- Andrew Napolitano
Treasurer Goldberg Provides Testimony to House and Senate Committees on Ways and Means Regarding Governor's Proposed FY24 Budget
Today, State Treasurer Deborah B. Goldberg joined the Massachusetts' House and Senate Committees on Ways and Means to discuss Governor Healey's proposed budget for FY24. Treasurer Goldberg provided testimony regarding how departments and agencies within Treasury performed at extraordinary levels and how the Treasury will continue to provide critical services in the next fiscal year. Below are the Treasurer's remarks prepared for delivery:
REMARKS OF TREASURER DEBORAH B. GOLDBERG
Joint Ways & Means Committee Hearing
Tuesday, March 7, 2023
As prepared for delivery:
Chairman Michlewitz, Chairman Rodrigues and Members of the Committee. I am pleased to have the opportunity to testify regarding the Governor’s proposed budget for Fiscal Year 2024.
Bond Rating/Rainy Day Fund
Even though we just saw each other for the Fiscal Year 2024 Consensus Revenue Hearing, I would like to take a moment to reiterate my thanks to you, the Legislature and the Healey Administration for your commitment to sound fiscal practices.
The Governor’s proposed Fiscal Year 2024 budget sends a powerful signal to the rating agencies that the state’s commitment to strong financial management continues across Administrations. The Rainy-Day Fund Balance has reached an historic high [approximately $7.1 billion], providing excellent coverage for when, no doubt, it rains again. And, we have made progress toward tackling and improving the state’s pension liability, lowering the actuarial rate of return to 7% and adopting the new three-year funding schedule.
Standard and Poor’s has changed the outlook for Massachusetts’ general obligation bonds from stable to positive last year, taking note of our culture of collaborative leadership and the statutory frameworks that reinforce and promote our sound fiscal practices. I am hopeful that our continued commitment to strong fiscal practices will ultimately result in an increase to our bond rating.
All of this helps my Debt Management team in the market, where demand for our bonds remains strong! I look forward to working alongside you to navigate this dynamic economy and maximize upcoming opportunities.
Turning to PRIM, the Massachusetts Pension Reserves Investment Trust [PRIT Fund] has constructed a portfolio that performs well in both strong and weak markets. It was up 4% in the December quarter and now sits at approximately $92 billion, despite a challenging market and persistent geopolitical and economic crises. We continue to outperform our peers and our benchmark.
We also made progress on many other initiatives, including the successful implementation of the Russian divestment legislation.
The Fund has continued to advance its work with diverse investment managers through the FUTURE Initiative, created after the Investment Equity legislation that we worked on together. PRIM has now allocated more than $9 billion [or almost 10%] to firms owned and operated by women, people of color, and those with disabilities. And we are just getting started!
PRIM is also on the forefront of Environmental, Social, and Governance, or what I would call “common sense”, investing. Our groundbreaking partnership with MIT Sloan School will enable the Fund to be among the first investors in the world to utilize more reliable ESG ratings. And a newly created, standing ESG Committee will help account for risks that may not show up on a balance sheet, improving our ability to deliver long-term returns for beneficiaries. Smart business people and savvy investors have always taken this approach, and we will now have the research and data as a complement.
These initiatives position PRIM as an industry leader, as we continue to generate consistent returns for our beneficiaries and your constituents.
I appreciate Governor Healey’s recognition of the important contribution of my office operations to the financial success of this state.
The Administration’s proposed Fiscal Year 2024 budget allocates almost $11.8 million [$11,783,921] to Treasury operations [0610-0000], funding which will enable my team to manage and safeguard the state’s public deposits and investments even more efficiently. These needed resources also support business continuity, furthering our ability to assist in the everyday functioning of agencies and departments all across state government, including those of the Legislature. I respectfully request your support for the full amount.
Turning to the Alcoholic Beverages Control Commission [ABCC], I would like to thank you again for your ongoing support of this important agency.
The ABCC plays an integral role in the economic vitality and public safety of every community in our state.
When I last joined you we were still awaiting final license renewal numbers. We now have those to share. In line with predictions, only 8% of state licensees – which includes manufacturers, wholesalers, and shipping companies – have not renewed for calendar year 2023. Additionally, with 95% of municipalities reporting on retail license renewals, we are finding that just 2.2% have not renewed – a much lower number than originally thought.
