If lawmakers adhere to Gov. Charlie Baker’s proposed budget proposal, the state could be near closing its structural deficit in fiscal 2018, allowing spending levels to subsequently grow apace with revenue growth, Administration and Finance Secretary Kristen Lepore told lawmakers Tuesday.
At the first House and Senate Ways and Means hearing on the governor’s annual spending bill Lepore faced questions from six lawmakers and finished her testimony before the budget-vetting committee in less than 45 minutes.
Sec. Lepore testified before a joint hearing of the Ways and Means Committee to outline details of the Baker administration’s budget. [Photo: Antonio Caban/SHNS]
House Ways and Means Chairman Brian Dempsey applauded the administration’s effort at “fiscal discipline,” and Senate Ways and Means Chairwoman Karen Spilka pushed for a budget that “continues to lift all families” despite “certain fiscal challenges.”
With state tax revenue growth pegged at 4.3 percent, Baker has proposed a $39.55 billion budget that increases spending 3.5 percent, with targeted investments in the Department of Children and Families, substance abuse treatment, and aid to cities and towns.
“Going into the next fiscal year, if you adopt all of the recommendations in our budget we will be close to structural balance when we file next year’s budget,” Lepore said.
While there’s much common ground, the House and Senate traditionally also make significant re-writes to budgets proposed by governors.
Lepore said state finances would be strengthened by contributions to the state’s reserve fund of between $206 million and $282 million - dependent on whether a casino license is awarded in the southeast - along with a roughly $1 billion reduction in reliance on one-time revenues compared to fiscal 2015.
Baker’s budget would use $253 million in one-time revenues and, with the casino license, would push the rainy day fund balance up to $1.545 billion from $1.258 billion. The rainy day fund had a $1.652 billion balance in 2011, after the last recession, but was drawn down in recent years despite a growing economy.
Spilka and Dempsey both keyed in on MassHealth, where Lepore aims to hold spending growth to 5 percent, a reduction from the 8 percent growth projected in fiscal 2016, and an even steeper drop from the projected 19 percent growth heading into fiscal 2016 that Lepore said budget writers faced a year ago. Baker’s budget proposes a $15.4 billion budget for MassHealth.
Lepore said improvements to the health insurance exchange - the website whose 2013-2014 failures placed numerous Bay Staters into free health care without any vetting - would be a crucial element of reining in MassHealth spending.
Better data from the health exchange will allow the state to better target employers for premium assistance for employees receiving insurance through the state’s Medicaid program, ensure only those eligible receive the benefit, and allow for better analysis of MassHealth trends, according to Lepore.
“It was growing at an unsustainable rate - double digits,” Lepore said of MassHealth, the biggest expenditure in the budget. She said the state’s long-term services and supports program has had “skyrocketing” costs and said Health and Human Services Secretary Marylou Sudders referred 12 providers in the program to the attorney general’s Medicaid fraud unit, has issued a moratorium on new providers, and initiated on-site audits.
Long-term services and supports includes case management, home care, nursing facilities, respite and personal care assistance and can be provided by friends and family, community and faith-based groups, or other providers, according the administration.
While last year, Baker vetoed the vast majority of the roughly $18 million lawmakers put into the fiscal 2016 budget for kindergarten grants to local school districts - a budget trim that was overridden by the Legislature - on Tuesday, Lepore touted the governor’s investment of $18.6 million in a “redesigned” kindergarten grant program.
Among the administration’s efforts at “doing more with less,” Lepore highlighted new protocols to reduce wait times at Registry of Motor Vehicles offices, consolidation of human resources within environmental agencies, and a program at the Group Insurance Commission to “maximize federal and manufacturer support for retiree drug costs.”
Lepore also said renegotiation of a federal five-year waiver from the Centers for Medicare and Medicaid Services would be crucial for the state’s “health care strategy” and finances.
“If we don’t renegotiate this waiver, we stand to lose a billion dollars a year over the next five years, so it’s critical that we work with our agencies at the federal level, with all of you to ensure that we’re able to receive approval of that waiver process,” Lepore said.
Lepore said last year’s early retirement incentive program, part of a budget-fix for fiscal 2016, has been a success and said the Department of Revenue - where about 400 employees took advantage of the program - has been “completely reorganized and restructured as a result” of early retirement.
Quizzed by Spilka about the reduced spending on revenue collection, Lepore said she has “no concerns” that the state’s ability to take in revenue will be impeded.
The fiscal 2016 budget included $94.8 million for Department of Revenue operations and $34.3 million for the department’s child support enforcement. The governor’s budget filed last week includes $77.5 million for the department’s operations and $29.3 million for child support enforcement.
Sen. Vinny deMacedo, the ranking Republican on Senate Ways and Means, quizzed Lepore about how the financial markets would receive the state’s approach. In November, the bond-rating agency Standard and Poor’s downgraded the state’s credit outlook from stable to negative while maintaining the current bond rating.
“Eliminating the structural deficit is very important to them,” said Lepore, who said the proposed rainy day fund deposit is “significant,” and would bring the ratio of the stabilization fund to operating funds to 3.7 percent, up from 3.1 percent.
