State Budget Practice Report Cards and Budget Resource Guide
Massachusetts is one of fourteen states receiving straight A’s in fiscal 2015, 2016, and 2017 for reserve funds, one of five budgetary categories evaluated by the Volcker Alliance. That achievement contrasts with the state’s across-the-board D-minus marks for legacy costs. Those lowest possible grades signal that the dual challenges of amassing cash reserves and fully funding retirement obligations may be increasingly hard to meet in coming years.
At the beginning of fiscal 2017, the Massachusetts rainy day fund balance was almost $1.3 billion, equivalent to about 3.5 percent of the state’s 2016 general fund. While the percentage trailed the 5.5 percent US average calculated by the National Association of State Budget Officers, Massachusetts followed several best practices for reserves, including tying balances to revenue volatility and having policies for disbursing and replenishing funds.
The D-minus for handling of legacy costs, which include public worker pensions and other post-employment benefits, reflects three consecutive years that Massachusetts didn’t make contributions actuaries had recommended for retirement and retiree health care plans. The state has only 62 percent of the assets needed to cover pension liabilities.
Massachusetts also did poorly in the budget maneuvers category, with a three-year C average. Its efforts to attain budgetary balance included a variety of techniques that put pressure on future years. For example, the state deferred $19.7 million in payments for its Medicaid program, MassHealth, to fiscal 2018 from the prior year.
The state fared better in budget transparency, with its B average reflecting best disclosure practices in maintaining a consolidated budget website and publishing information about tax expenditures and debt. The grade was depressed by Massachusetts’s lack of disclosure of deferred infrastructure replacement costs, the same deficit found in forty-seven other states.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2017. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eleven US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.