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Local Aid and Finance State eyes budget gap that could top $1B
With the national economy in disarray, state finance officials are expressing grave concerns about local economic conditions and making plans to revisit the fiscal 2009 state budget in the face of faltering tax collections.
Continuing woes in national and international financial markets, and a steep drop in stock market indexes in mid-September, led the governor’s chief finance officer, Leslie Kirwan, to announce on Sept. 16 that the prospect of budget cuts has increased and state agencies have prepared a list of potential cuts and cost savings.
According to the State House News Service, Kirwan said worries about capital gains tax collections have increased and her budget office was working with the Department of Revenue to monitor tax collections on a weekly basis.
The revenue projection used for fiscal 2009 assumed that capital gains collections would be unchanged from fiscal 2008.
While Massachusetts had been faring better economically than the nation as a whole, state officials in mid-August expressed growing concerns that conditions here might worsen, leading to tax collections falling short of projections by $400 million. They added that unexpected costs could increase the budget gap by another $600 million.
The warning on tax collections was due in part to concerns about a decline in capital gains tax collections that could result from the poor performance of the stock market.
In September, budget forecasters became increasingly concerned that their prediction of a $1 billion shortfall may have understated an even more serious problem.
When the Legislature ended formal sessions at the end of July, any budget cutting actions were left to the governor using his statutory “Section 9C” authority to unilaterally cut spending.
The main municipal and school aid accounts do not fall within the scope of 9C and could be cut only if the Legislature returns to session to make cuts or gives the governor expanded 9C authority, as was done midway through fiscal 2003 after tax collections had dropped by 15 percent over the course of the prior year. Then-Gov. Mitt Romney used his expanded 9C authority to cut Cherry Sheet Additional Assistance and Lottery distributions by $114 million combined and other local government accounts by $25 million.
Gov. Deval Patrick asked for expanded 9C authority in July, but his request was not approved by the Legislature.
Local Aid and Finance State eyes budget gap that could top $1B
State eyes budget gap that could top $1B
With the national economy in disarray, state finance officials are expressing grave concerns about local economic conditions and making plans to revisit the fiscal 2009 state budget in the face of faltering tax collections.
Continuing woes in national and international financial markets, and a steep drop in stock market indexes in mid-September, led the governor’s chief finance officer, Leslie Kirwan, to announce on Sept. 16 that the prospect of budget cuts has increased and state agencies have prepared a list of potential cuts and cost savings.
According to the State House News Service, Kirwan said worries about capital gains tax collections have increased and her budget office was working with the Department of Revenue to monitor tax collections on a weekly basis.
The revenue projection used for fiscal 2009 assumed that capital gains collections would be unchanged from fiscal 2008.
While Massachusetts had been faring better economically than the nation as a whole, state officials in mid-August expressed growing concerns that conditions here might worsen, leading to tax collections falling short of projections by $400 million. They added that unexpected costs could increase the budget gap by another $600 million.
The warning on tax collections was due in part to concerns about a decline in capital gains tax collections that could result from the poor performance of the stock market.
In September, budget forecasters became increasingly concerned that their prediction of a $1 billion shortfall may have understated an even more serious problem.
When the Legislature ended formal sessions at the end of July, any budget cutting actions were left to the governor using his statutory “Section 9C” authority to unilaterally cut spending.
The main municipal and school aid accounts do not fall within the scope of 9C and could be cut only if the Legislature returns to session to make cuts or gives the governor expanded 9C authority, as was done midway through fiscal 2003 after tax collections had dropped by 15 percent over the course of the prior year. Then-Gov. Mitt Romney used his expanded 9C authority to cut Cherry Sheet Additional Assistance and Lottery distributions by $114 million combined and other local government accounts by $25 million.
Gov. Deval Patrick asked for expanded 9C authority in July, but his request was not approved by the Legislature.
Written by MMA Legislative Director John Robertson
