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Budget Monitor:
The Governor's FY 2013 Budget

January 31, 2012
  • Table of Contents
    • Overview
    • Education
    • Environment & Recreation
    • Health Care
    • Human Services
    • Infrastructure, Housing & Economic Development
    • Law & Public Safety
    • Local Aid
    • Other
    • Revenue

Overview

On January 25, the Governor released his budget proposal for Fiscal Year 2013. With the Commonwealth facing a preliminary budget gap of approximately $1.3 billion, the Governor proposes balancing the budget with three strategies:

  • Cuts and savings of about $550 million1
  • Modest tax reforms and other revenue initiatives that generate about $215 million in ongoing revenue
  • The use of about $545 million in temporary revenues, mostly from the state stabilization fund (the "rainy day fund")

The Governor's decision to rely heavily on cuts and savings is consistent with recent practice. Throughout the last four years, the state's ongoing budget problems have been resolved largely through cuts and savings—including deep cuts in local aid, education, health care, human services and public safety.

In this year's budget, as in past years, some of these cuts show up in the budget as a reduction in the number of available dollars. In FY 2012, for instance, $6.3 million was allotted to provide subsidized lunches to seniors as part of the Elder Nutrition Program; in FY 2013, only $4.8 million is being made available. That is a clear cut. Another way to cut a program, however, is to provide too little money to keep up with inflation and the size of the relevant population. The Emergency Food Assistance Program, which supports food banks in Massachusetts, is being funded at the same level in FY 2013 as it has been since FY 2010 ($11.5 million). Over time, though, the cost of food has increased, which means that the food banks will actually be able to buy less food this year than last, even with the same number of dollars.

The Governor's budget proposal also introduces some modest initiatives which would increase revenues both for this year and for future years. These include a higher cigarette tax, an expansion of the bottle bill, and the end of the sales tax exemption for soda and candy.

The sections that follow analyze the details of the Governor's budget in greater detail, but it is important to keep in mind the bigger fiscal story--which is not just about one year's budget deficit but about the regular deficits that the Commonwealth has been facing for many years now.

There are two, basic reasons that Massachusetts continues to find itself in a fiscal crisis.

  • The lingering effects of the Great Recession, which has sapped state revenues even as it has increased the number of people relying on core safety net services.
  • The structural budget problems that the state has faced since cutting taxes in the late 1990s. Those tax cuts and other declines in tax receipts over the last fifteen years cost the state over $3 billion in annual revenue.2

These are some of the broader forces that have shaped the Governor's FY 2013 budget as a whole, and with it the many, specific proposals that we analyze in the sections that follow. If you want to go directly to a specific section, you can use the Table of Contents above or click on the appropriate line in the table below.


1 The gross savings is actually several hundred million dollars higher, but a large proportion of these cuts and savings are in the Medicaid program where the state shares savings with the federal government which pays half the costs of the program.

2 For more detail, see footnote 2 of Massbudget's FY13 Budget Preview.

Education

Under the Governor's Fiscal Year (FY) 2013 budget proposal, the broad MassBudget category of Education is up $240.6 million over current FY 2012 levels, in large part due to a Chapter 70 education aid increase driven mostly by state law. The budget proposes a set of governance reforms to the community college system coupled with a $14.3 million funding increase. Child care subsidies would be down somewhat, due mostly to reduced demand for TANF-Related Child Care and Supportive Child Care, but also due to closing access for new income-eligible families. Additionally, the Governor proposes a set of new education grant programs aimed at students and families in Gateway Cities.

Early Education & Care

While the Legislature has rejected this proposal for each of the last three years, the Governor once again calls for consolidating funding for child care subsidies from three line items to one (see table below). Consolidation would empower the Department of Early Education & Care to respond to caseload changes mid-year by transferring funds across these accounts without going to the Legislature for approval. Included in this consolidation is the TANF-Related Child Care line item for families that are current TAFDC recipients, the Supportive Child Care line item for families with active Department of Children and Families cases, and the Low-Income Child Care line item for low-income families that are not current or recent TAFDC recipients.

Most of the funding within Early Education & Care funds these direct child care subsidies, for which the Governor FY 2013 budget proposes $434.7 million, a decrease of $8.1 million from FY 2012 levels. The table below shows the Governor's proposed appropriation for the consolidated account (under "FY 2013 Governor") and also separates this appropriation back out in the current three line item form based on projections by the Executive Office of Administration & Finance ("FY13 Gov Separated Out").

Both Supportive Child Care and TANF-Related Child Care are entitlement programs, and their proposed FY 2013 reductions reflect reduced caseload projections. Access for new income-eligible families, on the other hand, has been closed for most of FY 2012 and the Governor's proposal continues to exclude new families for all of FY 2013. Continuing to freeze access for new low-income families is projected to result in waitlist growth for Low-Income Child Care from 20,000 to 30,000.

The Governor's Gateway Cities Education Agenda includes a new $575,000 Gateway Cities Early Literacy Programs line item funding targeted professional development to family child care providers and other family members. Since this program is overseen by the Department of Elementary and Secondary Education, it does not show up within the MassBudget subcategory of Early Education & Care.

Most other accounts within Early Education & Care are very close to level funded from current FY 2012 levels. It is worth noting that level funding a program in nominal terms is usually tantamount to a cut since no inflation adjustment is made to keep up with rising costs.

K-12: Chapter 70 Aid

The Governor's FY 2013 proposal funds Chapter 70 education aid to cities, towns, and regional school districts at $4.14 billion, an increase of $145.6 million, or 3.6 percent, from current FY 2012 funding levels. This proposal roughly funds the formula outlined in state law, using updated enrollment, inflation, and municipal revenue growth factor measures, helping school districts keep up with the rising cost of providing baseline services. Under the Governor's proposal, two-thirds of districts would receive the same nominal level of Chapter 70 aid as they did in FY 2012, with the rest receiving increases.

Through the FY 2007 budget process a set of reforms to the Chapter 70 formula was planned to be phased in over five years, finishing in FY 2011.1 Since these reforms require additional state funding, the Legislature chose to slow this phase in during the last three fiscal years as the financial crisis strained state resources. Similarly, the Governor's FY 2013 proposal freezes any further phasing in of reform provisions, except for one: an additional reduction of required local contributions for districts above their target local contributions. Qualifying districts will have their local contribution reduced by 15 percent of the gap between their preliminary contribution and their target contribution, resulting in a little more than $10 million in additional Chapter 70 aid for these districts. Fully phasing in effort reduction for these communities, bringing their required contributions down to their targets, would cost roughly an additional $110 million in Chapter 70 aid.

This statewide year-to-year increase looks considerably smaller when Education Jobs Fund revenue is built into FY 2012 and FY 2013 amounts. The Education Jobs Fund is a federal stimulus program that provided money to Massachusetts schools for use in FY 2011, FY 2012, and the first quarter of FY 2013—money that was distributed through the Chapter 70 formula. Of a total $200.5 million grant amount for these three years, $66.6 million was used in FY 2011 and $116.7 million has been claimed for FY 2012, leaving a projected $17.2 million for use during the first quarter of FY 2013. After combining this federal revenue with the Governor's proposed state contribution, the total amount available to districts for FY 2013 ($4.15 billion) represents an increase of $45.7 million over total amounts for FY 2012 ($4.11 billion).

K-12: Non-Chapter 70 Aid

The Governor's budget proposes to fund non-Chapter 70 programs for elementary and secondary education at $23.1 million above current FY 2012 levels. Most of the programs within the MassBudget category of K-12: Non Chapter 70 Aid are grant programs distributed to individual schools and/or school districts to advance specific priority initiatives. Among existing programs, the Governor proposes to increase funding for Kindergarten Expansion Grants, Targeted Intervention in Underperforming Schools, Extended Learning Time Grants, and Youth Build (for more detail please see the line item table at the end of this subcategory).

The Governor's budget includes funding for four new education-related initiatives that support the Governor's recently unveiled Gateway Cities Education Agenda (see table below). English Language Learner Programs would fund summer English learning camps for students who are not yet fluent in English. The Student Support program would create Student Support Councils and hire Student Support Councilors to target predominantly low-income schools. Career Academies would fund high school support centers to help students explore career opportunities. Early Literacy Programs would fund targeted professional development to family child care providers and other family members.

The Governor also proposes to create a new Innovation Fund and an Advanced Placement (AP) STEM program. The Innovation Fund would establish a $1.0 million fund with supplemental private support to help foster innovation in education policy design, professional development, and research. The AP STEM Program would fund a $2.4 million competitive grant program designed to increase participation and success in high school Advanced Placement courses that prepare students for careers and further education in science, technology, engineering, and mathematics.

In total, the Governor proposes level funding—$3.9 million—of literacy programs from the current FY 2012 budget, although he rolls the Bay State Reading Institute into Literacy Programs. The Targeted Tutorial Literacy Program maintains its own separate line item. Without adjusting for inflation, level funding these programs in nominal terms would be tantamount to a cut.

The Governor proposes funding the Special Education Circuit Breaker program at $213.2 million, level funding from FY 2012. This proposal represents a 13 percent cut from the FY 2009 GAA inflation-adjusted level of $245.7 million.

The Governor proposes funding Regional School Transportation at $43.5 million, level funding from FY 2012. This proposal represents a 34 percent cut from the FY 2009 GAA inflation-adjusted level of $65.5 million.

K-12: School Building

The Governor's budget projects a contribution to the School Modernization and Reconstruction Trust (SMART) of $699.2 million, an increase of $21.1 million from current FY 2012 levels. Each year the Commonwealth is required to contribute to this trust an amount equal to one penny of the state sales tax. This projection reflects anticipated increases in the sales tax due to: 1) continued economic recovery; and 2) the Governor's proposed elimination of the sales tax exemption for candy and soda.

Higher Education

Although the Governor's FY 2013 budget for Higher Education is $58.7 million above current FY 2012 levels, this increase is well below the total additional resources needed to reverse many years of deep cuts. Even with this proposed increase, Higher Education funding in FY 2013 would represent an inflation-adjusted cut of 13 percent from pre-recession levels (FY 2009 GAA). Cuts are even deeper when looked at over the last decade, with proposed FY 2013 funding representing a 30 percent cut from FY 2001.

