Senate Passes State Government and Finance Reform Bill

The Senate unanimously passed a conference committee report on bipartisan legislation that makes fundamental changes in the operations of state government, updating antiquated finance laws and implementing performance measurement requirements for all government agencies and programs to improve efficiency, transparency and accountability.

 “This legislation fundamentally reforms how state government works and is consistent with our ongoing efforts to increase government accountability and transparency to ensure responsible stewardship of taxpayer dollars,” said Senator Clark.  “The bill will improve the performance of our budgeted agencies through data-driven evaluations.  Furthermore, I believe cities and towns will welcome the opportunity to receive local aid payments on a monthly basis rather than a quarterly basis.”

The bill modernizes state government by pushing agencies toward more efficient electronic accounting and reporting systems with the elimination of outdated paper-based methods, and it also makes the following updates:

• Requires quarterly cash flow reports to compare actual results with prior estimates on spending and revenue and analyze the reasons for any discrepancies to improve future budget forecasts;

• Sets the state’s debt limit at $17.07 billion starting the first day of fiscal year 2012 and changes the arbitrary index rate to make it more responsive to true economic conditions, helping to control the state’s debt limit and further improve the state’s bond rating;

• Requires an independent debt affordability study to be performed before the Governor sets a bond cap and issues bonds for a particular fiscal year, and requires that report to be publicly available online;

• Requires improved reporting of spending on capital projects; and

• Requires monthly distribution of unrestricted local aid instead of quarterly distribution beginning in fiscal year 2014 to help cities and towns better identify their available cash flow and reduce the state’s reliance on short-term borrowing to support cash flow.

The government and finance reform legislation received high praise from business groups, including the Associated Industries of Massachusetts, which called the plan “a significant and constructive contribution toward reshaping state government to meet the challenges of our times.” The Massachusetts Competitive Partnership, which applauded the Senate President for bringing “this level of accountability” said the legislation “will help make our Commonwealth much more effective and efficient in the future.”

For the first time, each agency will be required to have a performance management system in place and develop a strategic plan for measuring performance that can be evaluated publicly and by the Legislature and Governor.

Additionally, the bill establishes a commission to make recommendations on the feasibility of moving the Commonwealth from traditional “maintenance”-based budgeting to a modern “zero”-based budgeting process for the fiscal year beginning July 1, 2016. This budgeting method is finding great success in some states, including Utah and Virginia.

The conference report must now be taken up by the House of Representatives. Final action to send the bill to the Governor is expected next week.