Closeout Budget On Ice As Summer Recess Continues

Comptroller Hoping For Action In September

STATE HOUSE, BOSTON, SEPT. 8, 2022…..Lawmakers adjourned for the weekend Thursday without taking up a $1.6 billion spending bill to close the books on fiscal year 2022, and Comptroller William McNamara is hoping they will complete the full legislative process by the end of the month so he can meet his own deadline.

McNamara said Thursday his team “should be in a good position” to file an annual financial report by Oct. 31, as required under state law, if the House and Senate complete the full range of action required for the closeout supplemental budget — a bill now intertwined with deliberations about tax relief — in September.

“That includes both the action of the Legislature and naturally any ongoing process of veto or other adjustments that happens afterward,” McNamara told the Comptroller Advisory Board. “We never know what surprises are there, but essentially, if that action takes place and we have a three-week period or so (to finish the report), we can be on or very, very close to the due date.”

Democrats who lead the Legislature have developed a pattern in recent years of delivering the annual budget late and also not showing much urgency when it comes to tying up loose ends after fiscal years conclude.

The closeout budget is an annual occurrence, and this time around debate could be supercharged by a nearly $3 billion pot of funding required to be returned to taxpayers.

The $1.6 billion closeout budget bill Baker filed Aug. 31 sets aside about $2.94 billion that his administration believes it will need to steer back to Bay Staters under a 1986 tax cap law, often referred to as Chapter 62F.

Six weeks after Baker publicly announced his expectation that the cap would be triggered, top House and Senate Democrats remain at an impasse over how much — if any at all — of their already-passed $4 billion economic development and tax relief bill they still want to pursue.

Auditor Suzanne Bump faces a Sept. 20 deadline to certify how much excess tax revenue the state will need to send back to taxpayers.

The House Ways and Means Committee has not acted on the budget bill (H 5260) since receiving it last week. In the meantime, McNamara said his team and other state offices have been preparing to close the books on fiscal year 2022, which ended June 30.

“The books for FY22 cannot be truly closed, of course, until the final supp is done because there will be important parts in there,” he said. “As you can imagine, there’s a tremendous amount of work that we and departments can do to essentially get as close to a close as we have. Every financial person across the state, our team, our systems team, our financial and accounting teams, everyone has been working hard and that’s gone extremely well. I think we’re in a very good spot, and we really are just waiting for final action on the closeout supp.”

McNamara’s office is not the only entity waiting on lawmakers: the comptroller said a team of outside auditors with CliftonLarsonAllen need a “decent interval so they can do their review” of the Statutory Basis Financial Report, or SBFR.

Three years ago, lawmakers took months to decide what to do with a $1.1 billion tax surplus, blowing past the Halloween reporting deadline and prompting then-Comptroller Andrew Maylor to threaten unilateral action to close the books himself and sweep all of the excess revenue into the state’s rainy day fund. A late agreement staved off that “extraordinary step,” though not before Maylor’s tweets from a Disney World vacation collided with his office’s eleventh-hour work to wrap up the report.

Most of Thursday’s advisory board meeting focused on an audit of state agencies based on fiscal year 2021.

Representatives from CLA told the board they found two “material weaknesses” in the state’s unemployment insurance program and the presidential declared assistance to individuals, households and other needs program. Another 20 programs were flagged for “significant deficiencies,” a level lower than “material weaknesses.”

McNamara said some of the issues identified at the Executive Office of Labor and Workforce Development stemmed from its relative financial independence, which led to some accounting information “not being published formally.” He stressed the office was not failing to meet a requirement.

The labor office agreed to issue annual financial statements for the unemployment and paid family and medical leave systems starting in FY22, then publish quarterly interim statements beginning in FY23, McNamara said. He added that EOLWD is “truly embracing these new requirements.”

McNamara pointed out at the start of the meeting that the discussion about the FY21 audit would effectively look back in time, since that fiscal year ended more than 14 months ago and officials are already working to close the books on FY22.

“If this were Star Wars, the screen crawl would say — because we’re talking about FY21 here — it would say ‘a long time ago in a galaxy far, far away,’ because fiscal year 2021 is now well behind us,” McNamara said.