Most notable within the Governor's FY 2013 budget for Higher Education is a set of proposed governance reforms to the state's community college system coupled with an increase of $14.3 million dollars. This proposal brings all community college funding under one consolidated line item. Of this increase, $10.4 million is the result of a higher direct appropriation to community colleges, whereas $4.0 million results from a greater total for collective bargaining accounts included in FY 2013 compared to FY 2012.

The Governor calls for community colleges to focus more specifically on job training and to coordinate their course offerings with the needs of local employers. The Governor seeks to standardize the system statewide, easing the process of transferring credits across campuses. This proposal also centralizes budget and leadership control over community colleges within the Board of Higher Education.

While the Governor's budget targets additional resources to community colleges to supplement policy reforms, it provides only modest increases for UMass and State University campuses. These increases only cover contractual obligations in collective bargaining agreements. Direct appropriations to campus line items are level from FY 2012 for both UMass ($418.0 million) and State Universities ($191.6 million).

Additionally, the Governor's budget also includes about $200,000 for a new municipal government performance management, accountability, and transparency program to be run by the Collins Center for Public Management at UMass Boston, which increases its appropriation from $497,000 to $700,000. Since this program is an earmark within the Collins Center's line item, it shows up in our Higher Education and UMass totals, even though the ultimate beneficiaries would be city and towns.

Starting in FY 2012, all campuses of public higher education began retaining tuition payments from out-of-state students, rather than remitting that revenue back to the state. MassBudget generally adjusts upwards the campus allocations by these projected amounts so that one can compare reasonably the levels or resources available at an individual campus to previous years when this tuition was remitted to the state. Since projected tuition retention amounts are not yet available for FY 2013, campus appropriations reported in this Budget Monitor assume the same level of tuition retention in FY 2013 as FY 2012. Once new projections are released for each of the campus line items, MassBudget will readjust FY 2013 amounts.

The Governor's budget funds the State Scholarship Program at $87.5 million, very close to level funding from FY 2012. Without making an inflation adjustment to keep pace with rising costs within higher education, this proposal continues the downward trend of funding for scholarships; the State Scholarship Program is down 15 percent from pre-recession levels.

Among the cuts proposed in the Governor's budget is elimination of the $635,000 Nursing and Allied Health Education Workforce Development program, which helps recruit new nurses.

Please see the table below for more information on Higher Education line items funded either in FY 2012 or FY 2013. This table includes tuition retention adjustments for each of the campus line items, but separates out collective bargaining accounts in the final three rows.


1 For more information on the 2007 reform plan, please see the November 2006 MassBudget paper Public School Funding in Massachusetts: Where We Are, What Has Changed, and Options Ahead.

Environment & Recreation

In his Fiscal Year 2013 budget proposal for environment and recreation programs, the Governor recommends an increase of $20.1 million in funding. Some of this increase comes from his proposal to expand the bottle bill and provide over $5 million in funding for recycling and redemption centers. The Governor also recommends increasing the amount of revenue various departments within this category can keep from fees and fines. Even with these recommended increases in the Governor's FY 2013 proposal, total funding for environment and recreation programs in the state has fallen by 20 percent in inflation-adjusted dollars since the onset of the state fiscal crisis in 2008.

Environment

The environment budget for the state supports programs that keep the state's air, water and land clean. This includes funding to clean hazardous waste sites, to support recycling and to pay for salaries and equipment for the state's environmental police force. The Governor's budget recommends increasing funding for state environment programs by $14.2 million over current spending for FY 2012. The majority of these increases come from:

  • $5.3 million increase for recycling and redemption centers. This funding will come from the $22.3 million in revenues raised with the Governor's proposed expansion of the bottle bill to include juice, water and coffee drinks.1 The FY 2012 budget provided $275,000 to help fund redemption centers around the state while recycling centers received no funding.
  • $1.2 million in additional funding for the hazardous waste clean-up program. Even with this recommended increase, state support for this program has fallen by more than one quarter since the onset of the state fiscal crisis.

Fish & Game

State fish and game programs oversee Massachusetts fisheries, wildlife habitats and other natural sites in the state. Much of the funding that supports fish and game programs comes from the revenues the Department of Fish and Game receives through the sale of licenses for hunting, fishing, boating and other activities.

Parks & Recreation

The state's parks and recreation budget supports state parks, urban parks, beaches, pools and the employees who work at these facilities. It also funds parkways and dams managed by the Department of Conservation and Recreation (DCR). For the first time since the onset of the state fiscal crisis in 2008, the Governor recommends an increase in the budget for parks and recreation programs by allowing DCR to retain an additional $5.7 million in revenue that it collects from fees at state parks, campgrounds, golf courses and other activities. Some of the increase in retained revenue, however, is offset by a recommended $2.5 million reduction in funding for state parks. Since the onset of the fiscal crisis, funding for state parks and recreation has fallen by 30 percent in inflation-adjusted dollars.

The Governor's budget also recommends slight increases in two other parks and recreation programs including an additional $816,000 for DCR administration and an additional $770,000 for DCR beaches, pools and seasonal employees who work at DCR facilities.


1 Outside Section 11 of the Governor's FY 2013 budget which expands the bottle bill is available here: http://www.mass.gov/bb/h1/fy13h1/os_13/h11.htm

Health Care

Overall spending on health care programs in the Governor's proposed Fiscal Year (FY) 2013 budget grows by about 5.4 percent, more than a percentage point faster than the growth of the overall budget. Underlying that growth are rather different changes in funding that vary depending on the type of spending involved. Spending on MassHealth and other health reform programs that provide health coverage to low-income people increases, largely as a result of enrollment growth and health inflation. Funding for health coverage for state employees is basically level (after taking into account the use of off-budget funds to pay for some costs in FY 2013). Meanwhile, while spending on Mental Health and Public Health programs rises slightly, it does not come close to restoring the funding that these programs have lost since FY 2009.

MassHealth (Medicaid) & Health Reform

The bulk of spending in this category goes to pay for MassHealth programs that provide health coverage for over 1.3 million people in Massachusetts (including Medicaid, which covers nursing home and other care for the elderly). Another significant portion is transferred to the Commonwealth Care Trust Fund and used to support programs that provide coverage to about 175,000 people with incomes above the cut-off for MassHealth coverage. Enrollment in these programs has risen steadily during the recent economic crisis, and more than one in five people in Massachusetts now depend on them for health coverage. Other spending in this category supports safety net hospitals, helps elderly and disabled people pay for prescription drugs and funds activities of the Division of Health Care Finance and Policy. Most of the spending in this category is eligible for federal reimbursement, generally at a rate of 50 percent of the state's spending.

The Governor's budget proposes a total of $12.70 billion on these programs in FY 2013, an increase of 6.9 percent compared to current FY 2012 spending. Taking into account supplemental spending that is likely to be approved in FY 2012, the increases between proposed FY 2013 and estimated FY 2012 spending is actually 4.8 percent. Since FY 2009 spending in this area has grown at an average annual rate of 3.4 percent above inflation. It is worth noting, however, that spending in this area is driven by enrollment increases as well as health cost growth, which has grown nationally at a faster rate than general inflation in recent decades. During the FY 2009—FY 2013 period the state has limited some benefits, cut providers rates and implemented a variety of savings strategies to reduce health care costs; without these the spending increase during this period would have been greater.

MassHealth (Medicaid)

The budget includes an increase in spending on MassHealth programs and administration of 5.4 percent in FY 2013 (5.0 percent when spending that is likely to be approved in FY 2012 is taken into account). The increase would have been higher, thanks to caseload increases and inflation, had the Governor not included a total of $606.3 million (or $303 million net state savings) in cuts and savings that the state expects to implement. These will come in addition to the $588 million the state expects to save in FY 2012; the budget also assumes shifts in funding among MassHealth program line items due to changes in enrollment in various types of coverage and a plan to move some costs for the Commonhealth program into the MassHealth managed care line item (see table at the end of this section for line item details). Savings strategies and cuts include more aggressive procurement of behavioral health and managed care contracts, changes to payment practices for long term care, rate reductions for hospitals and long-term care facilities, and plans to maximize federal revenue for some expenditures. The budget also contains funding for two new MassHealth initiatives, $2.0 million for a new Operations line item meant to improve the timeliness and efficiency of the MassHealth enrollment and redetermination process, in response to recent enrollment growth, and $3.1 million to help implement payment reform strategies, such as creating infrastructure to support bundled payment models.

Commonwealth Care Trust Fund

The Commonwealth Care Trust Fund (CCTF) receives transfers from the state's General Fund, as well as revenue from the cigarette tax, from assessments on certain employers who do not provide insurance and from penalties paid by people who can afford insurance but do not purchase it. The bulk of this funding goes to pay for the Commonwealth Care (CommCare) insurance program for low-income people who are not eligible for MassHealth. Since FY 2009, funds have also gone to support the Bridge program, which was created to provide limited health coverage to a group of legal immigrants (those in the country less than five years), after they were excluded from CommCare. A recent state Supreme Judicial Court decision found the exclusion unconstitutional and ordered the reinstatement of this category of immigrants into CommCare; the order will add about 37,400 new members to CommCare, including 13,400 currently enrolled in Bridge and another 24,000 legal immigrants who have not been able to enroll in Bridge because the program did not accept new enrollees beyond the initial group.

In order to fund the CommCare program in FY 2013, the Governor proposes to raise the cigarette tax by 50 cents, and apply the new rate to all tobacco products; the $72.9 million in new revenue expected from the proposal will be dedicated to the CCTF. The budget also assumes the use of $44.0 million in one-time revenue in the form of a carry-over of estimated FY 2012 fund balances, as well as savings due to aggressive procurement of managed care contracts. The result is that the proposed budget includes a transfer of $737.1 million from the General Fund to the CCTF, a slight decrease compared to the amount transferred in FY 2012 (a total of $745.0 million, including both the initial transfer of $728.0 million and $17.0 million in year-end surplus FY 2011 budget revenue transferred into the CCTF, for use in FY 2012.)

