On behalf of the Lieutenant Governor and the members of the Cabinet and staff who are here this evening, thanks to all of you for coming out this evening.
It is wonderful to be back in this beautiful hall. This place, as I understand it, was built in 1912, as a tribute to the courage and sacrifice of the Civil War. It was built with public money, by a people who believed that government had a role to play in creating stronger communities.
Tim Murray and I came to office with a mandate to strengthen our economy, our communities and our government - not just to meet the challenges we face today but to ensure that this generation and the next are able to meet the challenges to come.
Our first budget request, which we submit to the Legislature tomorrow, is a blueprint for reaching those goals. Taken together with initiatives that we have already proposed - as well as plans coming soon for education and transportation reform - we are building a foundation for lasting change and meaningful progress.
And we had better get on with it. Because Massachusetts is at a crossroads.
We are a great state. We have a tradition of innovation and economic leadership, a concentration of brainpower and venture capital, wonderful cultural attractions, beautiful land- and seascapes, remarkable people.
But yesterday's greatness will not assure tomorrow's. Corporate and political history is littered with the carcasses of great companies - like Wang or DEC or RCA - and great states - which I will not name - who made the mistake of thinking they could fuel their future on the fumes of the past.
Whether in Melrose or anywhere else in the Commonwealth, we need to face the plain fact that the same old thing is not enough to move us forward today.
I sense you know this. I was at a National Governors conference this past weekend in Washington, D.C. A presenter stood in front of us, governors from almost every state in the country, and asked how many thought we had a better standard of living than our parents had. Almost all hands in the room went up.
Then he asked how many of us felt certain that our children would have a better standard of living than we have now. A lot fewer hands went up. We know that we have to get on a different course to move Massachusetts forward.
What we need today is a spirit of active collaboration, between government, business, labor, universities, the medical and research community, non-profits, neighborhood groups. We need a new spirit of civic responsibility, less about party politics and more about problem solving, more about the best of our traditions and heritage of innovation and faith that built Massachusetts in the first place, less about the status quo and yesterday and more about innovation and tomorrow.
And we had better start by being clear-eyed and candid about just what our challenges are.
To start with, we are losing population -- the only state in the nation to have lost population in each of the last two years. Most of those leaving are young and well-educated, and they leave for one well documented reason, which is the high cost of housing.
We are facing competition not just from communities in Connecticut, Rhode Island or New Hampshire. Today our competitors are places like Shanghai or Lahore or Buenos Aires. And sometimes jobs go to such places not because labor is cheaper, but because it's better prepared. That's education. And because the roads are intact. And because you can have a cell phone call while driving and not have to reconnect every few hundred feet.
The point is that in places where we compete for jobs today, investment in the infrastructure is considered wise. But we have been starving our own.
Another challenge we face is the need to govern for our long-term interests, even if they don't have a short-term political payoff or if the risk short-term political resistance.
The point is that all over the Commonwealth, we are at the confluence of a number of significant challenges. They cry out for an ambitious agenda, and we have one.
The Lieutenant Governor and I have a strategy for spirited economic growth, for the next phase of education reform, pre-K through higher education, and for making health care accessible to all at a price we can afford. Our budget is a chapter in that story, not the whole story.
Developing this budget has been a challenge. As we began our work last month, we realized that instead of the $1 billion surplus we had been told to expect, we faced a $1.3 billion deficit. The deficit results from a combination of things: low revenue growth; dramatic increases in health care costs, and spending commitments carried over from last year. My team and I have poured over this budget, line item by line item - because we understand that behind every one of those dollars is a human being, a program vital to somebody or somebody's job.
Through a series of tough choices and creative solutions, we have closed that budget gap. But we also made significant, targeted investments to return to us the very strength in our economy, our communities and our state government that you elected us to deliver.
Tomorrow we will submit a $26.7 billion budget request for Fiscal Year 2008. Our budget is balanced and responsible. We used a conservative revenue forecast to be doubly sure that we are working within our means. We've held spending growth to about 1%, lower than the anticipated growth in revenue and a sharp reduction from the 8% growth in the previous year. We have identified savings and efficiencies in excess of $950 million -- and we are just getting started. And we have invested in our people and our economy because without well-prepared people and strong companies, large and small, we cannot secure our long-term future.
This budget is balanced without gimmicks. We did not defer difficult decisions. We did not use band-aids to treat symptoms and ignore their root causes. We did not square our ledger with under-the-radar fee increases. And we did not shift the financial burden onto cities and towns or public schools or poor people to meet our obligations. We have looked at our situation candidly, and set to right it - right now.
This budget lays the foundation for the Commonwealth's long-term fiscal and economic health by Strengthening Our Economy; Strengthening Our Communities; and Strengthening our Government. Here's how.
STRENGTHENING OUR ECONOMY
Strengthening the economy means more and better jobs. Let me acknowledge at the outset that business, not government, creates jobs. But I do believe that there are things government can and must do to create the right conditions for job growth.
