Budget Calls for $13.7 Billion

BOSTON--Legislative negotiators unveiled a $13.7 billion budget yesterday that lawmakers said would fundamentally change state government even though the spending plan would still be in the red before it goes to the governor.

The budget plan, presented by a House-Senate conference committee, would mark a spending increase below 3 percent for the fiscal year that began July 1. The state has been operating on an interim budget until the final package is approved.

At $13.695 billion, the budget would be slightly higher than the spending plans approved separately by the House and Senate.

A key element of the compromise budget was a proposal to merge several public health agencies under a new secretary of health and long-term care.

Also, to avoid a fiscal disaster similar to the crisis the state suffered in its last bookkeeping year, the budget would mandate that the governor impound money if state revenues start to decline unexpectedly, said Senate Ways and Means Chair Patricia McGovern, a member of the conference committee.

McGovern (D-Lawrence) called this provision unique, saying it ties the budget more closely to the state economy. The recent downturn in the economy has shrunk state tax collections, exacerbating a budget deficit.

"The money cannot continue to be spent if the economy worsens," she said.

"The budget contained other items--such as a plan to establish an enhanced emergency 911 phone system throughout the state, funded by charges against residential phone customers who use directory assistance more than 10 times a month.

Also included were provisions to stem Medicaid spending, open some liquor stores on Sundays, and provide guidelines for placing children in the homes of gays.

The budget package was expected to come up for debate today in the Legislature, less than a week after Gov. Michael S. Dukakis signed a tax bill designed to raise $1.2 billion for the current fiscal year.

Yet despite this tax increase--the largest in state history--McGovern said the budget would be out of balance, requiring Dukakis to impose cuts with line-item vetoes. McGovern had estimated that Dukakis might need to strike about $300 million worth of items from the budget.

Last week, Administration and Finance Secretary L. Edward Lashman urged lawmakers to help settle the state's fiscal matters because Standard & Poors, a Wall Street bond rating agency, is scheduled to publish a report this week on Massachusetts' financial situation.

Massachusetts already has the lowest bond ratings in the country, after recording a deficit above $1 billion last fiscal year. But Dukakis administration officials hope the tax package, coupled with a balanced 1991 budget, will send positive signals that the state is getting its finances back in order.

Bond rating analysts have said, however, that the state must also demonstrate it has better control over government spending.

To show some control, the budget would set a spending cap on Medicaid and impose other spending limits for the Massachusetts Bay Transportation Authority. These two accounts are among the "budget busters" that have eaten up state spending.

Within Medicaid, which helps pay for health care for the needy, disabled and aged, the state would require co-payments for prescription drugs and emergency room visits. The state would begin allowed to consider a person's home an asset when determining Medicaid eligibility, and would eliminate three optional benefits--chiropractic services, podiatry and non-prescription drugs for adults.

The budget would also create a special oversight process for several other accounts that are showing excessive growth, such as workers compensations and the "Turning 22" program that assists mentally retarded adults.

Other cuts would include the elimination of the Legislative Research Bureau plus a mandate for the administration to prepare a plan to eliminate two secretariats.