressive tax 
> avoidance strategies. The administration projects that these reforms will 
> generate $295 million to help balance the budget this year.
>  The budget also uses some one-time and reserve funds, such as money from 
> the Health Care Security Trust Fund and a portion of the interest earned by the 
> stabilization fund. In addition, the budget would not make a deposit into 
> the rainy day fund that is ordinarily made.
>  This preliminary analysis provides a quick overview based on our first few 
> hours analyzing the budget. A more complete analysis will be provided in our 
> Budget Monitor, which will be released late next week.
>  Aid to Cities and Towns
> • With lottery revenues expected to be relatively flat in FY 2008, lottery 
> aid to cities and towns increases by only $15 million, or 1.6 percent. Payment 
> in Lieu of Taxes (PILOT) funding for communities with large quantities of 
> state land will increase by $2.5 million. With the Additional Assistance 
> category of local aid remaining flat, as has been the case for several years, total 
> non-education aid to cities and towns will increase by only 1.3 percent 
> between FY 2007 and FY 2008, likely not keeping up with inflation.
>  • A new Municipal Police Grants program is proposed to enable cities and 
> towns to hire additional police officers. The program, funded at $30.7 million, 
> with no more than $300,000 for program administration, charges the Executive 
> Office of Public Safety with devising a formula for the distribution of 
> funds. This is a 44.1 percent increase over the $21.3 million provided for 
> community policing in FY 2007. While not traditionally considered local aid, if 
> this $9.4 million increase is combined with other categories of local aid, then 
> support to cities and towns will increase by 2.0 percent between FY 2007 and 
> FY 2008.
>  • The Governor’s budget includes a transfer of $634 million for school 
> building assistance, which the administration identifies as another component of 
> aid to cities and towns. This reflects a $62 million increase over the $572 
> million transferred according to the FY 2007 budget. This funding level is 
> determined by formula, and monies are diverted from revenue rather than 
> appropriated. This represents valuable aid to cities and towns in maintaining their 
> educational infrastructure, but it is not unrestricted local aid.
>  K-12 Education
> • The Governor’s budget would increase funding for Chapter 70 aid for K-12 
> education from $3.505 billion in FY 2007 to $3.705 billion in FY 2008, an 
> increase of $200 million or 5.7 percent. While the formula used in calculating 
> aid to cities and towns is the revised formula used in FY 2007, cities and 
> towns with excess local effort will find their required local contribution 
> reduced by 30 percent of the excess effort rather than the 40 percent that was 
> scheduled to be used in FY 2008. All districts have been kept at or above their 
> foundation funding level and all districts have received an increase of at 
> least $50 per pupil.
>  • Two grant programs highlight the Governor’s budget in K-12 education. 
> Kindergarten expansion grants, allowing districts to migrate from half day to 
> full day kindergarten classrooms, are proposed to increase from $27.3 million 
> to $39.5 million. Funding for extended time learning grants, allowing schools 
> to lengthen the school day, is doubled from $6.5 million to $13 million.
>  Higher Education
> • The Governor’s budget would increase core funding to the University of 
> Massachusetts system, state colleges, and state community colleges from about 
> $898 million in FY 2007 to $909 million in FY 2008. While the increase is 
> beneficial, it is probably well below the rate of inflation these institutions 
> will face in their costs.
>  • While core funding for the state’s higher education institutions will 
> increase slightly under the Governor’s budget, overall higher education funding 
> is flat. This reflects the elimination of earmarks for particular programs 
> or projects at some of the state’s institutions.
>  Public Health
> • The current FY 2007 budget for public health includes more than $40.1 
> million added to the FY 2007 General Appropriation Act by supplemental 
> appropriations, particularly the health reform act (Chapter 58 of the Acts of 2006). 
> The Governor’s budget recommendation does not continue the increased funding 
> provided by these supplemental funding budgets in certain line items. For 
> example, community health centers and substance abuse programming received funding 
> increases in the FY 2007 supplemental appropriations, and the Governor’s 
> budget recommends less funding in FY 2008 for these areas than their totals in 
> FY 2007. The Governor also consolidated certain health promotion and disease 
> prevention programs, but the Governor’s total funding recommendation for these 
> items is slightly less than in FY 2007.
>  • The Governor does recommend significant increases in certain line items, 
> most notably funding for smoking prevention and cessation services. The 
> Governor recommends almost doubling funding, from $8.3 million in FY 2007 to $16.3 
> million in FY 2008. The Governor also increases by two-thirds the funding 
> for the universal immunization programs, adding $24.8 million more for a total 
> of $61.2 million. Other public health line items that receive significant 
> funding increases include early intervention and support for the public health 
> hospitals.
>  • The Governor’s budget recommends a total of $547.0 million in funding 
> for public health, a $32.6 million – six percent – increase in funding from 
> the current FY 2007 total. Nevertheless, the Governor’s recommendations still 
> lag 12 percent below total funding in FY 2001.
>  Human Services
> • Human services spending in the Governor’s budget increases from about 
> $4.5 billion in FY 2007 to $4.6 billion in FY 2008. Human services, in this 
> context, includes early education and care, elder affairs, income supports, 
> mental health, mental retardation, social services, and services for veterans and 
> the disabled. This 1.5 percent increase in spending, lower than inflation, 
> will likely not be enough to keep every program at the same level of service as 
> was provided in FY 2007. Furthermore, FY 2008 spending levels, despite the 
> increase, remain 2.0 percent below the inflation-adjusted levels of human 
> services spending in FY 2001.
