Our State Budget, Four Years Later
As the Massachusetts House of Representatives debates our state budget for fiscal year 2012, a comparison to the budget of four years ago — prior to the Great Recession — raises some important concerns. My priorities as your advocate on Beacon Hill stem from this comparison and these concerns. My efforts will be focused on addressing these concerns while embracing our shared sense of financial prudence and collective values.
Four years ago, our economy was strong. Our state government “rainy day” fund was filled with over $2 billion in reserves. Our new governor was offering new initiatives for education, life sciences, and clean energy. His proposed FY 08 budget, grouped according to my preferred prism of outcomes, fulfilled obligations to the needy (health and human services) and the required infrastructure of state government (judiciary, transportation, public safety, K-12 and higher education).
This year, Governor Patrick offered a very similar budget, but also one reflecting important changes. In the past four years, because of increased unemployment, over 300,000 additional people are now on Medicaid/MassHealth. In addition, we borrowed more to maintain and upgrade our previously neglected infrastructure: roads and bridges, our state parks, our schools. We made significant administrative investments in information technology to make our government more efficient and effective. We made aid to our towns and cities a priority, but not as much as I would have liked. Health benefit costs for state employees have risen dramatically, a burden that plagues Lincoln, Sudbury, and Wayland and all other municipalities as well.
|Spending and Outcomes||FY08 ($ billions)||FY12 ($ billions)||% Change|
|Health care and basic services to the needy||13.2||16.1||22%|
|Municipal aid to hold down local property taxes||5.2||5.2||0%|
|Debt servicing (interest)||1.7||2.2||29%|
|Protection of the public’s safety||1.5||1.6||7%|
|Judicial system to promote and deliver justice||1.1||0.9||-18%|
|Higher education to train our future workforce||1.0||0.9||-10%|
|Low-income housing, transportation and workforce training||1.0||1.0||0%|
|Management and administration||1.0||1.2||20%|
|Health benefit premiums for state employees||0.8||1.2||50%|
|Preserve and protect the environment||0.2||0.2||0%|
My biggest concerns emanate from this analysis. First, we need more jobs to reduce the Medicaid/MassHealth population, which will help reduce the nearly $3 billion increase in health and human service spending. Similarly, we need to control health care costs writ large, a task that is absorbing much of my time as the Vice Chairman of the Joint Committee on Health Care Financing. And a related concern involves reducing the growth rate in health care benefit premiums for state employees and retirees. This rate of growth is unsustainable, and looks even more difficult to control with many more baby boomers retiring soon and living longer than the previous generation.
It is also interesting and informative to compare expected revenues from FY08 and FY12, as below:
|Tax Revenues, Transfers and Non-Tax Revenues||FY08 ($ billions)||FY12 ($ billions)||% Change|
|Corporate income tax||1.52||1.76||16%|
|Motor vehicle sales tax||0.55||0.66||21%|
|Alcohol, cigarette taxes||0.50||0.52||4%|
|Insurance tax and fee revenues||0.44||0.34||-23%|
|Financial institutions taxes and fee revenues||0.25||0.05||-81%|
An evaluation of revenues yields recognizable changes and some questions. Sales taxes have risen because we raised them two years ago. Corporate taxes are up because corporate profits have been at record levels for the past year. Insurance and financial institutions taxes and fees are down because these industries took the biggest hit during the recession and will have losses from 2008-2010 to offset profits this year, thereby reducing their tax burden. Deed revenues are down because the housing crisis slowed real estate sales. Non tax revenues have risen significantly because Medicaid spending is up significantly, and federal matching funds rise accordingly.
Some question arise: Why are public utilities revenues expect to dry up completely? Why are meals and motor vehicle taxes up? I’ll be getting answers to these questions.
In sum, the four year comparison demonstrates that the budget doesn’t change dramatically, because there is significant consensus on our spending priorities. At the same time, however, we must be watchful of trends and address parts of the budget that are growing at rates that are unsustainable. I welcome your thoughts and evaluations, and would be happy to answer any specific questions you have on either the numbers or the budget process.