Each year, in a process set forth specifically in law, the Executive and Legislative branches of the state's government put together an operating budget for the Commonwealth for the upcoming fiscal year. An operating budget covers the costs of running all government operations, services, programs, and provision of funds (local aid) to cities and towns. The budget is incremental, based on historic costs plus/minus anticipated adjustments.
The budget must set forth assumptions about revenue projections, which must be balanced against proposed expenditures. Unlike the federal budget, the state is barred from deficit spending.
The operating budget must exclude expenditures on major construction and improvement projects, such as building or rebuilding of dams, bridges, transit lines and other state facilities. Such capital projects must be financed through the issuance of long term debt. The principal and interest payments which the Commonwealth must make to repay its long term debt borrowing (debt service) are, however, included in the annual operating budget.
The Massachusetts state budget process takes place annually in advance of the fiscal year. Every February, the Governor submits his proposed budget to the legislature. In April, the House Committee on Ways and Means puts forward its own budget; members offer amendments and votes on the entire budget. It must then be approved by the Senate, and signed by the Governor.
In January 2009, I signed on as a co-sponsor to a bill that would make information about our state’s budget and spending more accessible to the public. This bill, titled the Revenues and Expenditures Act, would require the state’s fiscal year budget, as well as other revenue-related information, to be put on a comprehensive, easily-navigable website.
To read an article published in the Somerville Journal on this issue, click here:
Somerville legislators: Not accessible? Then it’s not public
The State Budget Transparency Bill passed out of committee March 16, 2010
State aid shortfall creates tough decisions Somerville News 6 July 2011
Governor's FY2011 Budget - analysis by Massachusetts Taxpayers Foundation
FY2010 Supplemental Bill March 2010
Revenue is the umbrella term for money coming into the state to fund its regular operating expenditures. The majority of state revenues come from a variety of taxes - income, capital gains, corporate, sales, excise, etc.. The federal government also provides revenue, both through regular programs, such as Medicaid, and grants for special purposes
How Tax Credits Work:
A tax credit is a direct subsidy to film productions that takes the form of an “IOU” from the State of Massachusetts to qualifying film productions. This credit may be redeemed by recipient for face value or sold. There is an active market for these tax credits, which buyers can for these tax credits, then redeem from the state treasury.
How the Film Tax Credit is Working:
In 2009, Massachusetts taxpayers spent $113 million on subsidies for the film industry, according to the Massachusetts Department of Revenue (DOR). While this expenditure admittedly led to both direct and indirect jobs, it only generated $17.5 million in tax revenue. The result was a loss to the state of $95.5 million.
The employment attributed to the tax credit, including temporary and part time jobs, amount to the equivalent of 1,064 full time jobs for Massachusetts residents. The cost to us as taxpayers to generate each full-time-equivalent (FTE) job was $89,755 ($95.5 million loss divided by 1,064 FTE jobs). Film-related FTE jobs pay, on average, $67,775 to Massachusetts residents, costing taxpayers $22,000 per job more than each such job pays.
The DOR estimates that Massachusetts will be obliged to pay out $125 million in FY 2011 for tax credits that have already been issued. All of our investment in these subsidies of $89,755 per job only maintained FTE jobs for the equivalent of one year – it hasn’t created permanent, full-time jobs. Every dollar spent on these temporary jobs from the film industry is one less the state has to invest in creating permanent jobs for Massachusetts residents.
DOR data from July 2009 show that for the $113 million in spending for the film tax credit the previous year, 18% of wages were paid to Massachusetts residents and 82% to out-of-state workers. Additionally, 27% of wages that qualified for tax credits went to people who earned more than $1 million annually. It is hard to justify the investment we are making in the film industry when our state gets so little benefit – In addition to the tax credit, for instance, film productions are exempt from paying any sales tax.
Where Next?:
Film tax credits are the only tax credits issued by Massachusetts that are not subject to a cap, making them a serious budget liability. When state investment can leverage job creation, this is a good thing – providing that the investment doesn’t exceed the benefit. The data coming in from DOR is what allows us to evaluate the effectiveness of this program, which seems to need considerable adjustment.
Film tax credits defended Dedham Transcript 2/27/10