Other Health Reform and Safety Net Spending

Also included in the proposed budget are:

  • A transfer of $186.9 million from the General Fund to a new Delivery System Transformation Initiatives (DSTI) Trust Fund that will provide incentive payments, in accordance with the state's MassHealth waiver agreement with the federal government, to providers for activities that support the development of new payment and health delivery systems, such as better management of chronic conditions and medical home infrastructures. (A similar transfer is included in an FY 2012 supplemental budget currently before the legislature.)
  • An authorization for the Division of Health Care Finance and Policy to spend $2 million from federal reimbursement funds in order to move management of Health Safety Net claims for uncompensated care to MassHealth. (Authorization for use of $6 million for this purpose is included in an FY 2012 supplemental budget currently before the legislature.)
  • A slight decrease in funding for the Prescription Advantage program, which reflects reduced utilization of the program.

Mental Health

The Governor's budget proposes a modest increase of 2.3 percent for mental health programs operated by the state's Department of Mental Health (DMH). Despite this increase, funding for mental health programs remains $66.1 million, or about 9 percent, below what was allocated in FY 2009 (after adjusting for inflation). Cuts since 2009 have affected programs that support education and employment, clubhouses, as well as reducing beds at DMH facilities. (The administration has also announced plans to close the DMH hospital in Taunton, but indicates that patients will be transferred to the new Worcester Recovery Center and to Tewksbury State Hospital.)

With the exception of an emergency services program, funding for core DMH programs—those providing treatment and support to children and adults in the community, as well as funding for in-patient facilities—rises compared to FY 2012. However, the FY 2012 budget relied on the one-time use of contributions from mental health trust funds to support many of these programs. Language in the FY 2012 budget specifically allowed use of these funds for in-patient or community services and authorized transfers of funds to the main adult services line item (5046-0000) and DMH facilities line item (5095-0015). When the use of these one-time funds is taken into account, the increase to these programs is more modest. Finally, the budget includes a substantial increase for a Forensic Services Program that assists mentally ill people who have recently been released from prison and other correctional facilities.

Public Health

The state budget funds a wide variety of public health programs. Some programs protect the health of the general public in Massachusetts, for instance by responding to public health emergencies and ensuring that health professionals and facilities are properly licensed; DPH also operates several public hospitals. Beyond these basic functions, more than half of DPH funding goes to programs that promote health and wellness and prevent disease in specific populations. The fiscal crisis has hit all these programs hard. Since FY 2009 (FY 2009) overall funding for public health has declined by $106.6 million (after adjusting for inflation), or nearly 17 percent (see table at the end of this section for details by program).

For FY 2013 the Governor's budget proposes more or less level funding for public health programs overall—the proposed increase of almost one percent is slightly below what is needed to keep pace with projected inflation. A significant portion of funding ($51.3 million, or nearly 10 percent of the total appropriation for public health) consists of new revenue that would come from the Governor's plan to impose the sales tax on soda and candy. The revenue would be dedicated to specific programs and although some of these programs see increases, most of the new revenue essentially supplants existing resources—in other words, while it likely helps avoid further cuts, it does not fund new initiatives.

Administration, Regulatory and Public Health Hospitals

Funding for DPH administration is basically level, while funding for regulatory activities grows slightly, mainly due to increases in the amount of revenue derived from these activities that the department is allowed to retain and spend. Spending levels on the table at the end of this section reflect adjustments to account for a transfer of some activity from the state laboratory to the state police laboratory (once this is taken into account, funding for the state lab remains level in FY 2013); there has also been a transfer of $750,000 from the main line administrative line item to a retained revenue account for the Division of Health Care Quality Health Facility licensing fees (4510-0712

Children's Health and Prevention Programs

More than a quarter of public health funding goes to programs that support children's health, broadly defined. Programs range from the Women, Infants, and Children (WIC) program, which provides healthy food and nutritional education for children (and their parents), to youth violence prevention grants. Highlights of the Governor's proposed budget include:

  • A slight increase in Youth Violence Prevention Grants, and a new round of funding for the Safe and Successful Youth Initiative, a more narrowly defined violence prevention program that focuses on gun violence in certain cities (the latter program was first funded in a supplemental budget last year; MassBudget includes it in the public health total although it technically falls under the Executive Office of Health and Human Services).
  • A drop of nearly 4 percent in funding for Early Intervention Services (Note that MassBudget numbers are adjusted to reflect a proposed transfer of $4.3 million in payments for early intervention services into a MassHealth line item; we add that amount back into the DPH line item).
  • A slight drop in funding for School-Based Health Programs, which have been cut by about 40 percent since 2009 (after adjusting for inflation). The Governor's budget proposes to fund this program with revenue from the new tax on soda and candy.
  • An increase in the amount that the WIC Program is authorized to retain and spend from revenue it receives from infant formula rebates and other federal measures. The increase will help the program serve more people.

Family Planning & Teen Pregnancy

Both the Family Health Services line item, which funds comprehensive family planning services, and the Teen Pregnancy Prevention Services line item receive cuts of around 4 percent in the Governor's budget, and the budget proposes to fund Family Health Services with revenue from the new tax on soda and candy.

HIV/AIDS

Proposed funding for HIV/AIDS prevention and treatment programs is essentially level with FY 2012, after taking into account supplemental FY 2012 funding that was approved after passage of the initial budget.

Smoking Prevention and Cessation

The Governor's budget proposes a substantial increase—about 41 percent—in funding for smoking prevention and cessation programs, although funding would remain well below FY 2009 levels. Under the proposed budget, the program would be solely funded using revenue from the new tax on soda and candy.

Substance Abuse and Addiction Services

Funding for the Division of Substance Abuse Services increases by 2.3 percent, and the budget proposes to fund 34 percent of the appropriation using new revenue from the tax on soda and candy. Other programs that treat addiction receive level funding. There is no additional funding for the Substance Abuse Services Fund, which was created in a supplemental budget last year and received a $10.0 million transfer from the General Fund. However, funds from the original transfer may continue to be spent through the end of FY 2013; such spending would reduce the apparent drop in overall spending for this category compared to FY 2012.

Other Programs

Funding for the Health Promotion and Disease Prevention line item receives essentially level funding, and remains far below its inflation-adjusted 2009 level. The budget proposes to fund the entire cost of this program using revenue from the new tax on soda and candy.

State Employee Health Insurance

The Governor's budget proposes total funding $1.3 billion for the state share of health and other benefits provided to active and retired state employees, as well as some other groups, through Group Insurance Commission (this figure excludes the cost of health coverage for municipalities who have joined the state's Group Insurance Commission, since they repay those costs; see table at the end of this section for details). As with the other state health insurance programs such as MassHealth and Commonwealth Care, the state has employed a number of strategies to hold down cost increases in recent years, and believes it can continue these strategies, including aggressive procurement and the implementation of new payment models, in FY 2013.

Most funding for state employee health costs comes in the form of an appropriation for the premium and health costs of current employees plus a transfer from the General Fund to the State Retiree Benefits Trust Fund that supports the cost of health coverage for retired employees. As the table above shows, funding for active and retired health costs appears to decline compared to FY 2013. However, the Governor's budget also indicates a plan to use $40.0 million in existing balances in a Group Insurance trust fund to pay for state employee health costs in FY 2013; when this one-time resource is taken into account, funding is basically level. Budget documents also indicate that $4.0 million from trust fund balances will be used to pay for wellness and smoking cessation programs that are expected to reduce health costs for state employees in the long term. These one-time resources come from a fund that holds federal revenue resulting from the state's participation in an early retiree reinsurance program created by the national health care reform law.

In addition to the transfer from the General Fund shown in the table above, the State Retiree Benefits Trust Fund will also begin to receive a portion of revenue from the annual tobacco settlement payment made to the state (in recent years this revenue has been deposited in the General Fund for use in the budget). In FY 2013 10 percent tobacco settlement payment, or $27.6 million, will be deposited in the Fund. The share will increase by increments of ten percentage points each year, until 2022, when 100 percent of the payment will go into the fund. In addition, 5 percent of any capital gains revenue beyond $1 billion will also be deposited in the fund (other capital gains revenue beyond this limit will go into the Stabilization, or Rainy Day, Fund). In both cases these new revenues will help reduce the unfunded liability related to future health benefits promised to state employees.

Human Services

Human services programs in the Governor's budget make up a crucial part of the "safety net," yet because the Governor has had to create a budget under significant financial constraints, these essential services do not receive substantial new funding in Fiscal Year (FY) 2013. Although the Governor highlights "improving children, youth & families services" in his budget proposal, the funding allocated to support services for the Commonwealth's youngest and most vulnerable residents allows for only a few significant innovations or expansions in service. In most instances, FY 2013 funding is essentially level with FY 2012, with several important programs experiencing significant cuts, and others barely staying level with FY 2012 when considering the impacts of inflation. Moreover, looking over the longer term and comparing funding in the Governor's proposal with pre-recession levels, funding for services for vulnerable children and their families has been cut substantially over time.

Children, Youth & Families

The Governor's budget includes a few new funding initiatives for children, youth, and families, although total funding growth barely exceeds inflation and does not maintain pace with pre-recession funding levels.

A major new initiative in the Governor's budget is $2.1 million in the Department of Youth Services for an alternative lock up program. This program—which up until now had been funded only with limited federal dollars—is designed to provide a safe (non-police) environment for alleged juvenile offenders awaiting court appearance. Current federal law restricts police departments from holding juveniles for more than six hours, and in any case many police department facilities do not have appropriate holding areas for children. This funding will allow for the Department to manage funding for the four existing community-based secure and appropriate placements for children awaiting arraignment. Previously, these federal grants had been managed by the Executive Office of Public Safety.

The Department of Youth Services (DYS) receives a total of $155.3 million, a 7.8 percent increase over FY 2012 current funding levels. This total include an increase in funding for residential services for the detained population, from $18.3 million to $21.4 million, and an increase in residential services for the committed population, from $97.6 million to $102.8 million. The Administration does not anticipate a significant change in departmental caseload, but these increases will support an across-agency initiative to standardize provider rates for the various human service agencies.