The first is for government to move at the speed of business. We are committed to deciding on state approvals and permits within 6 months, faster wherever we can. One leader in the insurance industry told me it takes 2 months for the commission in another state to approve new products as compared to 6 months here. Well, not any more.
We have put in place a new standard of one-stop shopping for businesses in need of state approvals. As our newly-appointed permitting ombudsman, Greg Bialecki serves as that one stop. And we have proposed to spend $4 million in incentives for local communities to streamline their permitting, too, continuing an investment introduced in last year's economic stimulus package.
The second thing state government can do is work proactively to attract new business. So, our budget consolidates $3.5 million in funding for Business Development with a Sales Team whose job it is to encourage new business investment.
Our budget also supports an initiative to provide $2 million in grants to help community development organizations and small businesses get off the ground. I am pleased to announce that MassDevelopment has agreed to provide an additional $5 million in capital for new small businesses, too. These programs recognize that most new jobs are created in small businesses, and that we want small businesses to make it in Massachusetts, too.
The third and most important thing government can do to ensure lasting economic success is to provide a world-class public education system: one that helps prepare our children for the economies of their future.
So our budget will increase funding for education by an additional $200 million. Next year, the state will invest a record $3.7 billion in public education. Resources for every single public school in Massachusetts will increase.
We will enable up to 800 new all-day Kindergarten programs to give 12,000 to 15,000 students the proven advantage of strong beginnings. This investment of $39.6 million represents a 46% increase in funding for full-day kindergarten classes next year, and will pay returns throughout this generation and the next.
We propose to double allocations for grants to support after-school programs and extended learning time, so that we create the conditions for teachers to add enrichment programs, math and science preparation and provide a safe, engaged after-school environment for kids all across the Commonwealth.
The fastest growing cost to businesses - not to mention individuals and government - is health care. Health care costs consume almost 40% of our state budget and are growing at three times the rate of inflation. Strengthening our economy - and every family - means making good on the promise of health care reform.
I am proud to say that our budget fully funds the next phase of implementation. We have already expanded coverage to an additional 100,000 residents who were once without insurance and have written into this budget coverage for 150,000 more. By investing in prevention and covering the uninsured we have been able to reduce funding for the Safety Net Care Pool, formerly the Uncompensated Care Pool, by over $255 million.
Highlights of those preventative measures include:
- expanding the Universal Immunization Program to better protect children from rotavirus, which kills a child a minute worldwide and offering vaccines for Human Papilloma Virus to over 72,000 young girls to protect them from the risk of cervical cancer;
- investing more than $20 million in Health Promotion and Disease Prevention Programs;
- and increasing funding for Early Intervention Programs by nearly $4 million to expand access to therapy for children under three who suffer from developmental disabilities and delays like autism.
What does this all mean in human terms? It means that half the people who are uninsured today will be insured by 2008. And we move one step closer to a truly universal, affordable and accessible health care system.
STRENGTHENING OUR COMMUNITIES
This budget strengthens our communities as well. We have not closed the deficit gap by cutting local aid, which would increase the already significant pressure on local property taxes. I have met too many seniors and young families alike who are worried that property taxes will squeeze them right out of their homes, people like Richard and Kathleen Sears in Paxton, who in their eighties, have had to go back to work in the cafeteria of the local college to pay their property tax bill.
For immediate and direct relief, our budget this year proposes to extend the current Senior Circuit Breaker program to homeowners regardless of age, lowering property taxes for an additional 100,000 households and cutting the average property tax bill by 25 percent. That's up to $870 in savings per qualified household.
To take the squeeze off of cities and towns, our new budget continues the effort to restore local aid, including $77 million to build new schools. Our Municipal Partnership Act provides investment and savings options like opening the state's Group Insurance program to municipal workers, and allowing better returns for retirees through state pension funds. Options like a 1 or 2 percent tax on meals or hotels, not required by the state but as you see fit in your local community - so long as you use at least 25 cents of every dollar collected to fund property tax relief for homeowners.
To address the safety of neighborhood streets, this year we launch our program to put 1,000 new cops in community patrols throughout the state. We will begin with $33.6 million for public safety programs, including the hiring and training of up to 250 new police officers in the next fiscal year. We have set aside $2 million for year-round job opportunities for at-risk youth, as well, to give young people constructive alternatives to crime and violence.
Finally, our budget breaks new ground in addressing the growing problem of homelessness. We propose to consolidate 11 homeless funding accounts into 2, with one clear goal: to end homelessness in Massachusetts once and for all.
STRENGTHENING OUR GOVERNMENT
As the Chief Executive of the Commonwealth, my job is to strengthen our government so that it works better for you. Our budget begins by addressing the gimmicks that distort our position and slow our progress. Most notable is the practice of borrowing money to pay the salaries, benefits and pension contributions for a large number of state employees. It's like the government paying its workers on a credit card, and costs the Commonwealth 60 cents extra on every dollar. Our budget starts to correct that by moving 158 employees back on to the regular payroll. It's a start. More to come.
