State Budget Practice Report Cards and Budget Resource Guide
As recently as 2017, Massachusetts relied heavily on one-time measures to balance budgets, including the tapping of special funds to meet general expenses and the deferring of payments for MassHealth, the state’s Medicaid and children’s health insurance program. It received a D, the second-lowest grade available, in budget maneuvers that year. But stronger tax collections enabled the state to reduce its use of such techniques, helping it earn a C average in the category for 2017 through 2019. Even so, Massachusetts continued to push school costs onto local governments while using special funds and proceeds from the Tobacco Master Settlement Agreement to cover general fund spending needs.
Massachusetts fared more poorly in legacy costs, which cover public worker pensions and other postemployment benefits (OPEB), principally health care. It was one of only seven states averaging a D-minus, the lowest grade possible. Its $94 billion in pension liabilities are the tenth highest in the country and are funded at about 61 percent, 9 percentage points below the total for all states. Its annual funding of pensions and OPEB also fell short of the amounts that actuaries deemed necessary to move toward full funding.
Massachusetts was one of eighteen states to receive a top A average in reserve funds. According to the National Association of State Budget Officers, the state put aside almost $2.6 billion, or 5.7 percent of general fund expenditures, in 2019. Its policies are in line with best practices cited in the Volcker Alliance’s recent working paper, Rainy Day Fund Strategies: A Call to Acton, with funding tied to revenue volatility, surpluses used for replenishment, and the reasons for fund disbursements clearly delineated.
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 2017 through 2019. 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 eight 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.