Also included in the Governor's budget is an issue brief outlining the Administration's concerns about a fragmented service delivery system for vulnerable children and their families. It is true, in fact, that families seeking services for their children are often confronted with a confusing array of seemingly-overlapping agencies and programs. The Governor last year convened a Children, Youth, and Families Advisory Council which developed a series of recommendations to begin the process of improving program coordination. The Governor's budget includes a new line item with $3.0 million within the Executive Office of Health and Human Services to fund the recommendations of this group, and language in an outside section of the budget specifies that the coordination of services would focus on information and data sharing, while attempting to maintain appropriate privacy protections. Of particular note in this initiative is that the intent is to incorporate data-sharing not just among the health and human services agencies and programs, but also schools.

The Department of Children and Families (DCF, formerly DSS) receives $770.9 million in the Governor's budget, compared to $744.3 million in the FY 2012 current budget, a 3.6 percent increase. This increase will allow the department to begin implementing a statewide initiative to standardize and increase human service provider rates across various departments, including a rate increase for foster care providers.

Family support and stabilization services receive $44.6 million in the Governor's budget proposal, a 12.1 percent increase over FY 2012 current funding levels, and the relatively largest increase throughout the department. Even though there are more children receiving kinship-based care and support than those in out-of-home placements, family support funding has historically lagged well behind funding for out-of-home care.

Disability Services

Funding for individuals with disabilities barely keeps pace with inflation in the Governor's budget proposal, and does not keep pace with the anticipated need for services felt by the growing numbers of young adults leaving special education and needing extensive support services in the community. The Administration has repeatedly stated a commitment to community-based services, but some of the line items funding community-based supports for persons with disabilities have been cut substantially over the past few years, although there continues to be a shift in funding away from the state-run institutions. Adults with disabilities seeking employment are particularly hard hit by ongoing funding reductions in the Departments of Developmental Services and the Mass. Rehabilitation Commission.

Within the Department of Developmental Services, funding for transportation—one of the key determinants of whether a disabled adult is able to maintain employment or take part in community activities—is shifted from its own line item into community services line item, but is cut by close to 10 percent. The Administration estimates that approximately 1,040 disabled adults will lose transportation services with this funding cut.

The biggest direct cut, however, goes to the respite (family supports) program. Funding in the Governor's budget is $41.0 million, a $5.5 million cut or 11.8 percent. This cut will affect approximately 1750 families who rely on the community-based supports provided by the respite program. For many families with disabled children, the respite program is the only source of support for afterschool recreational programming or for specialized caregiving.

Services for young developmentally disabled adults Turning 22 in FY 2013 are funded at $5.0 million, level funding with FY 2013, but a substantial reduction (33.9 percent) compared to pre-recession funding levels. The Turning 22 line item supports the entry of young developmentally disabled adults into the adult service system from the special education system, and constraints on this funding limit the number of adults who will receive services as well as the services that they will receive in the future.

The Governor states that funding for community residential supports for developmentally disabled adults includes full residential funding for the young adults entering into the developmental services system, meaning that this $31.3 million increase should be sufficient to maintain current services for the anticipated caseload. The Administration also states similarly that the $10.8 million increase in funding for community day and work services should be sufficient to maintain current servicesreceive full funding in this budget proposal. (Just as the Governor's budget includes transportation funding within the community day and work line item, this line item also includes the final year of funding for the Rolland Court Monitor. The line item breakdown below adjusts for these transfers in order to allow for more accurate year-to-year comparisons.)

For adults with other types of disabilities, the Governor's budget essentially maintains current funding levels, but these levels do not necessarily keep pace with inflation or anticipated need. The Administration acknowledges that the funding in this budget proposal will eliminate community services for approximately 75 deaf and blind adults, and that seven disabled young adults turning 22 in the coming year will now be denied access to services within the Mass. Rehabilitation Commission. (We adjust funding for the central office for the Mass. Commission for the Blind to reflect a shift of funding for the administration of SSI benefits for the blind from that office to the Department of Children and Families—see discussion above.)

Elder Services

The Governor's budget level funds funded community-based long term care services for elders. These home care services, which include a wide variety of supports such as homemakers and transportation assistance help keep the Commonwealth's frail elders in their homes as long as possible. Without additional funding, hundreds of elders are at risk of languishing on a wait list for services. (For information on nursing home funding or the Prescription Advantage program, see the MassHealth & Health Reform section of this Budget Monitor.)

Community-based long term care services include:

  • $133.5 million for home care case management and services
  • $46.5 million for enhanced home care for the frailest and most vulnerable elders
  • $16.6 million for elder protective services, which investigate elder abuse and neglect, and provide money management supports to prevent financial exploitation

The Governor's budget proposal also includes a cut in funding for the elder nutrition programs, from $6.3 million to $4.8 million in FY 2013. This $1.5 million cut could result in the loss of 240,000 free or reduced-price meals for elders. For some elders, the elder lunch programs—which are often run by local councils on aging—are the only guaranteed healthy meal or opportunity for socialization.

Transitional Assistance

Funding for transitional assistance programs is significantly affected by anticipated caseload levels. The Governor's budget for Transitional Assistance for Families with Dependent Children (TAFDC) grants, and for the other cash assistance programs assumes a slight drop in caseload in FY 2013. The TAFDC grant funding includes language allowing for a clothing allowance ($150 in FY 2012), but without a specified amount. Unless there are significant unanticipated changes in caseload, it is likely that the amount of the clothing allowance will not be affected.

Also included in the TAFDC grant total is a $40 per month transportation allotment for "non-exempt households" meeting "specified work program requirements." Although this essential benefit makes it easier for certain TAFDC participants to get to and from work, this benefit is not available for participants not meeting all of the necessary work program requirements, thereby potentially limiting their ability to become fully employed. There is also funding for transportation for persons in education, training and job search within the Employment Services Program.

The Administration anticipates a drop in funding for Emergency Aid to Elders, Disabled and Children (EAEDC), based on an assumed drop in caseload. Funding in the Governor's budget drops from $89.0 million in the FY 2012 budget to $88.3 million in FY 2013.

Funding for the state supplement to Social Security Income (SSI) goes from $222.2 million in FY 2012 to an equivalent of $229.8 million in FY 2013. The Governor's budget actually includes $237.9 million for the SSI supplement, but this total includes a $8.1 million transfer of funding from the Mass. Commission for the Blind, which in past year's separately accounted for the state SSI supplement for the blind. In FY 2013, the Governor recommends consolidating the funding for these two groups of people, and also recommends shifting the administration of the program from the Social Security Administration to University of Massachusetts Medical Center. The University already contracts with the state to handle substantial administrative responsibilities for various health and human service programs.

Unlike the TAFDC or EAEDC caseloads, the Administration anticipates that the SNAP (Food Stamp) caseload will continue to rise as it has over the past years. The Administration projects being able to fund additional caseworkers, and the Governor also proposes $3.2 million for efforts to increase food stamp participation, an increase of 8.1 percent over FY 2012 current funding levels, as well as $1.2 million for a state supplement to SNAP benefits for certain working families.

Other Human Services

The Governor's budget has made expanded funding for services for veterans a priority in his FY 2013 budget. His budget includes an increase in the benefits provided to veterans, as well as an increase in the reimbursement to cities and towns that house homeless veterans' shelters. The Governor also proposes consolidating funding for the veterans' cemeteries.

Funding for the Emergency Food Assistance Program in the Governor's budget is $11.5 million. This is level with FY 2012 current budget totals, in spite of the continuing demand at food pantries throughout the state for emergency food assistance. Level funding for this line item is—for all intents and purposes—a cut, since food prices have risen (based on regional consumer price index analyses) by more than 4 percent over the past year.

Infrastructure, Housing & Economic Development

Overall, the Governor's Fiscal Year (FY) 2013 budget proposes a very small increase to programs within the MassBudget category of Infrastructure, Housing & Economic Development. In fact, if it were not for a one-time deposit of $38.0 million to the Infrastructure Development Fund in FY 2012, the Governor's FY 2013 proposal would instead reflect an increase of $22.5 million. A modest increase of this size, however, is likely insufficient to keep up with the rising costs. The cost of providing baseline homeless supports, for instance, has risen dramatically during the ongoing economic crisis, as the number of homeless families has grown.

The Governor's budget maintains a broad reorganization of the state's economic development agencies initiated in FY 2012, and it plans a deposit of $10.0 million into the Workforce Competitiveness Trust Fund pending sufficient surplus funds leaving the current fiscal year. In his housing budget, the Governor recommends reducing spending on shelters by denying many low-income homeless families access to shelters, while simultaneously increasing funding for housing programs to help support these families with permanent housing solutions. Additionally, the Governor proposes near level funding overall for transportation related line-items, with the vast majority funding operations and debt service costs at the MBTA.

Economic Development

The Governor's FY 2013 budget for Economic Development reflects a reduction of $32.7 million from current FY 2012 levels, although this reduction is driven almost entirely by a one-time deposit of $38.0 million into the Infrastructure Development Fund in FY 2012. If it weren't for this one-time increase to the FY 2012 budget, the Governor's proposal for Economic Development would actually show an increase of $5.2 million over current FY 2012 levels.

The Governor's budget maintains a reorganization of economic development programs that was initiated through the FY 2012 budget.1 A new agency, the Massachusetts Marketing Partnership (MMP), now coordinates efforts to promote the state domestically and internationally as an attractive, competitive, and innovative state in which to do businesses. Total funding for the MMP is proposed by the Governor to increase by $845,000 to $9.0 million for FY 2013. For detail on related line items, please see the note "MMP" in the table at the end of this subcategory.

This year's economic development reorganization also identified the Massachusetts Office of Business Development (MOBD) as the lead business development agency, and the Governor proposes to continue this arraignment, increasing funding by $131,000.

The FY 2012 budget also reassigned line item numbers for programs administered by the Executive Office of Labor and Workforce Development. The Governor's budget continues the new line item structure and proposes to fund these programs in total at $25.0 million, an increase of $674,000 from current FY 2012 levels. For detail on related line items, please see the note "LWD" in the table at the end of this subcategory.

