MMA BUDGET ALERT
Thursday, June 24, 2010

BUDGET CONFERENCE COMMITTEE RELEASES

FY 2011 STATE BUDGET PLAN

POTENTIAL LOSS OF $687M IN FEDERAL FUNDS TRIGGERS DEEPER CUTS ACROSS THE BUDGET

• Conferees Protect Unrestricted General Government Aid and Chapter 70, Keep Cuts at 4%
• Other Local Aid Accounts Impacted by Budget
• No Municipal Health Provisions Included
• House and Senate Approval Expected Thursday

On Wednesday evening, June 23, the House-Senate Budget Conference Committee reached agreement on a $27.6 billion fiscal 2011 state budget plan, setting the stage for approval by both branches today (June 24).  This would give the Governor seven days to review the budget before the beginning of the new fiscal year on July 1.

The budget negotiations were disrupted earlier this month when the fate of $687 million in expected federal Medicaid funds became unclear, threatening to remove a vital revenue base upon which the Governor, House and Senate all built their budget plans.  Thirty states across the nation have banked on receiving a share of $24 billion in temporarily higher federal Medicaid reimbursement percentages (FMAP) that Congress, the U.S. Senate and the President have all supported at various times.  However, leadership in both the Congress and U.S. Senate have been unable to secure the necessary votes to approve the funding in recent weeks, derailing budget planning in most states, including ours here at home.  In Massachusetts, every U.S. Representative and Senator Kerry are on record supporting immediate passage of the FMAP funds.  Senator Brown is the only member of the delegation to withhold support and vote to block passage.

Budget Sees Deeper Cuts, Major Local Aid Accounts Protected from FMAP Loss

Preparing for the potential loss of the $687 million in FMAP funds, the Conference Committee has proposed a spending plan that cuts tens of millions of dollars below the initial budgets approved in the House and Senate in April and May, imposes deep reductions throughout the budget, draws $100 million from the state stabilization fund, defers the transfer of another $95 million to the rainy day fund, and axes significant health access programs for immigrants and MassHealth recipients.  In a major victory for cities and towns, House and Senate leaders have protected Unrestricted General Government Aid and Chapter 70 from any cuts beyond the 4% included in their spending plans passed earlier this spring.  Governor Patrick has already announced that he would not impose any additional cuts on these accounts.  Thus, communities will receive the UGGA and Chapter 70 distribution amounts that were announced earlier this year by legislators.

The Conference Committee has crafted a framework that would add or restore funds to many budget accounts if the FMAP monies do materialize during the year.  This is accomplished by creating an FMAP stabilization fund into which any additional FMAP funds would be deposited, and using that fund to supplement appropriations from the state’s General Fund for certain accounts identified throughout the budget.

Other key municipal and school accounts are funded as follows:

• Regional School Transportation Reimbursements are level-funded at $40.5 million, however this account would be increased by $3.5 million if the state receives the full FMAP increase;
• The Payment-in-Lieu-of-Taxes (PILOT) program is funded at $25,270,000, a decrease of $2 million compared to fiscal 2010, however the $2 million would be restored if the state receives the full FMAP increase;
• The Special Education Circuit Breaker program is level-funded at $133.1 million, however this account would be increased by $12.5 million if the FMAP funds materialize;
• Kindergarten Development Grants are funded at $22.95 million, a cut of $2.75 million below fiscal 2010, however $3 million would be added to the account if the state receives the full FMAP increase;
• The Shannon Anti-Gang Grant Program is level-funded at $4.5 million, however $2 million would be added if the state receives the full FMAP increase;
• Charter School Reimbursements are funded at $71.5 million, a $3 million reduction below fiscal 2010 levels;
• The Police Career Incentive Pay program is funded at $5 million, down from $10 million in fiscal 2010; and
• Library aid accounts are funded at $15.6 million, a $3 million reduction below fiscal 2010 levels.

Conferees Set Aside Municipal Health Insurance Reform

For the second year in a row, disagreement between the branches sidetracked legislation to provide relief to cities and towns to allow municipalities to implement vital health insurance plan design changes to save taxpayers and communities up to $100 million a year.  These savings are needed to prevent further layoffs, service cuts and higher reliance on property taxes.

The Senate had included a municipal insurance provision in its version of the budget, but the draft had significant and serious flaws that needed to be addressed.  The proposal would have guaranteed too little savings for communities and taxpayers, required permanent acceptance of Section 19 coalition bargaining that would give unions permanent control and veto power over every other aspect of health insurance, and provided for binding arbitration to allow an outside authority to impose costs on cities and towns.  The MMA had strongly advocated improving the Senate language to address these and other flaws, so that meaningful reform could pass this year to allow local leaders to implement cost savings immediately.  However, the branches could not reach agreement, with advocates for reform pushing for a stronger bill and union allies looking to further water down the measure.

While this is a disappointing development, it is much better than passage of flawed legislation that would offer little or no relief to the vast majority of communities.  The MMA will continue to work aggressively with all cities, towns and stakeholders to keep this top priority front and center, as taxpayers are demanding reform that will reduce costs and protect local budgets.

A full copy of the Conference Committee’s fiscal 2011 state budget bill can be viewed or downloaded at http://www.mass.gov/legis (look under “Current Agenda and News” on the lefthand side of the Legislature’s webpage).

The MMA will be posting additional information and links to the Conference Committee’s proposed state budget at http://www.mma.org during the day on Thursday as details become available.

Thank you.