Bill Summary – FastDemocracy

November 1, 2024
Her Excellency Maura Healey, Governor                 Secretary Matthew J. Gorzkowicz
Commonwealth of Massachusetts                         Executive Office for Administration & Finance
State House, Room 360                                 State House, Room 373
Boston, MA 02133                                      Boston, MA 02133
Honorable Aaron Michlewitz, Chair                     Honorable Michael J. Rodrigues, Chair
House Committee on Ways and Means                     Senate Committee on Ways and Means
State House, Room 243                                 State House, Room 212
Boston, MA 02133                                      Boston, MA 02133
Mr. Steven T. James                                   Mr. Michael D. Hurley
Clerk of the House of Representatives                 Clerk of the Senate
State House, Room 145                                 State House, Room 335
Boston, MA 02133                                      Boston, MA 02133
Pursuant to M.G.L c. 7A, § 12, I am required to submit the Statutory Basis Financial Report
(SBFR) to you by October 31 of each year. We have not met that deadline for Fiscal Year 2024.
As you know, the completion of the final supplementary budget (the “closeout supp”) for the
preceding year is necessary to close the books of the Commonwealth. When the closeout supp is
complete, it triggers a series of final transfers and transactions, followed by the development of the
report itself, which is a document of well over 175 pages. The draft SBFR goes to the
Commonwealth’s independent CPA firm for review. Finally, as required by statute, the draft
report is reviewed by the Advisory Board to the Comptroller. Although every preparatory step
possible is taken, roughly four-to-five weeks is required for work between the closeout supp and
issuance of the SBFR under normal circumstances.
Therefore, to meet the October 31 deadline, the annual closeout supp process would ideally be
completed no later than mid-September each year. If the closeout supp were to be completed as
late as October 1, then there could still be an opportunity to hit the October 31 date or to issue only
slightly later.
Historical trend. The table on the following page shows the SBFR issuance date over the past
two decades:
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  Fiscal Year End     SBFR          Issuance Date              Fiscal Year End     SBFR      Issuance Date
   06/30/2004       SBFR FY04       10/26/2004                  06/30/2014       SBFR FY14   10/31/2014
   06/30/2005       SBFR FY05       10/28/2005                  06/30/2015       SBFR FY15   11/10/2015
   06/30/2006       SBFR FY06       10/28/2006                  06/30/2016       SBFR FY16   10/31/2016
   06/30/2007       SBFR FY07       10/26/2007                  06/30/2017       SBFR FY17   11/16/2017
   06/30/2008       SBFR FY08       10/29/2008                  06/30/2018       SBFR FY18   11/06/2018
   06/30/2009       SBFR FY09       11/03/2009                  06/30/2019       SBFR FY19   01/06/2020
   06/30/2010       SBFR FY10       10/31/2010                  06/30/2020       SBFR FY20   12/18/2020
   06/30/2011       SBFR FY11       11/02/2011                  06/30/2021       SBFR FY21   11/19/2021
   06/30/2012       SBFR FY12       10/23/2012                  06/30/2022       SBFR FY22   12/23/2022
   06/30/2013       SBFR FY13       11/01/2013                  06/30/2023       SBFR FY23   02/06/2024
     Legend
                    On or before 10/31
                    Not more than 7 days late
                    >7 days late but in November
                    December or later
In the fifteen years from 2004 through 2018, the SBFR was issued either by the deadline or
following a relatively brief delay. Beginning in 2019, the length of delay became more serious,
with delivery coming in December or later in four of the last five years.
Impact of timing on the work process. We have identified a secondary effect, occurring in my
office, that compounds the delay issue.
As noted before, the time to produce the SBFR has historically been roughly four to five weeks.
However, if the close-out supp is not completed before mid-October, then the time to produce the
SBFR can be substantially longer. There are two causes for this:
First, if SBFR work starts late, it is pushed toward Thanksgiving and potentially the holidays.
This reduces the professional time available, because of the holidays and scheduled time-off. Our
devoted employees and our colleagues at the independent audit firm both change their schedules
and work long hours, but it is realistic to recognize that there will be an impact.
Second, as we move into November and December, work must proceed on the two other
components of year-end reporting: the Annual Comprehensive Financial Report (ACFR) and the
federal Single Audit. We prioritize the SBFR, but the ACFR and Single Audit have “now or
never” tasks that become competing priorities. Both Comptroller staff and the independent CPA
firm face this challenge.
Potential consequences of annual delays. As I have noted each year in addressing the delays,
the financial condition of the Commonwealth is very sound. That reality and our reputation rest
on two pillars: the fiscal prudence of elected officials over many years, through managing budget
challenges and building reserves, and the growth in revenue provided by the hardworking
residents of Massachusetts who engage in our robust, resilient economy. Each year, the SBFR and
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the ACFR provide the record and evidence of that fact to the citizens and taxpayers of the
Commonwealth, and to ratings agencies and bondholders of the Commonwealth.
The unfortunate pattern of late issuance of the SBFR and ACFR does not change that reality, but it
can only serve to diminish the luster of the Commonwealth’s financial reputation. For every state,
the ability to enact budgets in a timely way, whether to open or close a fiscal year, is one indicator
of a fiscal house in good order. I do not see any evidence that it has caused tangible consequences
to date, but we should break the pattern of late settlement of the prior fiscal year in budgeting and
reporting.
As ever, when discussing passage of the close-out supp or any budget legislation, I have a
fundamental respect for the complexity of the issues before policymakers and the prerogative of
elected officials to take time for consideration, debate, and negotiation. In addition, I know that all
participants in this process are aware of the issues and working toward resolution.
Regarding Fiscal Year 2024, I understand that both the House and the Senate have engrossed
versions of the closeout supp and are moving forward. I greatly appreciate every step taken to
accelerate this process to conclusion as soon as possible.
For Fiscal Year 2025 and beyond, I would submit that the exhibit shows that late timing is not an
aberration, but a pattern. Good intent and incremental improvements, despite being serious and
sincere, has not availed to change the pattern. I would not presume to prescribe actions to either
legislative or executive leadership, but I would suggest that a more fundamental examination of
the process may be required.
Respectfully yours,
William McNamara
Comptroller
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