Finally, the Governor's FY 2013 budget directs up to $10.0 million of FY 2012 surplus funds to help recapitalize the Workforce Competitiveness Trust Fund (WCTF). Since this appropriation is contingent upon the existence of sufficient surplus money at the end of FY 2012, it does not show up in this Budget Monitor's FY 2013 totals. The WCTF was created by the Workforce Solutions Act/Economic Stimulus Bill of 2006 and funds workforce training programs in a range of employer, nonprofit, and vocational settings.

Housing

The Governor's Fiscal Year (FY) 2013 budget recommends spending almost $375 million on housing programs, an increase of more than $25 million over current spending in FY 2012. The Governor's budget is also 27 percent higher than the FY 2009 General Appropriations Act (GAA) after adjusting for inflation. With the onset of the Great Recession, as many low-income families lost their jobs and homes and sought help from the state-supported family shelter system, state spending on housing has increased dramatically.

The Governor's FY 2013 budget recommends that the state continue to implement the Housing First model recommended by the Interagency Council on Housing and Homelessness in its 2009 report. The Governor's FY 2013 budget proposes to continue shifting funding away from more costly family shelters and into housing supports for low-income homeless families.

About the same time that the state began implementing the Housing First model the economic crisis of 2008 hit and demand for Emergency Assistance (EA) shelter and services skyrocketed.2 Despite efforts by the state to reduce spending on EA, as more low-income families became homeless the state has increased funding for the program in each fiscal year beginning in FY 2009.

In FY 2009, the EA program served low-income homeless families living at or below 130 percent of poverty. The FY 2010 General Appropriations Act (GAA) lowered the eligibility of families served by EA to those living at or below 115 percent of poverty. Yet, as the effects of the recession grew, demand for the program increased as many low-income families lost their housing because they had been evicted, were asked to leave or were living in overcrowded accommodations or for other reasons.3 In another effort to lower the cost of EA and further implement the Housing First model, the FY 2012 GAA no longer provided shelter to every low-income, homeless family who in previous years was eligible to receive help through the EA program. Instead, the FY 2012 GAA limited EA to a certain population of low-income, homeless families4 and created a new short-term housing assistance program, Home Base that would help most other homeless families living at 115 percent of poverty to find permanent housing. The FY 2012 GAA did, however, include a provision, allowing families served by Home Base to temporarily stay in shelters if they were unable to secure permanent housing immediately. Despite these efforts, as the chart above indicates, during the course of FY 2012 the Legislature had to increase funding for EA by $21.0 million and Home Base by $19.4 million since the passage of the 2012 GAA.

In his FY 2013 budget the Governor makes a number of recommendations to lower state spending on shelters, by prohibiting many low-income homeless families who are currently eligible for EA, from receiving shelter and services. Instead the Governor's budget proposes increasing funding for state-supported housing programs designed to help low-income families find permanent housing or prevent them from becoming homeless. The restrictions included in the Governor's proposal could deny shelter to low-income homeless families who are unable to find adequate housing. Some of his FY 2013 budget proposals include:

  • Reducing funding for Emergency Assistance (EA) by $18.4 million below the amount the state has budgeted for FY 2012 and providing shelter only to a particular population of low-income homeless families. As stated above, under current law EA is generally limited to families living at or below 115 percent of poverty who have lost housing due to domestic violence, fire or other natural disaster or whose head of household is under 21. If, however, low-income, homeless families who are only eligible for Home Base are unable to find housing they are currently allowed to live in EA shelters temporarily. In his FY 2013 budget, the Governor proposes limiting EA services. First he recommends that the state only provide shelter for a maximum of 8 months except in cases where a family with a disability qualifies for an extension. The Governor also proposes that EA serve only a particular population of homeless families similar to those in current law,5 and no longer allows other low-income homeless families who cannot find permanent housing through Home Base to stay in EA shelters.
  • Increasing funding for the short-term housing assistance program, Home Base, by $25.4 million above the current FY 2012 budget. This increase will pay for housing supports to families who are currently receiving assistance through Home Base and to families who in the Governor's budget proposal are eligible for EA. Under the Governor's FY 2013 proposal, low-income homeless families who are not eligible for EA and apply for Home Base after in July 1, 2012 (the start of the FY 2013 fiscal year) will not qualify for rental assistance through Home Base. As a result, these low-income, homeless families will no longer receive help from the state unless they can find housing through other resources noted below including MRVP, RAFT or securing a rental apartment in a public housing facility. The Governor's budget also recommends that rental assistance provided though Home Base be reduced from the current 36 months down to 24 and that rental assistance be capped at $4,000 per year except under limited circumstances. Under current law rental assistance can exceed the $4,000 annual limit for families living in parts of the state, like the Greater Boston region, with high rental costs.
  • Boosting funding for the Massachusetts Rental Voucher Program (MRVP) which provides housing vouchers to low-income renters. The Governor's budget also recommends setting the income-eligibility limit at 50 percent of the area median income which would make MRVP available to renters with slightly higher incomes who live in communities where rents are also higher than in other parts of the state. Currently, MRVP vouchers are provided to renters living at or below 200 percent of poverty. The state no longer issues new vouchers because of inadequate funding. Documents accompanying the Governor's budget release, states that the $10.0 million increase in MRVP will allow the state to support an additional 800 vouchers in FY 2013.6
  • Increasing state funding for local public housing authorities by $4.0 million. According to documents accompanying the Governor's budget, this increase will allow 48,000 families to remain in state public housing. In supporting documents accompanying his budget, the Governor also outlines steps he has taken to improve how housing authorities are managed and overseen.7 The Governor also filed legislation, accompanying his budget, to prohibit local housing authorities from paying members of their boards.
  • Providing $8.8 million for Residential Assistance for Families in Transition (RAFT). The majority of the RAFT funding will help prevent low-income families, those living below 15 percent of the area median income, from becoming homeless. RAFT will provide these families with one-time payments either to stay in current housing or to secure new housing if they can show they have the income to remain in that housing over the long term. For the past several fiscal years, because the federal stimulus bill provided temporary funding for a rapid rehousing program that was similar to RAFT, the state shifted its funds elsewhere. Now that the federal funds have run out, the Governor recommends restoring funding for RAFT.

Transportation

The Governor's FY 2013 budget provides $1.13 billion for transportation lines items and operating transfers. This represents a small decrease (0.7 percent) from current FY 2012 funding levels, though when cost inflation is taken into consideration, we can assume the result is a somewhat larger decline in actual purchasing power. The large majority ($947.0 million) of the Governor's proposed total would go to fund the Massachusetts Bay Transit Authority (MBTA), both for debt service costs and to help support annual operating costs (see line item details, below). A much smaller amount ($15.0 million) would be provided to the state's 15 Regional Transit Authorities.

The Governor provides $165.2 million to the Massachusetts Transportation Trust Fund (MTTF), a decrease of $14.9 million from current FY 2012 funding levels. The MTTF helps to fund Massachusetts Department of Transportation (MassDOT) functions. These functions include maintaining and improving state roads, highways and bridges; maintaining and improving airports, rail and transit lines; administering the Registry of Motor Vehicles (RMV); and covering specific transportation-related debt service costs. This annual transfer of funds to MassDOT through the MTTF represents only a portion of the total MassDOT budget, which receives additional funds from highway and bridge tolls, gas and sales tax revenues, RMV fees, and other sources.

Commercial Regulatory Entities


1For more detail on the FY 2012 reorganizations please see MassBudget's Budget Monitor: The Fiscal Year 2012 General Appropriations Act.

2Between January 2009 and January 2010 the caseload for the Emergency Assistance program increased from 1,928 to 2,580 families. This and other EA caseload information is available at: http://www.mass.gov/hed/housing/stabilization/

3The most recent Legislative report available on the Department of Housing and Community Development's (DHCD) website is from December 2010. While the majority of families lose their housing due to the reasons stated above, others become homeless because of domestic violence, a fire or because their current housing is deemed unhealthy or unsafe. The December 2010 report is available at: http://www.mass.gov/hed/docs/dhcd/hs/2010dec.pdf

4The FY 2012 GAA stated that EA shelter and services would be limited to families who left housing due to domestic violence, fire or other natural disaster or if the head of household is under 21.

5In the Governor's FY 2013 budget, EA would serve families who lose housing through no fault of their own including domestic violence, fire or other natural disaster or, eviction due to loss of income.

6In The Governor's Issue Brief accompanying his FY 2012 budget Initiatives to End Homelessness.

7The Governor's Issue Brief accompanying his FY 2012 budget Reforms to Local Housing Authorities.

Law & Public Safety

After adjusting FY 2013 funding amounts to align with FY 2012 line item structures (in order to make a proper apples-to-apples comparison between the two years), the Governor's Fiscal Year 2013 budget provides $2.39 billion in funding for Law& Public Safety programs. This amount is an increase of $105.6 million (or somewhat less than 5 percent) over current FY 2012 levels. As in past years, the Governor again proposes making a number of significant changes to the state's legal and corrections systems. The most notable of these proposals include the following:

  • Consolidation of parole and probation functions with a new Department of Re-entry and Community Supervision.
  • Consolidation of funding for the trial courts into the Office of the Chief Justice for Administration and Management (CJAM).
  • An increase in the share of indigent defense cases handled by public defenders and improved indigency verification systems.
  • Closure of one medium security prison in combination with sentencing reforms and improved re-entry programming aimed at safely reducing the prison population.

Courts & Legal Assistance

Adjusting to allow for an apples-to-apples comparison with current FY 2012 spending, the Governor's FY 2013 budget proposes $627.5 million for Courts & Legal Assistance. This is an increase of $36.0 million or 6.1 percent over the current FY 2012 funding level. As the Governor has done in past budgets, in his FY 2013 budget he again proposes consolidating most funding for the various trial courts into the Office of the Chief Justice for Administration and Management (CJAM) (see table, below). Making the necessary adjustments to account for this proposed consolidation, the Governor's FY 2013 budget provides an increase of 1.9 percent for the CJAM itself, and increases funding for the combined CJAM and various trial courts (with adjustments for related collective bargaining agreements) by 9.2 percent over current FY 2012 levels. Relative to the amounts provided in the FY 2009 GAA, however (the last budget to be drawn up before the Great Recession really took hold in Massachusetts), the Governor's FY 2013 proposals represent very significant declines in funding for these accounts.

