JAN. 21, 2011……The annual budget proposal Gov. Deval Patrick will unveil next week will boost state aid for schools by $140 million, cut another pool of local aid by $65 million, and include a pair of health insurance reforms that the governor believes could offset any related negative impacts on local government services and jobs.

Patrick, who next week plans to fully outline ways to erase a gap between projected state revenues and expenses of up to $2 billion, told local officials meeting in Boston Friday morning that his budget will increase Chapter 70 education aid to cities and towns by $140 million, or 4 percent, to a total of $4 billion next fiscal year.

The budget Patrick will propose next week will also offer $834 million in "unrestricted" local aid, which is used to provide local services like public safety, representing a $65 million cut from this fiscal year.

Patrick said he will also propose an $80 million increase in a pool of funding for special education and increase Chapter 90 funding for local road improvements by $45 million to $200 million.

In recent weeks, the governor has repeatedly said he has no new plans to raise taxes and warned he'll need to deeply slash state spending next fiscal year since the state has exhausted billions of dollars in federal stimulus funds. It won't be fully known until next week which areas of the state budget he'll reduce, or which other reforms and reorganizations he'll offer, to help trim costs and afford the local aid increases he outlined on Friday.

The governor disclosed that he plans to press lawmakers this winter and spring to adopt municipal health reforms that members of the Legislature and some public employee unions have resisted, fearing higher costs for workers.

Under Patrick's plan, all cities and towns in Massachusetts will be required to either join the state-run health insurance program or institute a program "of equivalent value and cost" by July 1, the start of fiscal year 2012.

Patrick's legislation also eyes between $15 million and $30 million a year in savings for cities and towns by requiring all municipalities to move eligible retirees into the federally funded Medicare program, an idea the governor has long promoted.

The two health reforms, if adopted, could curb municipal health costs by $120 million, Patrick said, and help sustain local services and jobs in the face of reductions in direct cash aid from the state.

"This proposal is a critical step towards delivering material savings in health care costs to cities and towns at a time when they need it most," state Secretary of the Executive Office of Administration and Finance Jay Gonzalez said in a statement. "In this challenging fiscal environment, taxpayers can no longer be asked to fund overly generous health benefits at the expense of critical local services."

State Labor Secretary Joanne Goldstein said that under Patrick's plan, unions representing municipal workers and municipalities "will have the opportunity to collaborate on how to continue to provide quality healthcare for workers while ensuring meaningful savings for cities and towns."

The governor's budget will also call for a new $9.7 million grant program that will encourage cities and towns to compete for funds that will help them regionalize services and transition to new methods of service delivery that will save time and money.