The ABCC continues to work on streamlining the application process by making it more user-friendly, and by creating educational opportunities for all stakeholders. We have been able to expand outreach efforts to promote greater diversity, equity and inclusion, supporting licensees who are women and people of color. We have also implemented regular training sessions for Local Boards and Licensees, as well as attorneys. The goal of this effort is to pro-actively provide information and encourage compliance to prevent future issues and/or violations.
In Fiscal Year 2022, the ABCC generated $5.76 million in direct revenue for the state. We are on track to deliver over $5.86 million in Fiscal Year 2023 and hope to meet the same projection in Fiscal Year 2024. In addition, through collaboration with other state departments [the Department of Revenue, the Department of Unemployment Assistance, the Department of Industrial Accidents and the Massachusetts Lottery] we help collect back payments and penalties owed to the Commonwealth.
The Governor’s Fiscal Year 2024 budget funds the ABCC line-item [0610-0050] at just over $5 million [$5,072,164]. I appreciate the Governor’s support and respectfully request that the Legislature fund the ABCC’s administrative line-item at the full amount.
I am extremely proud of everyone who works at the ABCC. Under the most demanding circumstances, they have provided superlative service to all our constituents.
I would also like to thank you for your ongoing support of the Office of Economic Empowerment [OEE]. Their work supports the mission of the Economic Empowerment Trust Fund [EETF] authorized by the Legislature in 2015. This Office is the first of its kind in the country and provides critical programs to individuals and businesses across the state.
OEE delivers free, accessible financial education and programming from young children to seniors and to those from every type of life experience. A critical component of ensuring success is to create community-led initiatives that incorporate individual, unique perspectives and financial needs.
The newly-created Community Ambassadors Program will help us increase participation in the design and implementation of OEE’s programming. The Office will be selecting 10 Ambassadors, who will receive financial education and training, along with a stipend. These individuals will spread awareness about free resources and to collect feedback on current and future programs. The goal is to ensure our offerings are truly empowering everyone we aim to reach.
Applications to become an Ambassador are open until March 15th. Find it online on the mass.gov website [https://www.mass.gov/info-details/the-community-ambassadors-program], and please share the opportunity with your constituents!
We are now in the fourth year of the BabySteps Savings Plan, the state’s first child savings account program designed to empower all families to save for their child’s future college or vocational/technical training. This public-private partnership deposits $50 in seed funding into a 529 account and wraps financial literacy around the entire participating family. Since its inception in 2020, almost 25,000 families [24,620] have enrolled and have started on a path to support their child’s future.
A recent study by the Economic and Racial Equity Institute at Brandeis University found that the BabySteps program fueled a 27% increase in the number of new 529 accounts. What is more, the increase in the uptake rate in low-income zip codes is 1.7 times higher than the increase in uptake rate in high-income zip codes.
The Governor’s Fiscal Year 2024 budget includes $1.626 million [$1,626,701] in funding for OEE. I respectfully request your support for the full amount.
I also respectfully request that the Legislature include the Fiscal Year 2023 earmark of $500,000 for the EETF matching grant. These funds have already leveraged significant private philanthropic contributions and will help to ensure the sustainability of this important program.
The Veteran’s Bonus Division, as always, is exceptionally busy. With your support, the Division awarded $1.26 million [$1,261,500] to veterans and their families across the state in Fiscal Year 2022. The team processed almost 3,000 applications [2,723], with approximately 2,000 [1,923] of the applications submitted online. And, they are still coming in! These bonuses have made a real difference in the lives of our veterans and service members, and will continue to do so.
The Division operates nimbly and efficiently, utilizing all available resources. In fact, the Commonwealth recently recognized their performance, awarding them the 2022 Manuel Carballo Governor’s Award for Excellence in Public Service for their tireless work.
I am proud of this tiny, but mighty team. They consistently go above and beyond to support our servicemembers. In order to continue to meet the needs of our veterans and their families, I respectfully request a modest increase to the Division’s operating expenses from $300,000 to $350,000. This increase will be used for education and outreach, system maintenance costs, and additional staff support.
