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Archived: Senate Budget Includes Municipal Health Reform, No Tax Increases

Posted on May 18, 2011

The Massachusetts Senate unveiled a proposed Fiscal Year 2012 state budget this morning that includes no tax increases; moves the Workforce Training Fund into a trust; and makes modest changes to a House of Representatives plan to give cities and towns the authority to manage their health insurance costs.

Senate budgetThe $30.3 billion spending blueprint seeks to close an estimated $1.9 billion budget deficit through $1.5 billion in spending reductions – including a $65 million reduction in aid to cities and towns – coupled with $440 million in one-time revenues. The document eliminates 277 budget items and level-funds 221 others.

Amendments to the budget were due on Friday and AIM continues to review them. The association will communicate with members this week about any major issues contained in the amendments.

“As difficult as the recent budgets have been, the fiscal year 2012 budget presents a new set of challenges,” said Senator Steven M. Brewer, Chair of the Senate Ways and Means Committee.

“The absence of $1.5 billion in federal stimulus funds and growth in non-discretionary costs leave us with a budget gap of $1.9 billion. Once again, we will utilize a balanced approach to address this shortfall, but deep cuts to services and programs cannot be avoided. We must continue to do more with less.”

Broad agreement between the Senate budget proposal and the House blueprint approved two weeks ago virtually assures that the commonwealth will navigate its fourth year of fiscal crisis without a tax increase. The agreement on creating a trust for the state’s flagship worker training program also signals that lawmakers agree with AIM and employers that the program should be removed from the uncertainty of annual budget deliberations.

“Placing the Workforce Training Fund into a trust will create the kind of predictability that employers need to improve the skills of Massachusetts workers. We are gratified that the Senate included this provision in its budget proposal,” said Richard C. Lord, President of AIM and chair of the WTF Advisory Board.

The Senate plan for municipal health reform differs from the House version, which would allow municipal officials to set health-insurance co-pays and deductibles unilaterally after a 30-day negotiating period. The Senate proposes that if managers and employees cannot negotiate an agreement during that window, the health plan changes would be handed over to a three-person review panel made up of one labor representative, one management representative and a third mutually selected person from a list provided by the Secretary of Administration and Finance of professionals with expertise in dispute resolution, municipal finance, or municipal health insurance.

The review board would be required to approve any health insurance plan changes proposed by management that do not exceed the benefits received by state employees.

The Senate plan would also require more of any premium savings generated by health plan changes to go to municipal workers – one-third of savings in the first year versus 20 percent under unilaterally imposed changes in the House bill.

Both versions would leave cities and towns to continue negotiating with unions over the percentage of premiums paid by employees. They would also force all eligible retirees to enroll in Medicare.

Lawmakers estimate that both reform plans would save approximately $100 million per year.

AIM and Massachusetts employers generally support municipal health reform because the spiraling cost of health insurance is eroding the ability of city and town governments to deliver educational, public safety and other services upon which the economy depends. A recent report by the Massachusetts Business Alliance for Education found that virtually all of the increased state funding for schools during the past decade has been diverted from classrooms to pay for soaring health benefits.

Massachusetts’ 351 cities and towns spent $3.297 billion more on health insurance from 2001 to 2010 than they would have spent had they purchased coverage through the Group Insurance Commission, which buys insurance for state employees. The Commission limited annual premium increases to a modest 6.4 percent during that time because it is able to make plan design changes outside of collective bargaining.

The Senate budget does not include a provision of the House plan that would limit the onerous 2008 treble damages law to willful violations of the state wage and hour statute. AIM looks forward to continued discussions with the Legislature on modifying treble damages.