The Governor today signed the Fiscal Year 2011 budget, used his line-item veto authority to reduce spending in a number of areas (largely to reflect the likelihood that Congress will fail to provide anticipated extended state fiscal relief), proposed several modifications, and recommended reducing cuts in two public safety accounts.

The budget enacted by the Legislature on June 23, 2010 included two sets of spending levels: one if the state does not receive additional fiscal relief from the federal government, and another set of numbers allocating $374.1 million in funding that could be received if Congress does provide additional state fiscal relief. This money would come from an extension of the enhanced Federal Medicaid Assistance Percentage (FMAP), a significant component of stimulus included in the federal Recovery Act. To show how this money would be allocated, the Legislature’s budget proposal included spending levels in a number of line items that had both a base level and a higher amount that could be spent if additional FMAP funding is received (for a complete list see here and here).

The Governor vetoes from each line item the amount associated with an enhanced FMAP extension. If Congress eventually passes legislation that includes additional FMAP funding, the Governor could then file supplementary budget legislation that would propose how to spend those dollars. Most of the Governor’s vetoes are, thus, more related to process than substance. The Legislature identified $374 million in cuts that will be made if Congress fails to extend FMAP. As the fiscal year starts tomorrow and Congress has not authorized that money, the Governor’s vetoes clarify that without the revenue source those cuts will take effect. Without an FMAP extension states across the country will be forced to make cuts that will have a direct effect on the people who will lose access to health care, child care, higher quality schools, and other services. These cuts will also weaken the national economy and cost jobs at a time when the economic recovery remains fragile. ¹

The Governor’s budget also is based on a few differences from the Legislature in assumptions about other sources of revenue (the conference committee had adopted higher revenue estimates than the Senate or the House for the lottery and several other non-tax revenue sources). To live within these lower revenue estimates, and address other issues, the Governor proposes additional cuts and savings:

• Funding for debt service that reflects the fact that certain debt is being issued later in the year than had been anticipated. This reduces the Commonwealth’s debt service costs by $25 million.
• Because there is an estimated $30 million surplus in the Commonwealth Care Trust Fund (which pays for the state’s Commonwealth Care and other health safety net programs) in FY 2010, the Governor recommends reducing the transfer from the General Fund to the trust fund by $30 million. The surplus is due to the costs of the Commonwealth Bridge program in FY 2010 being less than anticipated, and tobacco tax revenues going into the fund have been higher than anticipated.
• Cutting appropriations in several instances, including where the Governor’s recommended funding level in House One was less than the amount proposed by the Conference Committee.

Specific line item vetoes include:

• $12.5 million cut from workforce training programs (from $24 million). The Governor does, however, hope to allow for the spending in FY 2011 of $10 million in uncommitted funds that had been budgeted in FY 2010.
• Funding for legislative redistricting costs and operational funding for the Legislature.
• Reductions in funding to agencies that up to this point have not been cut as deeply as other departments (such as the department of transportation).

Finally, the Governor files legislation to restore funding in a few areas to amounts higher than as proposed by the Legislature. The Governor restores:

• $10 million to the Department of Corrections.
• $3.5 million to the State Police.

The Governor also includes a plan to restore funding to the Commonwealth Bridge program, a health insurance program for legal immigrants who are no longer eligible for MassHealth due to changes in the rules about MassHealth eligibility. This program has been funded by transfers from the General Fund and by revenues from the tobacco tax. The current program is slated to expire at the end of August.

The Governor’s accompanying legislation includes language that would allow for this program to be extended. A portion of the revenue necessary for this extension would come from higher than originally-anticipated tobacco tax revenues. Additional resources could be generated by identifying potential savings in this and other state health insurance programs. As in the Legislature’s budget, the budget signed by the Governor includes a direct withdrawal of $100 million from the stabilization fund, and also forgoes the statutory roll-forward of $95 million into FY 2012.

MassBudget will publish a full Budget Monitor next week. The Governor’s line-item vetoes can be seen here and the outside section vetoes are here.

¹ For more information, see “Economic Stimulus: What Can National and State Governments Do To Save and Create Jobs Quickly?,” MassBudget, June 9, 2010.