REP. FRESOLO, HOUSE PASS FISCAL YEAR 2010 STATE BUDGET

Bill makes targeted investments, focuses on local aid, education

BOSTON, MA - State Representative John P. Fresolo joined his colleagues in the Massachusetts House of Representatives in passing a fiscal year 2010 operating budget designed to close a $3.6 billion budget gap though a combination of policy reforms, program cuts, and revenue enhancements. The balanced budget addresses Massachusetts' fiscal challenges yet still protects core programs and services.

Due to the decline in state revenues as a result of the larger economic downturn, the House took dramatic steps to cut non-essential state programs, in the end cutting over $1.2 billion from the budget and eliminating dozens of line items. In seeking cost savings measures, the House of Representatives brought reform to sections of state government long considered sacred cows, including both the municipal police incentive program known as the Quinn Bill, and state employee health insurance contribution rates. These reforms alone will save the Commonwealth more than $54 million in the year ahead.

By cutting spending in programs throughout the budget, the House was able to balance the budget without using any funds from the state's stabilization account. This fund, which was built up in more favorable economic times, is used to augment state spending when unanticipated events occur. The state's rainy day account, which now contains only $1.3 billion, began the fiscal year at over $2.1 billion. Instead of further depleting state reserves, the budget proposal relies on approximately $1.4 billion in federal funds, directed to the state as part of the American Recovery and Reinvestment Act of 2009. In resisting drawing down the reserve account, the state will be better prepared to supplement revenues when the federal stimulus money goes away in fiscal year 2012.

The budget comes after the House has passed unprecedented reforms in the areas of transportation, pension and ethics and campaign finance.

"In tough economic times government must focus on what is most important. I am happy that, even with all the cuts we've had to make, education funding and local aid has, in large part, been spared. Massachusetts' schools are national leaders and will be the foundation of our economic recovery and future prosperity," said Representative Fresolo

While struggling with a sudden decline in tax receipts, the fiscal year 2010 budget adopted by the House still was able to guarantee cities and towns receive level funding of Chapter 70 state education aid in the year ahead. At almost $3.5 billion, state aid for education comprises over 14% of the state budget. In addition to Chapter 70 aid, the budget will direct over $1 billion in unrestricted government aid to municipalities to help pay for local services including police and fire.

"The House has passed a responsible budget that balances the needs of our Commonwealth with the stark fiscal realities plaguing not only state coffers, but the global economy. In the face of a $3.6 billion deficit, we have worked to shield our cities and towns and most needy residents from the pain of the current crisis," said House Speaker Robert A. DeLeo (D-Winthrop). "We also set aside funds that will be needed later to offset potential revenue gaps."

The budget also made sweeping reforms to the manner in which the state manages tax receipts from capital gains. Though the recession has decreased all tax revenue streams used to fund state services, capital gains receipts have been particularly constrained. After bottoming out in FY02, revenues from capital gains have continued to increase until reaching a peak of $2.335 billion to begin FY08. These monies were used to support many functions and expansions of state services over the past six years. With the economic downturn, however, receipts from capital gains have largely evaporated. In an effort to insulate the Commonwealth from these dramatic swings in tax receipts, the House adopted broad reforms to how the state uses capital gains taxes. The new plan would mandate that half of the yearly growth of capital gains receipts be deposited directly into the state's rainy day account, thereby quickly replenishing the state's reserve account and tempering the wildly inconsistent revenue stream.

While cutting state programs throughout the budget, the budget also seeks to protect the most in need of state services. Many services to the disabled, blind, deaf, and elderly were protected.

The budget will also direct approximately $300 million to address the state's growing transportation infrastructure needs, including road and bridge repairs and remaining debts from the Big Dig. Most importantly, this dedicated revenue stream eliminates the need for either a gas tax increase or a toll increase on the MassPike.

The budget now moves over to the Senate for consideration.