I also respectfully request the ability to carry over unspent funds from Fiscal Year 2023 into Fiscal Year 2024, for the specific purpose of enhancing accessibility and improving the member’s experience.
More and more of our veterans are submitting applications online. To support demand, we need to make system upgrades and automate many internal processes. We also need to digitize service records that date back to 1898. This effort will help ensure that all applications are processed in a timely way. And, we plan to make the service records available to the public!
Last, but certainly not least, on to the Massachusetts State Lottery. We celebrated a historic milestone last year – our 50th Anniversary! Since its inception in 1972, the Lottery has sold over $143 billion in tickets, paid out over $100 billion in prizes, provided over $8 billion in commissions and bonuses to our retail partners, and generated over $31 billion in unrestricted local aid for the state’s 351 cities and towns.
The team at the Lottery is working tirelessly to deliver similar success for our state, communities, agents and customers for the next 50 years!
I am pleased to report that we are still on track to meet the projection of $1 billion in net profit for Fiscal Year 2023, despite tightening consumer spending and an increasingly competitive marketplace. Our future projections are far less certain, however.
Large jackpots have helped to boost our bottom line this Fiscal Year, but they are unpredictable and not a reliable source of revenue. In fact, in the past, these jackpots would drive increased sales across our other product lines. Recently, it has merely helped hold us even.
Adding to the uncertainty, Massachusetts residents can now place a bet on their favorite sports team both in-person and, as of this Friday, online. Sports betting operators have a completely different level of resources to dedicate to winning customers. The Lottery, within its current statutory framework and at its current funding level, simply cannot compete.
I know you agree – the success of the Lottery should not be up to chance. Together, we have the opportunity to ensure a profitable Lottery for generations to come.
I would like to provide you with an example that will demonstrate how even a small investment can pay off:
Instant tickets account for 65% of our almost $6 billion in sales. Massachusetts has led the way in this product category, since we launched the first ever, instant ticket in the 1970’s. Demand for a ticket in a higher price point has grown over the last several years. In response, 15 other states, recognizing this trend, launched their own $50 ticket. The Massachusetts Lottery, however, simply did not have the resources to do so.
However, this year a strategic decision was made to forgo the release of 6 tickets at lower price points in order to launch the $50 ticket. The “Billion Dollars Extravaganza”, launched on February 7th, has generated over $125 million in sales – making it the most successful instant ticket per capita in the first month of sales in the history of all instant tickets in the entire country.
This one ticket alone will bring in $250 million in net profit for local aid, over $16 million in commissions and bonuses for our agents, and more than $15 million in additional tax revenue for the state. The hard cost to the Lottery to launch the ticket was just $2.8 million. This $2.8 million investment will kick back more than more than $265 million to the state. I will take those odds!
While our bet paid off, it took the Lottery years of planning and operational tradeoffs to be able to bring this ticket to market. As we navigate future ongoing uncertainty, technological changes, and an increasingly competitive marketplace, I look forward to working together to make sure that the Lottery has the resources necessary.
The Governor’s proposed Fiscal Year 2024 budget includes critical funding for the Lottery. And, every dollar counts.
Increased funding for the Lottery’s operating account [0640-0000] will enable our team to proactively address changing business and operational needs, including instant ticket innovations.
Likewise, support for the Lottery’s monitor games [0640-0005] will allow our team to replace aging displays, update the aesthetic and interface of KENO, and so much more. These long-overdue changes will help enhance the player experience and keep our products competitive.
Finally, additional funding for advertising [0640-0010] will help the Lottery maintain market share and attract new customers. The ability to advertise is essential, particularly in this highly competitive environment. I am sure you have seen our competitor’s advertisements, which have increased dramatically particularly since the first of the first of the year. As the Lottery with one of the lowest advertising budgets in the nation and one of the highest rates of return to the state, these funds are critical. We will put every dollar to work for your communities and constituents.
Again, I appreciate your support and the tremendous support of the Healey Administration for the Lottery. Just remember, even a small investment in the Lottery can pay off big.
As always, I want to thank you for the opportunity to testify today and for the consideration of our requests.
Please consider my office a partner and a resource as you move forward with the budget drafting process.
I am happy to answer any questions.