Massachusetts Gov. Deval Patrick yesterday signed into law a $27.6 billion fiscal 2011 budget as lawmakers continue to work on legislation that would restructure general obligation bonds to reduce fiscal 2011 debt-service costs. Fiscal 2011 begins today.
The legislature is set to pass the debt restructuring bill today. That plan would refinance $300 million of GO bonds to move those debt service costs to future years. The bonds will have a maximum maturity of up to six years, according to the bill. Officials are aiming to price the refinancing deal in July.
Patrick cut $457 million from the budget in line-item vetos to bring the spending plan to $27.6 billion. Those vetos include $372 million of appropriations funded from enhanced federal Federal Medical Assistance Percentages funds. Congress has yet to extend the FMAP funding for six months.
Massachusetts was pegged to receive more than $600 million of FMAP funds. Patrick and other governors are now questioning whether their states will receive the full funding amounts, even if Congress does extend the funds.
“Without FMAP, families and businesses across the commonwealth will not be able to rely on the level of services from the state that they once could,” Administration and Finance Secretary Jay Gonzalez said in a prepared statement. “But we must live within our means, and this budget responsibly reflects that reality.”
The state will tap into $100 million of rainy-day funds in fiscal 2011 and will suspend a statutory carryover of $95 million of general funds into fiscal 2012. Those actions will leave $556 million in the rainy-day fund at the end of fiscal 2011.
Municipalities and school districts will receive a 4% reduction in aid as the state was forced to reduce its spending to offset declining revenues.
The fiscal 2011 budget includes an initiative to divert capital gains receipts in excess of $1 billion from the general fund and into specific funds. The rainy-day fund will receive 95% of the additional revenue, and the remaining 5% will go towards paying down Massachusetts’ outstanding other post-employment benefit obligations.