Rep. Hynes State House Report July, 2003 Fiscal Year 2004 State Budget: For the first time in seven years and only the fourth time in 21 years the state budget for the 2004 fiscal year, beginning on July 1, is on time and in place. This $23.1 billion budget is balanced and will cause shrinkage and reductions in all budgeted accounts. State workers will pay more for their health insurance premiums, fewer people will have Medicaid coverage, cities and towns will see up to a 20% reduction in their revenue sharing, state finances for higher education will be cut by nearly 20% and several administrative reforms promoted by Governor Romney have been approved. Economy: The harsh realities of this budget, requiring the elimination of a $3 billion fiscal hole, are directly related to the economic doldrums of the last three years. Massachusetts, like virtually every other state, faces unprecedented fiscal restraints due to a general economic morass caused by several factors including the collapse of the dot com economy, the shrinkage of the high tech and financial sectors, and severe cutbacks in tourism due to 9/11. Last year alone state income tax revenues were off the previous year's mark by $2.5 billion. Presently both income and sales tax receipts continue to fall short of forecast, confirming other economic data that show the recession in Massachusetts has not yet bottomed out. My own sense is that the economy continues to be sluggish, stuck in first gear, and is unlikely to show any significant improvement anytime soon. Massachusetts' job losses are severe. The state has lost 160,000 jobs since the peak payroll employment in January, 2001. Although less severe than jobs lost in the recession of the late 1980's, Massachusetts' increase in the rate of lost jobs is second highest in the nation, driven by losses in manufacturing, business services, construction, retail and wholesale trade, transportation and communications' services, finance, engineering and management services, and government. Relatively high unemployment and weak wage rate growth for those employed has a chilling effect on consumer spending with consumer and business confidence correspondingly weakened. Economists simply don't know when these factors will turn around. Many do, however, see a rebound in the later part of this year but the pace of recovery is predicted to be restrained and economic growth is expected to be slow for the next several years. Health Care: Medicaid, the state/federal health care program for the poor, disabled, and chronically ill elderly, represents 30% of the state's budget and has been growing, like other health care programs, at annual double digit numbers for several years. Significant Medicaid spending cuts were achieved during this past year and roughly $500 million of savings are contained in the new budget. Additionally pharmacy costs are contained, overall eligibility limitations are established, and more effective managed care procedures are introduced. Simultaneously, however, the program is expected to grow because of the underlying cost pressures on the entire health care system. Benefits for the long term unemployed, eliminated in April, are reinstated because costs savings, never materialized when such patients sought more expensive care provided in hospital emergency rooms. The only bright light in Medicaid is the expected one time increase, over the next two fiscal years, of $550 million additional federal government revenue, as part of the recently approved federal tax cut bill. The Senior Pharmacy Program, which provides drug benefits to needy seniors, continues to receive funding, albeit with stricter eligibility standards and more burdensome co-payments. Finally hospitals are given modest financial relief in reduced financial payments to the Uncompensated Care Pool which is used to reimburse for care given in hospitals to uninsured patients. All 70 state acute care hospitals are assessed payments to this program, which are then redistributed to a handful of hospitals providing care to the greatest number of patients. The costs have grown exponentially, threatening the solvency of many hospitals. This modest, one year relief is most welcome. Local Aid: State revenue sharing to municipalities represents almost 25% of state spending. The three primary accounts are Base Education (CH 70), Additional Assistance, and Lottery Aid, which have been cut by over $330 million, with the Governor proposing an additional $23 million in reductions. The $3.1 billion Base Education Aid, although reduced by $150 million, appropriates sufficient state monies to allow each school district to meet its foundation budget requirement. The reductions in Local Aid, although as early as last fall predicted to be as much as 20%, are no less easy to deal with and cause severe hardships for many South Shore communities. The Early Childhood Care and Education Program, which provides educational and reading benefits to 3 to 5 year olds, was cut back to $74 million. Yet, due to my collaborative efforts with legislative leaders and Governor Romney's policy makers, this important school based program avoided being subsumed by the Office of Child Care Services. It continues to exist independently under the Office of the Department of Education, thus retaining as its mission, the primary goals of education and reading literacy. "To Be Continued": Later I will continue this report on the State Budget with more specific commentary on certain budget highlights, including the Governor's vetoes and other new laws. Today's Reflection: "Change is the law of life. And those who look only to the past or the present are certain to miss the future." ~~~~~ John F. Kennedy Back to top of page |