Friday, June 25, 2010

Mass Municipal Association: Legislature OK’s budget with no further cuts in main local aid accounts

Legislature OK’s budget with no further cuts in main local aid accounts

June 24, 2010

Both branches of the Legislature today approved the $27.6 billion fiscal 2011 state budget released by the House-Senate Budget Conference Committee 24 hours earlier.

The budget cuts the main local aid accounts by 4 percent, but makes deeper cuts to numerous other programs throughout the budget due to the possible loss of federal aid.

For the second year in a row, disagreement between the branches sidetracked legislation to allow municipalities to implement changes to health insurance plan designs in order to save taxpayers and communities up to $100 million a year.

Budget negotiations were disrupted earlier this month when the fate of $687 million in expected federal Medicaid funds became unclear, threatening to remove a vital revenue source upon which the governor, House and Senate all built their budget plans.

Thirty states have banked on receiving a share of $24 billion in temporarily higher federal Medicaid reimbursement (FMAP) percentages that Congress, the U.S. Senate and the president have all supported at various times. Congressional leaders, however, have been unable to secure the necessary votes to approve the funding in recent weeks, derailing budget planning in many states. Every member of the Massachusetts Congressional delegation is on record in support of immediate passage of the FMAP funds with the exception of U.S. Sen. Scott Brown.

Preparing for the potential loss of the $687 million in FMAP funds, the spending plan cuts tens of millions of dollars below the budgets approved in the House in April and the Senate in May, draws $100 million from the state stabilization fund, defers the transfer of another $95 million to the rainy day fund, and axes significant health access programs for immigrants and MassHealth recipients.

The Legislature, however, protected the Unrestricted General Government Aid and Chapter 70 accounts from any cuts beyond the 4 percent included in spending plans passed in the House and Senate earlier this spring. Gov. Deval Patrick has already announced that he would not impose any additional cuts on these accounts.

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

Other than UGGA and Chapter 70, key municipal and school accounts are funded as follows:

• Regional school transportation reimbursements are level-funded at $40.5 million, though this account would be increased by $3.5 million if the state receives the full FMAP increase.

• The Payment-in-Lieu-of-Taxes program is funded at $25.27 million, a decrease of $2 million compared to fiscal 2010, but the $2 million would be restored if the state receives the full FMAP increase.

• The Special Education Circuit Breaker program is level-funded at $133.1 million, though this account would be increased by $12.5 million if the FMAP funds materialize.

• Kindergarten Development Grants are funded at $22.95 million, a cut of $2.75 million below fiscal 2010, but $3 million would be added to the account if the state receives the full FMAP increase.

• The Shannon Anti-Gang Grant Program is level-funded at $4.5 million, though $2 million would be added if the state receives the full FMAP increase.

• Charter School Reimbursements are funded at $71.5 million, a $3 million reduction below fiscal 2010 levels.

• The Police Career Incentive Pay Program is funded at $5 million, down from $10 million in fiscal 2010.

• Library aid accounts are funded at $15.6 million, a $3 million reduction below fiscal 2010 levels.

Municipal health insurance reform
The Senate budget bill had included a provision that would allow municipalities to make changes to insurance plans outside of collective bargaining, but the MMA and other organizations argued that the proposal had serious flaws that needed to be addressed. The Senate proposal would have guaranteed too little savings for communities and taxpayers, required permanent acceptance of Section 19 coalition bargaining, which would have given unions permanent control over every other aspect of health insurance, and would have instituted binding arbitration, which would have allowed an outside authority to impose costs on cities and towns.

The MMA had urged legislators to address these and other flaws so that meaningful reform could pass this year and local leaders would be able to implement cost savings immediately. The House and Senate could not reach agreement, however; advocates for reform pushed for a stronger bill, and union allies looked to further water down the measure.

The MMA will continue to work aggressively with all cities, towns and stakeholders to keep this top priority front and center, as taxpayers are demanding reform that will reduce costs and protect local budgets.

The passage of the conference committee budget today gives the governor seven days to review the budget before the beginning of the new fiscal year on July 1.

Link to DLS website for local aid estimates based on Legislature’s budget

Download full text of the conference committee’s fiscal 2011 state budget bill (2.4M PDF)

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