Comptroller Thomas Shack feels like he’s the chirping smoke detector of state government, regularly sloughed off when he attempts to warn of an impending problem.
“When the smoke detector starts to go off you have two things you can do; you can either address the smoke or you can unplug it or take the battery out of it,” Shack said. “Sometimes I feel like the battery is taken out of it as opposed to dealing with the smoke and I think that that’s a fair assessment.”
In the latest instance, Shack has been trying to warn the Legislature that its inaction on a bill to close the books on fiscal year 2018 and spend surplus funds is putting his ability to meet a financial reporting deadline prescribed by the Legislature in serious doubt. It’s the same issue he’s been raising with legislative leaders annually for four years.
Shack’s office must close the books on the fiscal year that ended June 30 and file the annual Statutory Basis Financial Report by Oct. 31. He said that having the Legislature pass its final supplemental budget by Aug. 31 is an industry best practice because it allows his team enough time to properly prepare the financial report, which needs to be independently audited before its filing.
“This is the fourth fiscal year that I’ve operated as the Commonwealth’s comptroller, and this is the fourth year under my comptrollership that we will not meet the statutory deadline,” he said Friday at a meeting of the Comptroller Advisory Board. “I would reiterate that such late activity is really perilous. It’s a well-known risk within the audit world that if you do not meet your own statutory obligations you may well subject yourself to really, really significant scrutiny.”
Governor Charlie Baker in July filed a spending bill to close out unsettled accounts and spend fiscal 2018 surplus funds but months later the Legislature has not taken action on it as most lawmakers have cleared out of Beacon Hill for campaign season. The supplemental budget came after the Legislature could not agree in time on a fiscal 2019 budget, making Massachusetts the last state in the country to deliver its annual spending plan for FY 2019.
Treasurer Deborah Goldberg noted that the state is in strong financial shape and said that while there are “all sorts of legitimate explanations as to what’s going on” with the supplemental budget, two things are “a little bit shocking.”
“One is not a real strict adherence to the deadlines, which are critical in terms of how the outside world looks at all of this, so sort of getting away with this, it’s sort of like kids getting away with stuff for too long,” Goldberg said. She said the other thing of concern is that repeatedly missing deadlines opens the state up to more scrutiny from rating agencies.
“We just don’t want to be giving the outside world things to point to,” she said.
In June 2017, S&P Global Ratings lowered its rating for Massachusetts bonds to AA from AA+ and admonished the state for its approach to stashing funds in its rainy day fund.
Auditor Suzanne Bump, who sits on the advisory board, said she recently met with audit firm KPMG to discuss potential financial risks to the commonwealth and that KPMG raised the lateness of the closeout budget as an issue.
“This is constantly presented, not just internally to state government but to the rest of the world as a problem and a potential financial risk for the state,” Bump said. She told Shack, “I share your frustration that the Legislature doesn’t seem to comprehend the magnitude of the ramifications of their failure to act.”
On Friday afternoon, spokespeople for legislative leaders said that the Legislature understands Shack’s concerns and plans to get the supplemental budget done soon. Legislative leaders in mid-September said they were working on the bill and hoped to get it done as soon as possible.
“The House and Senate are in the midst of preparing the supplemental budget. We expect the review process will be complete in the coming days,” Collin Fedor, a spokesman for House Ways and Means Chairman Jeffrey Sanchez said.
Sarah Blodgett, a spokeswoman for Senate President Karen Spilka, said, “The Legislature is cognizant of the importance of this bill and working hard with our colleagues to finalize the matter in the coming days.”
Shack said he is expecting that Massachusetts will again be the last state in the country to file its statutory basis financial report. He said he’s heard legislative leaders say they’re working on it, but that he doesn’t think action is imminent.
“I do not see a supplemental on the near horizon. That’s very concerning. Over the course of the last several years, we’ve had on the horizon a view of what’s happening behind the scenes that it’s really, really close or that things are happening,” he said Friday. “We have heard that we’re close and things are happening, but I have yet to see anything of any real import that would suggest that this is going to happen any time soon.”
Shack said one of the most frustrating things about the position he has found himself in the last several years is that the Oct. 31 deadline he is bound by was imposed by the Legislature.
“If you cannot meet your own laws, then why are you establishing those laws in the first place?” he said. “I’m loathe, as any attorney would be, to engage in any behavior that results in laws being broken. In this case, as I’ve said on other occasions, that’s exactly what I’m forced to do and I have been forced to do.”