>  Group Insurance Commission
> • The Governor’s budget appropriates $803 million for the Group Insurance 
> Commission (GIC). This is a drop of 24 percent compared to FY07. It appears 
> that this is a result of changing how retired employees’ health care is funded.
>  Medicaid/MassHealth and Other Health Programs
> • The Governor’s budget recommendations account for Medicaid/MassHealth 
> line items slightly differently than in FY 2007. One significant difference is 
> that Medicaid rate enhancements for nursing home facilities, formerly funded 
> through the off-budget Health Care Quality Improvement Trust, is now reflected 
> as a direct appropriation of $288.5 million. The Governor has also 
> consolidated funding for a variety of health care programs, including the MassHealth 
> program for persons with HIV, the MassHealth program for women with breast or 
> cervical cancer, and health insurance for pregnant women. The Governor’s 
> recommendations also continue support for the reforms initiated with the 
> Commonwealth’s health reform, including expanded benefits and eligibility for the 
> MassHealth programs, and support for a new wellness initiative. Although the 
> Governor’s documents suggest that there are $179 million in savings from the 
> Medicaid program, it is not immediately clear where these savings will come 
> from.
>  Revenue
> • Along with the budget, the Governor filed legislation to reduce corporate 
> tax avoidance by approximately $295 million in FY 2008. We recently released 
> a Facts at a Glance report showing that business taxes in Massachusetts are 
> currently among the lowest in the nation. The tax legislation accompanying the 
> budget closes corporate tax loopholes in several ways:
>  o implementing combined reporting so that companies cannot shift income 
> between subsidiaries to reduce their taxes.
> o conforming to federal rules so that companies cannot avoid taxes by being 
> classified as partnerships in one state and corporations in another state;
>  o requiring that businesses owned by insurance companies pay the same taxes 
> as other businesses;
> o prohibiting corporate taxpayers from placing real estate in a subsidiary 
> entity and selling that entity rather than the real estate itself to avoid the 
> real estate transfer tax;
>  o ensuring that internet sites that sell hotel rooms remit the sales tax on 
> the full cost of the rooms they sell (rather than on the wholesale price 
> they pay to the hotels);
>  o reducing the ability of businesses to lease equipment from their own 
> subsidiaries to avoid paying the full sales tax upfront.
> 
> 
> 
> 
>  Structural Budget Issues
> • The House One Budget does not include a balance sheet structured in a 
> manner that allows a reader to determine easily whether the budget is 
> structurally balanced. Several provisions in the budget may be cause for concern.
>  o The budget appears to use $50 million from the Health Care Security Trust 
> Fund to pay for ongoing costs. By using a one-time revenue source to pay for 
> ongoing costs, the budget likely creates structural balance problems.
>  o The budget does not make a $100 million deposit that would ordinarily be 
> made into the stabilization fund. While this option would be available in 
> future years and therefore may not cause structural balance problems, if the 
> Commonwealth wants to return to the practice of making automatic deposits into 
> the stabilization fund in future years then it will have to find a way to fill 
> this gap
>  o The budget uses 84 percent of the interest that the rainy-day fund is 
> expected to earn during FY 2008 to fund this year’s budget; this amounts to $75 
> million.
>  o The budget also uses a temporary source to begin funding retiree health 
> care obligations. It transfers the balance in the Health Care Security Trust 
> Fund (likely approximately $400 million) to the State Retiree Benefits Trust 
> Fund. While this is a use of one-time revenue it is also a commitment to fund 
> a future obligation that has never before been funded. This transfer has no 
> positive or negative effect on the bottom line of this year’s budget but it 
> does set the Commonwealth on a path to meeting a future obligation (which will 
> require increasing appropriations from the general fund in future years).
> 
> 
> 
> 
>  Budget Transparency
> • This budget makes significant progress on transparency and provides 
> information that makes it much easier for an ordinary reader to understand the 
> meaning of the funding recommendations made in the budget document. The budget 
> materials provided on-line include several new features that make the budget a 
> more accessible and informative document, including the following:
>  o a “Budget Navigation Guide” that provides information about how to 
> understand the budget, where to find information about both spending and revenue, 
> and links to additional background information;
>  o tables that provide extensive information on current and prior spending 
> levels by line item so that the reader can see where spending is increasing, 
> where it is falling, and how current appropriations compare to historic 
> trends;
>  o a spreadsheet that includes all of the appropriations by line item and 
> can be easily downloaded;
> o mission statements and organizational charts to explain the goals, 
> responsibilities, and structure of each state department (to find this you have to 
> click on “Department Information” when you get to the page with the budget of 
> a given department).
> 
> 
> 
> 
>  • While the progress on transparency is impressive for an administration 
> that has been in office for less than 60 days, there are several areas where 
> additional progress could still be made. In addition to all of the new 
> information provided in this year’s budget, ideally a transparent budget would 
> include several other features, such as the following:
>  o a clear and complete balance sheet that separately identifies ongoing and 
> temporary spending and ongoing and temporary revenue and allows the reader 
> to determine easily not only whether the budget is balanced, but also whether 
> it is structurally balanced;
>  o short descriptions of each program funded that includes a clear statement 
> of goals and objectives;
> o information about caseload assumptions and other data that would allow the 
> reader to determine when spending changes are due to caseload or cost 
> changes rather than the result of decisions to expand or cut a program or service.
> 
> 





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