Another notable proposal affecting Law & Public Safety programs is the Governor's call to increase the share of indigent defense cases handled by public defenders (rather than by private bar attorneys (PBAs)) to 50 percent. This proposal extends a series of reforms adopted in the FY 2012 budget, in which the Committee for Public Counsel Services (CPCS) was directed to hire additional public defenders and to assign 25 percent of the indigent defendant caseload to public defenders (prior to this reform, approximately 10 percent of cases were handled by public defenders, with the other 90 percent going to PBAs). Documents accompanying the Governor's FY 2013 budget indicate that the administration projects this shift will produce $19.6 million in savings in FY 2013 relative to anticipated spending on the CPCS in FY 2012.

Reflecting this proposed shift toward increased use of public defenders, the Governor's FY 2013 budget reduces private counsel compensation by $25.1 million, while CPCS funding is increased by $25.4 million (see table, below). The result is that total spending on indigent defense related accounts remains essentially flat (it increases by $310,000) under the Governor's FY 2013 proposal relative to current FY 2012 levels. The projected $19.6 million in savings is based on the administration's estimate of total funding ($120.5 million) that will be required for Private Counsel Compensation in FY 2012 (actual current FY 2012 spending stands at $101.1 million).

In conjunction with the shift from PBAs to public defenders, the Governor's budget also includes measures to improve compliance with the state's new indigency verification process (see further discussion under "Prisons, Probation & Parole"). By providing a publically-funded defense only to those defendants who verifiably meet the income (and other) eligibility criteria, the administration hopes to reduce costs further.

Finally, the Governor provides $12 million for the Massachusetts Legal Assistance Corporation (MLAC) in his FY 2013 budget, an increase of $2.5 million over current FY 2012 levels. MLAC provides low-income people with legal information, advice and representation on critical, non-criminal legal problems.

Law Enforcement

After adjusting FY 2013 funding amounts to align with FY 2012 line item structures and making adjustments for related collective bargaining agreements (which together allow us to make a proper apples-to-apples comparison between the two years), the Governor's FY 2013 budget provides $345.1 million, an increase of $19.1 million or 5.9 percent over current FY 2012 funding levels. This $19.1 million is a net total figure composed of the numerous, smaller increases provided to most law enforcement accounts, as well as decreases proposed for several accounts (see the line-item summary table at the end of this section for the complete listing). The bulk of the additional funding, $12.7 million, went to the Department of State Police Operations, resulting in an increase of 4.8 percent over current FY 2012 funding levels (see table, below). At $8.0 million, Shannon Grant funding is held constant in the Governor's budget relative to the funding available in FY 2012.

Prisons, Probation & Parole

After adjusting FY 2013 funding amounts to align with FY 2012 line item structures (in order to make a proper apples-to-apples comparison between the two years), the Governor's FY 2013 Budget proposes $1.22 billion for prison, probation and parole functions, an increase of 4.3 percent over current FY 2012 funding levels. In his budget, the Governor proposes a number of significant changes and reorganizations to related departments and programs. Among the most notable of these proposals is a renewed call to consolidate probation and parole functions within a new Department of Re-entry and Community Supervision (the Governor made a similar proposal in his FY 2012 budget, which the Legislature chose not to adopt).

Under the Governor's proposal, the new department would receive $115.0 million (through line items 8940-0100 and 8940-0200) and would be housed within the Executive Branch, thus removing responsibility from the Judiciary for the oversight of probation and parole functions. The Governor further proposes additional specific funding of $4.0 million for a new Indigency Verification Program (8940-0101) to be administered by the Department of Re-entry and Community Supervision. The program's purpose would be to ensure that all defendants applying to receive a publically-funded defense actually meet the criteria for income and asset limits, based on tax, unemployment and motor vehicle registration records.1

(Because MassBudget reassigns the funding proposed for these items to existing line-items, funding for these items is listed as zero in the table at the end of this subcategory discussion.)

When the numbers are adjusted (to align FY 2013 funding amounts with FY 2012 line item structures and to reflect associated collective bargaining agreements—both of which allow for a proper apples-to-apples comparison between the two years), the Governor's FY 2013 budget proposes a reduction in overall funding for probation and parole services of $5.4 million or 3.4 percent from current FY 2012 levels and 25 percent from the FY 2009 GAA (see table below).

Another notable proposal the Governor makes is for the closure of one medium security prison, in combination with various sentencing reforms and the creation of special "pre-release" units, where soon-to-be-released offenders would have access to re-entry programming (including help with job, housing and transportation issues). The sentencing reforms—currently before the legislature—would step down the security classifications of some nonviolent offenders, allowing them to be housed in lower security settings, and would reduce mandatory sentence lengths for some offenders. The Governor's budget documents indicate that if enacted, these reforms would save the state $10 million annually in prison costs.

In conjunction with the creation of "pre-release" units, the Governor also proposes increasing supervision of and services for offenders upon their re-entry into the community. In order to do so, the Governor more than triples specific funding for Re-Entry Programs within the Department of Corrections (see table, above). The goal of these reforms, according to the Governor's budget documents, would be to improve public safety and decrease recidivism (again helping to reduce the state's prison population).

The Governor's budget documents indicate that, taken together, these various reform measures will reduce the prison population sufficiently to allow for the closure of one state prison. This step would permit the elimination of 118 correctional officer positions and thereby save the state $8.9 million in annual costs, the administration estimates.

In the Governor's FY 2013 budget, he provides $549.0 million for the Department of Corrections line items, an increase of 3.2 percent (see table, above). For the County Sheriffs' Departments, the Governor provides an adjusted $509.4 million. Current FY 2012 spending for the sheriffs stands at $477.0 million, but this figure does not include funds from a supplemental spending bill awaiting the Governor's signature that would provide roughly another $26.9 million in combined funding to the fourteen county sheriffs' offices in FY 2012. Including these funds in the FY 2012 total would bring final FY 2012 spending on sheriffs to approximately $504 million, or about $5 million less than the Governor is proposing for FY 2013. Given cost inflation, the Governor's proposal represents an actual decline in funding for the sheriffs in FY 2013.

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Prosecutors

After adjusting FY 2013 funding amounts to align with FY 2012 line item structures (in order to make a proper apples-to-apples comparison between the two years), the Governor's FY 2013 budget proposes $138.5 million for prosecutors, nearly level-funding (a 0.3 percent increase) from current FY 2012 levels. When inflation is taken into account, this translates into a modest decrease for these programs overall.

Most of the individual District Attorneys' offices are level-funded, though several receive small decreases (see the line item list at the end of this subcategory for details). The Office of the Attorney General (AG) itself would receive a modest decrease in funding (2.9 percent) under the Governor's FY 2013 proposal, while the Wage Enforcement Program within the AG's office would see a an increase of 2.4 percent. Looking at total combined funding for all the line items related to the AG's office (see table, below), one can see that the Governor is proposing a modest increase over current FY 2012 levels, but that relative to the FY 2009 GAA, funding for the AG's activities have dropped substantially.

The Governor also proposes a new initiative within the AG's office for Litigation and Enhanced Recoveries. According to the Governor's budget documents, the $1.8 million proposed for this initiative would fund "existing and future litigation devoted to obtaining significant recoveries for the Commonwealth."2

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Other Law & Public Safety

This subcategory covers an array of departments and programs including the Executive Office of Public Safety; the Department of Fire Services; the Massachusetts Emergency Management Agency, elevator and boiler inspections; nuclear safety; and the state's Military Division. Overall, the Governor proposes spending $49.7 million for these functions in FY 2013, a 2.0 percent decline in funding from current FY2012 levels. For several program areas, however, the proposed percent change in funding is of considerably greater magnitude.

The Governor proposes reducing funding for Fire Fighting Services by over 12 percent, a decrease of $2.1 million (see table below for details). At the same time, the Governor proposes increasing funding for the state's Military Division by almost 8 percent, and for the Massachusetts Emergency Management Agency by over 13 percent from current FY 2012 levels. Relative to FY 2009 GAA funding levels, however, all three of these areas specifically—and Other Law & Public Safety in general—would receive decreased funding under the Governor's FY 2013 budget proposal.


1 Governor's FY 2013 Budget website: http://www.mass.gov/bb/h1/fy13h1/brec_13/act_13/h89400101.htm?q=8940-0101

2 Governor's FY 2013 Budget website: http://www.mass.gov/bb/h1/fy13h1/brec_13/act_13/h08100061.htm?q=0810-0061

Local Aid

The Governor's budget proposes to fund the full MassBudget category of Local Aid at $867.3 million, a cut of $68.2 million from current Fiscal Year (FY) 2012 levels. Much of this cut could be reversed if sufficient FY 2012 surpluses allow for funding a supplemental $65.0 spending plan for Unrestricted General Government Aid also included in the Governor's budget (see General Local Aid section below). The vast majority of MassBudget's Local Aid category funds general local aid provided to cities and towns, helping them fund vital local services such as police and fire protection, parks, and public works. MassBudget treats education aid separately in our Education section, although cities and towns often use a portion of their general local aid to help fund education as well.

General Local Aid

The Governor's FY 2013 proposal for Unrestricted General Government Aid (UGGA) mirrors the plan adopted in FY 2012. UGGA will be funded at the same baseline level of $834.0 million. And, in a maneuver that is similar to last year, any surplus in the general fund at the end of the current year will serve as a supplement (up to $65.0 million). In FY 2012, that supplement was sufficient to fund the full $65.0 million amount, and it is quite possible that the same would be true in FY 2013, bringing total UGGA funding back up to $899.0 million (equal to the final amount spent in both FY 2012 and FY 2011).

