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State gets $132.7m boost from US

Funds from stimulus will help close gaps

By Matt Viser
Globe Staff / February 19, 2010

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The federal government gave Massachusetts an unanticipated $132.7 million boost yesterday, which will help significantly in closing any budget gaps during the remaining four months of the fiscal year and could put the state on better financial footing heading into next year.

The funds, which come through the federal stimulus bill and were announced late yesterday afternoon by the Obama administration, are meant to relieve strains on state coffers by offsetting the cost of Medicare prescription drug coverage.

Nationwide, it will provide $4.3 billion in financial relief, which translates to $132.7 million in Massachusetts.

“This is not money that we accounted for,’’ JudyAnn Bigby, the state’s secretary of health and human services, said last night. “It is an additional source of revenue for the state.’’

Bigby said that Massachusetts and other states had been lobbying for the enhanced reimbursements but that it was unclear until late yesterday whether the money would be freed up.

“This is an additional amount that we were hoping we would get, but we weren’t sure,’’ Bigby said.

Massachusetts officials have not yet identified how the money will be used. Any appropriations would have to be approved by the Legislature and, while the funds will come through health care reimbursements, it could free up spending in other areas of the state budget.

“Wow. Wow,’’ state Senator Steven C. Panagiotakos, a Lowell Democrat and chairman of the Senate Ways and Means Committee, said last night when told of the news. “This amount of money certainly is going to help us get through this year.

“It’s good to hear $132 million on the plus side as opposed to $132 million on the minus side. That’s where it’s been recently.’’

There are still expenses that could come in higher than expected in this year’s state budget, including snow and ice removal accounts that are notoriously underfunded, but the added US funds will help an already strained budget.

The adjustments involve a complex set of payments that states provide to the federal government for Medicare prescription drug coverage for residents who are eligible for both Medicare and Medicaid. Because of the announcement, Massachusetts will pay $480 million to the federal government, instead of $613 million.

The changes announced yesterday are retroactive to Oct. 1, 2008, and will continue at least through the end of this year.

In essence, it means the state will pay less to the federal government than originally planned. It means about $108 million in unplanned revenue will be available next month, with $24 million more coming in June and October, according to Bigby.

“I could spend [that money] in about three minutes,’’ said state Representative Charles A. Murphy, a Burlington Democrat and chairman of the House Ways and Means Committee. “To have that money at our disposal is extremely helpful.’’

The state has dealt with more than two years of declining revenues that came as a result of the global economic downturn, and Governor Deval Patrick several times has made midyear budget cuts, most recently in October. State revenues have been meeting expectations in recent months, which has prevented any further cuts.

Because state officials have relied heavily on one-time revenues that will soon no longer be available, the budget woes are likely to continue. House and Senate lawmakers are currently crafting their budget proposals for next fiscal year, which begins July 1.

“That still remains a significant hurdle we’re going to have to deal with,’’ said Murphy.

“It’s a bit of good news,’’ said Michael J. Widmer, president of the business-funded Massachusetts Taxpayers Foundation, who follows the budget closely. “It doesn’t change the fact that we’ve got two more difficult fiscal years ahead, but additional revenue is certainly good news.’’

US Health and Human Services Secretary Kathleen Sebelius, in a statement after delivering the news to governors, said, “We believe today’s action will help states as they struggle to maintain Medicaid and other budget priorities in these difficult economic times.’’

The announcement came after lobbying from governors, including Patrick, who wrote a letter earlier this month to Sebelius, the former governor of Kansas, requesting the additional money.

“As a former governor yourself, I know you can imagine how crucial it is that we receive immediate reimbursement for the [money] we have already paid and a reduction in the bills going forward,’’ Patrick wrote in the letter, which was provided to the Globe. “Thank you in advance for any assistance you can provide in resolving this issue.’’

Matt Viser can be reached at maviser@globe.com.