Like all states, we face looming future expenses in retiree health care. If we ignore this problem, we will only saddle the next generation with a crippling financial burden. In this budget, we take an innovative step of dedicating proceeds of the 1990s tobacco litigation to begin to offset our retiree health care liability. By thinking for the long-term we can develop a $7 billion savings plan and help avert a financial crisis.
These are part of a new standard we want to set in efficient, transparent and forward-looking administration. Thanks to the hard work and creativity of our State Treasurer, Tim Cahill, we will save more than $100 million through smarter debt and cash management. Our budget also eliminates dozens of earmarks, collapses hundreds of line items into fewer project categories, and significantly limits the use of outside sections for non-budgetary purposes.
At noon tomorrow, we will provide an easy-to-understand version of the Fiscal Year 2008 budget both in print and online at www.mass.gov/governor, with more explanation about specific programs and services. The budget is a long and complicated document, but we want you to understand it, and this will help.
LOOPHOLES
Our budget also proposes to close a series of tax loopholes for Massachusetts corporations. Let me be clear about what these loopholes are and what they are not.
There are legitimate business incentives that our state needs to be competitive such as the single sales tax factor or credits for research and development. I strongly support these and other measures that encourage growth, and none of these will be targeted by our reforms.
What we want to address are gaps in the tax laws discovered and exploited by clever tax accountants to extract advantages the law never intended.
One loophole permits multi-state corporations to funnel instate earnings to out-of-state to avoid Massachusetts taxes. Another allows businesses to charge themselves rent on their own property and then deducting those rental costs on their tax returns. Yet another loophole allows businesses to identify their corporate structure one way on their federal tax return and a different way on their Massachusetts tax return to produce the lowest obligation on each.
The combined effect is an uneven playing field where companies who can afford highly specialized tax advisors benefit, shifting the tax burden onto homeowners and small business and depriving the state of revenue that could be used meaningfully to improve our business climate. Closing these loopholes is a matter of basic fairness.
This will not hurt our ability to compete. Many of the states competing successfully with us for business investment today have already closed these very kinds of loopholes. In fact, our total tax burden for businesses is among the lowest in the nation. Ernst & Young estimates that Massachusetts businesses have the 47th lowest tax burden in the country.
We must work hard to improve the business climate here in Massachusetts, and I am committed to do so. That's why we have invested in speedier permitting, in a state sales force, in marketing our state as a good place to invest. Companies wan police, decent roads, bridges and mass transit and affordable housing every bit as much as individuals do. That's the lasting competitive edge. Ultimately our policies on these - not just our tax policy - must encourage business growth and innovation and strengthen our global competitiveness. Will encourage business growth and innovation.
Obbviously, I know that taxes are about your money and I want companies, just like each of you, to keep as much of your money as you can. It's your money. But it's also your broken roads. It's your broken neighborhoods and your broken neighbors, for that matter. All of that is yours too. And it is high time we shared responsibility for that.
IT'S NOT ALL ABOUT THE BUDGET
Even with all of these savings, it is important that you hear from the Governor that there was not money for everything in our budget. For example, the condition of our state parks, forests and beaches is in sore need of improvement. We have proposed modest growth this year, but I have asked that before significant new investment we refocus our parks agency on its core mission, delivering resources to the front lines of maintenance and operations, and in that way lay the groundwork for future investment.
I recognize that we are facing serious concerns in housing, that can't all be addressed in this budget. So we have asked some of our quasi-public agencies to step up, and they have. The Massachusetts Housing Partnership has committed an additional $10 million of affordable housing financing to double the SoftSecond program and MassHousing will support $40 million for the Affordable Housing Trust Fund. These two highly successful programs have put home ownership within the reach of low and moderate income families. In fiscal year 2008, we are all committed to addressing the significant backlog of repairs and upgrades needed to bring our stock of public housing back up to grade.
In the same vein, our public universities and colleges receive a modest funding increase in this budget request, as well as greater flexibility to allocate resources and incentives to achieve savings through shared services and purchasing. But the more significant investment I have in mind for public higher education will come as part of the package of education reform legislation we will propose in the next few months.
I am proud of this budget, of the agenda it fits within, and of the thoughtful and creative team that put it together, many of whom are here tonight.
They know, just like any of you, that progress will not be instant and that change will not come without struggle. It will take hard work and a commitment to long-term over short-term gain. But I don't believe those who say it can't be done. Yes, it takes imagination and courage to step out and try something new. But think for a moment about those who founded Massachusetts. They left their known world, stepped into a wilderness here - and built one of the most remarkable societies in the history of the world.
That took creativity, imagination, courage and vision -- a belief in things unseen. That's the lesson of our founders. That's the lesson of our communities. That's the lesson of our own lives. Let that be the legacy we leave for the next generation too.