It should be noted that even if UGGA is funded at the full $899.0 million level in FY 2013, this is still well below the historical level. In fact, implementation of the Governor's proposal would represent an inflation-adjusted cut to general local aid of 37 percent between FY 2008 and FY 2013 (see graph below). Even if the full $65.0 million supplement were to come through for FY 2013, the Governor's proposal deepens the ongoing trend of general local aid cuts by not making an adjustment for inflation.1

While it is unlikely that any new revenue will be available for FY 2013, the November 2011 casino law is expected to generate new general local aid revenue once casino licenses have been sold and facilities are up and running. While legalized casino gambling facilities will provide some new tax revenue, the state also expects lottery revenues to decrease somewhat as some gambling activity shifts from lottery sales to casinos. For both of these reasons, the new gambling law distributes a portion of future gambling tax revenue to cities and towns in the form of new general local aid. All tax revenue from the slots-only facility and 20 percent of tax revenue from the three full-scale casinos will go into a new Gaming Local Aid Fund and into a related Local Aid Stabilization Fund. Revenue distributed from these funds will be distributed to cities and towns as Unrestricted General Government Aid, but since UGGA funds have never been distributed using a formula, a policy decision will need to be made for distributing any of this new aid.

Other Local Aid

The Governor's FY 2013 proposal continues funding of $7.0 million for a second year of Community Innovation Challenge Grants to support one-time or transition costs related to regionalization and other efficiency initiatives within local governments. While this proposal is $2.1 million below current FY 2012 levels, the FY 2012 appropriation included several earmarks, dedicating $4.0 million of the total $9.1 million for this program in particular. For the program's first year, the state has received 100 applications from cities and towns across Massachusetts and will award winners in February 2012.

The Governor's budget also includes about $200,000 for a new municipal government performance management, accountability, and transparency program to be run by the Collins Center for Public Management at UMass Boston. Since this funding is included as an earmark in the Collins Center's line item, this funding shows up in the MassBudget category of Higher Education.


1For more information on the history of general local aid, see MassBudget's recent Demystifying General Local Aid in Massachusetts.

Other

Constitutional Offices

This subcategory includes funding for the Secretary of State, the State Auditor, the Registrars of Deeds as well as various other offices and commissions. In his budget for FY 2013, the Governor proposes creating a new account within the Special Investigations Unit at the Auditors Office, with almost $500,000 in funding, to ensure that the public benefits programs supported by the state are distributed properly.

Debt Service

The Governor's FY 2013 budget provides $2.43 billion for debt service lines items, an increase of $173.3 million or 7.7 percent over current FY 2012 levels.

Executive & Legislative

The Governor's FY 2013 budget recommends level funding most accounts for the executive and legislative branch. Now that redistricting is complete for the State Legislature, the Governor's budget does not include funds for those accounts.

Libraries

The state supports public libraries in Massachusetts through a number of programs. The two largest are the Public Libraries Local Aid account which provides direct state aid to local libraries and the Regional Libraries account which supports regional library networks including the inter-library loan and electronic references resources. The state also provides funding for the Talking Book program which is housed in the Perkins School for the Blind serving the eastern part of the Massachusetts and the Worcester Public Library in the western part of the state.

Except for a $114,000 increase in funding for the Board of Library Commissioners indicated in the table below, the Governor's budget recommends that state aid for public libraries receive level funding in Fiscal Year (FY) 2013. Given that inflation increases the costs of providing the same level of services from one year to the next, the Governor's recommendation for level funding library programs in FY 2013 actually represents a cut. Since the onset of the fiscal crisis, total funding for libraries, when accounting for inflation, has been cut by more than 41 percent.

Pensions

Annual pension funding is governed by state law (Chapter 32§22C of the Massachusetts General Laws), which requires an annual transfer to the state Pension Liability Fund and sets out a funding schedule, which is periodically updated. The most recent update was contained in a section of the FY 2012 budget that extended the timeframe for paying down the state's pension liability to 2040 and set out a schedule of specific payments through FY 2017. In accordance with that schedule, the proposed FY 2013 budget assumes a transfer of $1.55 billion dollars to the Pension Liability Fund.

The budget also contains outside section language specifying that the FY 2013 pension transfer is intended to cover the cost of providing retirees with a 3 percent cost-of-living increase in FY 2013. This provision, which is regularly included in the state budget, is calculated on a base that is defined in state statute. In FY 2012 that base was $12,000 per year, meaning that retirees could receive an increase of up to $360 per year. Recent pension reform legislation increased that base to $13,000 (an increase of $30 to $390 per year).

Other Administrative

The Other Administrative subcategory includes accounts that cover a wide range of government activities. This subcategory includes one-time funding to help communities recover from major storms or floods, various state commissions as well as funding for the Executive Office of Administration and Finance (A&F).

The FY 2012 General Appropriations Act (GAA) created a new office of Commonwealth Performance, Accountability and Transparency (CPAT) within A&F. The Governor recommends providing this office with an additional $150,000 to continue its efforts to enhance the functioning of state government. Last year CPAT was charged with improving the way that state agencies coordinate similar activities such as information technology, maximizing the grants from the federal government and assuring that the state delivers services in the most effective and efficient matter possible. CPAT was also charged with improving transparency. In 2011 it launched its new Open Checkbook program to give the public a better understanding of how the state spends its resources. In FY 2013 CPAT will continue to coordinate and improve government services by working with state agencies to develop strategic plans and goals that align with the Governor's priorities including lowering the achievement gap, creating jobs, and reducing state spending on health care.

In his budget proposal the Governor also estimates $30.0 million in savings from reducing 400 positions within the Executive Branch.

Revenue

The Governor's FY 2013 budget is built upon the assumption that the Commonwealth will be able to rely on close to $760 million in new revenue in Fiscal Year (FY) 2013. Of this total, $214.5 million can be described as ongoing revenue (in other words, providing an ongoing revenue stream beyond FY 2013), while $545.0 million is "one time" (i.e., available only in FY 2013). Like permanent changes in spending levels, ongoing revenue changes affect the state's structural budget deficit, whereas temporary revenue changes are useful for balancing the budget only in the current fiscal year.

Tax Revenues

The Governor's budget proposes $227.3 million in tax initiatives, composed of $181.4 million in ongoing revenues, and $45.9 million in one-time tax revenues.

Chief among the Governor's revenue proposals are three tax initiatives that bring in revenue and improve public health. The first eliminates the current sales tax exemption for candy and soda. The two other proposals raise taxes on cigarettes and update the Commonwealth's tobacco tax laws as applied to other tobacco products (including cigars and "smokeless" tobacco products). In addition, the Governor proposes several other measures that would increase tax collections for the Commonwealth.

The Sales Tax Exemption for Candy and Soda

In Massachusetts, most food items are exempt from the sales tax. At present, soda and candy purchases are included in this exemption. The Governor has proposed eliminating this exemption for soda and candy, a change that would bring in $61.5 million in FY 2013. Approximately $10 million of this new sales tax revenue would be transferred, according to pre-existing statute, to the MBTA and School Building Authority. The Governor has proposed dedicating the remaining $51.5 million to a Health and Prevention Trust Fund which would fund public health and wellness programs targeting health risks such as smoking and obesity.

In general, soda and candy do not fit most people's definition of food, suggesting that a tax break for these non-essential items may not be appropriate. In addition, studies have linked consumption of these items to obesity,1 and obesity is a substantial problem for adults and children, both nationally and here in Massachusetts. About one in three children and six out of ten adults in Massachusetts are overweight or obese.2 Studies show that obese children are more likely to suffer from other illnesses and to miss more school; they also are at increased risk of being obese as adults.3 Obese adults are more likely to suffer from a variety of illnesses including diabetes, heart disease and some types of cancer.4

Eliminating the sales tax exemption on soda and candy means that the Commonwealth no longer would be providing an implicit subsidy for these items5 which, like all subsidies, reduces costs for the consumer and thereby increases consumption. In addition, greater funding for public health and wellness programs (resulting from the increase in sales tax revenue) can help to reduce statewide levels of obesity. Reductions in obesity could have an important positive effect on the lives of many individuals and potentially on overall health care costs here in Massachusetts.6 It is worth noting, however, that the sales tax is a "regressive" tax, collecting a greater share of the household income of low and moderate income families than of high income families.7

Cigarette Taxes and Taxes on Other Tobacco Products

The Governor has proposed a $0.50 per pack increase in the cigarette tax (increasing the tax from $2.51 to $3.01) which the administration estimates would bring in $62.5 million in FY 2013. In addition, the Governor proposes a measure that would equalize tax rates on cigars and "smokeless" tobacco products with the rate applied to tobacco sold in the form of cigarettes. (Smokeless tobacco products include items such as chewing tobacco, snuff, and nicotine-containing breath mints and lozenges.) This update to the tax laws governing other tobacco products would generate another $10.4 million, the Governor estimates. The Governor proposes directing these revenues to the Commonwealth Care Trust Fund, which pays for the state's Commonwealth Care insurance program and the Health Safety Net.

In addition to new revenues, increases in cigarette and tobacco taxes may have a small impact on levels of tobacco consumption in Massachusetts for both adults and youth (research suggests that increases at the level proposed by the Governor are likely to produce only limited declines in consumption, particularly among adults).8 Over 16 percent of Massachusetts adults are current smokers and over 9 percent of youths ages 12-17 are current smokers.9 In Massachusetts in 2010, smokers purchased more than 220 million packs of cigarettes.10 The economic costs associated with smoking (including direct medical costs and lost productivity) are estimated at over $10 per pack, suggesting that a substantial impact to the state economy results from cigarette and other tobacco use in Massachusetts.11 Any reduction in usage due to higher user costs (resulting from the proposed tax increases) is likely to improve individual health and reduce negative impacts on the state economy related to tobacco use.

FAS 109

As a one-time revenue proposal, the Governor postpones (for another year) a provision contained in the Commonwealth's 2008 package of reforms to the corporate tax code. Referred to as "FAS 109," the Governor estimates that the deferral of this tax break would save $45.9 million in what otherwise would be forgone revenue in FY 2013.

While the details involve technical and complex interactions among a corporation's records for tax purposes, its public financial accounting records, and possibly its stock prices, the FAS 109 provision in essence is an attempt to offset certain costs to publically-traded companies resulting from the 2008 combined reporting tax reform package.12 As part of that package, rule changes were enacted that increased the cost of some tax liabilities of some companies operating in the Commonwealth. In some cases, these changes affected the accuracy of a company's existing financial statements, statements used to determine a company's publically stated earnings. The FAS 109 provision allowed publically-traded companies to claim a new tax break that would offset the impact to their financial statements resulting from combined reporting, eliminating the need for these companies to adjust their earnings calculations.

DOR has estimated that this provision will cost the Commonwealth $535 million during the period in which it was originally schedule to be in effect (tax benefits would be distributed equally across seven years, 2012-2018).13 DOR has estimated further that 88 percent (or $472 million) of the total tax reductions associated with the FAS 109 will accrue to just fourteen corporations.14

Corporate Taxes

The Governor proposes changing the share of profits of certain multi-state corporations that will be apportioned to Massachusetts for tax purposes. One of the factors that determines the share of a corporation's profits that is taxed in Massachusetts is the percentage of the corporation's national sales that occur in Massachusetts. Under current law, sales of services are sometimes treated as occurring outside Massachusetts even though the purchaser is in Massachusetts and the service is used in Massachusetts. Under the Governor's proposal, these sales of services to Massachusetts consumers would count as Massachusetts sales and thus would increase the share of the company's income that would be taxed in Massachusetts. The Governor estimates the change would raise $20 million in FY 2012.

Enhanced Tax Enforcement

The Governor proposes purchasing new analytic software for the Department of Revenue that would allow DOR to identify "collection and audit opportunities." Making use of historical data, data mining techniques and statistical probability assessments, the new software would allow DOR to better enforce existing tax laws and collect taxes that are owed but that have not been paid. The administration estimates that the new software would generate $22.3 million in additional revenue in FY13 (though the purchase cost for the software would bring the net gain down to $18.3 million).

Room Occupancy Tax

The Governor proposes clarifying the tax rules governing the collection by and remittance of the Room Occupancy Tax on the part of Internet room resellers to ensure that the tax is based on the reseller's full markup price. At present, some internet room sellers collect and remit the tax only on the portion of the total bill paid by the consumer that arises directly from the cost of the room itself, neglecting to collect tax on the portion of the total bill that reflects the internet seller's service fee. Massachusetts hotels and motels, however, collect and remit tax on the full amount they receive from the customer. Clarification of the rules and accompanying enforcement efforts by DOR would help to equalize the tax costs associated with renting a room online vs. renting directly from a bricks and mortar operation here in Massachusetts.15

The administration estimates that the revenue impact from this proposal in fiscal year 2013 would be $7.2 million (with an August 1st effective date). The Governor further estimates that cities and towns that have adopted the local hotel/motel tax stand to gain up to an additional $7 million from the state's increased enforcement efforts.

Taxation of Non-Insurance Subsidiaries of Insurance Companies

In Massachusetts, insurance companies (unlike other businesses) are not taxed based on their income. Instead, they pay a 2 percent tax on the premiums they charge customers. Because of this unique tax arrangement, insurance companies currently are able to avoid paying taxes on the income of non-insurance subsidiary companies they may own.

In recent years, Massachusetts has seen a marked increase in businesses operating as Limited Liability Companies (LLCs) and other "pass through" entities, a legal structure that allows the profits from these businesses to remain untaxed until those profits have been passed through to the ultimate owners of the LLC. Once the profits are claimed by the ultimate owner those profits are subject to whatever taxes apply to that owner's income. In the case of insurance companies, however, their corporate income is not subject to state taxes; as noted above, only their premiums from insurance policy sales are taxed. Insurance companies have taken advantage of this loophole to increase their after-tax profits by creating subsidiary businesses—for example a brokerage firm or a hotel—structured as LLCs from which the insurance company derives corporate income, but for which it pays no state income tax.16

The Governor proposes subjecting "operating income from these non-insurance subsidiaries of insurance companies to the corporate tax as if these entities were business corporations."17 The administration estimates that this change would result in an additional $7 million in tax revenue in FY13.

Tax Deductions for Losing Lottery Tickets

At present, certain tax filers are qualified to claim the cost of losing lottery tickets as a deductible business expense against their lottery earnings, reducing the amount of tax they otherwise would owe. As a result, winning tickets have a higher after-tax value to those who can claim the cost of losing tickets than for those who pay taxes on the winnings. A small trade has grown in the purchase (at a small discount) of winning tickets from taxable winners by people who collect large numbers of losing tickets in order to erase the taxes they will owe on the winning tickets they purchase. This constitutes a form of tax fraud, fraud that is made possible by the presence of this deduction in the tax code.

By eliminating the deduction for losing tickets, the Governor would remove the incentives that lead to this problem. The Governor estimates this change would generate $500,000 in tax revenue in FY13.

Non-Tax Revenues

The Governor's budget includes a total of $532.2 million in non-tax revenues—$33.1 million in ongoing revenue and $499.1 million in one-time revenues. The major non-tax components of the Governor's revenue proposals include the following items:

Modernize Bottle Redemption

Ongoing departmental and federal revenue initiatives include the extension of the state's bottle redemption deposit of $0.05 to bottled water, flavored waters, iced teas, coffee based drinks and sports drinks. As with beverages currently covered by the "Bottle Bill," consumers are refunded this deposit if they return the empty bottles for recycling. The Governor estimates that extending the Bottle Bill to these additional beverages would bring in $22.3 million annually from bottles that consumers do not redeem. The Governor proposes using $5 million of this revenue to support expanded state recycling coordination and redemption efforts.

Agency Revenue Initiatives

The Governor proposes a number of increases to the permitting and licensing fees charged by a various departments, changes that together would raise an estimated $10.8 million in ongoing revenue annually. Approximately half ($5 million) of the total would derive from selling advertising space on a limited number of state owned assets, such as vehicles.

Among the other proposed increases are for fees charged by the Department of Environmental Protection for construction permitting and compliance activities; licensing fees charged by the Department of Public Health to operators of Adult Day Health Centers; licensing fees charged by the Department of Public Health to hospitals, nursing homes, clinics and satellite offices; license fees charged by the Division of Standards to gas station operators, private auctioneers, and "peddlers and hawkers."

Stabilization Fund

The Governor's budget relies on $400 million in one-time funding from the state's Stabilization Fund (the "Rainy Day Fund"), and proposes transferring into the General Fund an estimated $9.1 million in anticipated interest earned by the Stabilization Fund. The Governor's budget also makes a required $100 million deposit into the Stabilization Fund which is the estimated amount of FY 2013 capital gains revenues in excess of $1 billion. In FY 2013, these transactions would result in a net reduction of approximately $300 million in the Stabilization Fund's balance.

Unused Balances

Finally, the Governor's budget relies on the use of unused balances in existing trust funds to pay for FY 2013 costs, including $6.0 million from various trusts, $44.0 million to support the costs of the state employee health insurance, and $40.0 million towards the costs of the Commonwealth Care program and the Health Safety Net. These fund transfers are all one-time resources that, if used in FY 2013, will help fill the budget gap in the current year, but once used will no longer be available to balance the budget in future years.


1Babey, Susan H. et al., "Bubbling Over: Soda Consumption and Its Link to Obesity in California," UCLA Health Policy Research Brief

2Sacheck, Jennifer and Clark, Valerie, "Childhood Obesity in Massachusetts: Costs, Consequences and Opportunities for Change," Massachusetts Health Policy Forum, 2008. See also "Health of Massachusetts: Impact of Overweight and Obesity (1998-2007)," Massachusetts Department of Public Health, 2009. Kaiser Family Foundation, State Health Facts: http://www.statehealthfacts.org/comparemaptable.jsp?ind=51&cat=2&sub=14&rgnhl=23

3Babey, Susan H. et al., "Bubbling Over: Soda Consumption and Its Link to Obesity in California," UCLA Health Policy. Sacheck, Jennifer and Clark, Valerie, "Childhood Obesity in Massachusetts: Costs, Consequences and Opportunities for Change," Massachusetts Health Policy Forum, 2008. See also "Health of Massachusetts: Impact of Overweight and Obesity (1998-2007)," Massachusetts Department of Public Health, 2009.

4Ibid

5Walter Willett, "Healthy People/Healthy Economy: Soda, Snacks and the Obesity Epidemic" (presentation to Boston Foundation, May 11, 2011)

6Current research suggests that reductions in obesity can have a substantial impact on population health that would help lower projected economic costs related to growth in obesity rates; taxing unhealthy food and beverages is identified as a cost-effective policy intervention. See Gortmaker, Steven L., et al., "Changing the future of obesity: science, policy and action", The Lancet 2011,378:838-47.

7For a more detailed discussion of "Regressivity", please see the MassBudget factsheet, Examining Tax Fairness: http://www.massbudget.org/report_window.php?loc=FactsTaxFairness.html. For a more detailed discussion of the impacts of the sales tax on low vs. high income households, please see the following MassBudget factsheet: http://www.massbudget.org/report_window.php?loc=FactsSales.html

8Surgeon General's 2012 Report: http://www.surgeongeneral.gov/library/preventing-youth-tobacco-use/factsheet.html

9U.S. Centers for Disease Control and Prevention: http://www.cdc.gov/tobacco/data_statistics/state_data/state_highlights/2010/states/massachusetts/index.htm

10Massachusetts Dept. of Public Health: http://www.mass.gov/eohhs/docs/dph/tobacco-control/sales-tobacco-fy07-fy11.pdf

11U.S. Centers for Disease Control and Prevention: http://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/#costs

12As part of the combined reporting package, the tax rates applied to business profits were reduced significantly. This reduction in tax rates offset much of the gain in tax revenue the Commonwealth otherwise would have received through combined reporting (which closes a variety of corporate tax loopholes). For a more thorough discussion of Combined Reporting, please see MassBudget’s Tax Primer (Chapter 7: Business Taxes): http://www.massbudget.org/report_window.php?loc=Tax_Primer_83110.html

13Department of Revenue report to Legislature: http://www.massbudget.org/reports/pdf/DOR_FAS109Report_Sept2009.pdf

14Ibid

15Governor's Budget FY2013 documents: http://www.mass.gov/bb/h1/fy13h1/exec_13/hbuddevnontax.htm

16Governor's Budget FY2013 documents: http://www.mass.gov/bb/h1/fy13h1/exec_13/hbuddevnontax.htm

17Ibid