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Local Aid and Finance Gov. says deficit persists, more cuts ahead
Gov. Deval Patrick today called a group of reporters into his office to announce that, despite budget cuts made just two months ago, the state still faces a fiscal 2009 budget deficit of at least $1 billion, due primarily to plummeting state tax revenues, especially capital gains tax collections and declining sales taxes.
In October, the governor used his budget authority to close what was then projected to be a $1.4 billion shortfall. The deep recession has hit Massachusetts with full force, however, and the state budget remains dangerously out of balance. The governor stated that he will use his budget-cutting powers to eliminate the deficit at some point in January.
When asked about possible areas that would be cut, the governor said, “Everything is on the table, including local aid.”
The administration is asking the Legislature to expand its budget-cutting authority under Section 9C, similar to the authority used by then-Gov. Mitt Romney to institute mid-year local aid reductions in 2003. The Legislature is expected to grant that authority within the next several weeks, after it reconvenes on Jan. 7.
The governor’s words echo what Lt. Gov. Timothy Murray, House Speaker Salvatore DiMasi and Senate President Therese Murray have all said in the past two weeks, following a Dec. 15 public hearing on state revenues that revealed a widening budget gap.
The MMA is warning state leaders and the public that local aid cuts would have a deep, painful and immediate impact on cities and towns, triggering reductions in vital services that are important to the state’s economy. Education, public safety and public works would all suffer immediate cuts, which would lengthen and deepen the recession in Massachusetts.
The MMA is pressing for major reforms to give cities and towns the tools and resources they need to navigate the recession, protect services and reduce reliance on the property tax. Those tools include local-option meals and lodging revenues, closing telecommunications property tax loopholes, giving municipalities control over health insurance plan design and other personnel matters, and fixing the flawed charter school funding system. None of those tools would be available, however, to offset mid-year local aid cuts, which is why the state must avoid such cuts.
State officials have only four practical options to close the $1 billion state budget deficit: further mid-year cuts; additional withdrawals from the state’s “rainy day” fund; use of federal budget assistance that may be included in a stimulus package being developed by President-elect Barack Obama and Congress; and a large increase in the gas tax.
Option 1 (further mid-year cuts): The administration is not publicly discussing any specific amounts or programs to be cut. Ultimately, the extent of the cuts will be determined by how much that state is able to make use of options 2, 3 and 4. The mid-year local aid cuts of fiscal 2003 totaled $114 million, but the overall state budget gap was smaller at that time.
Option 2 (use of the “rainy day” fund): The state still has $1.7 billion in its stabilization fund, but that money will also be needed in fiscal 2010 and 2011 to close structural budget gaps of at least $2.5 billion. State leaders are expected to conserve as much of this fund as possible in order to avoid fiscal collapse next year.
Option 3 (federal stimulus): This is the biggest question mark. A stimulus package is likely to contain billions of dollars for states to use in closing their budget deficits – most states are in the same condition as Massachusetts – but it is unknown how much Massachusetts will receive and when. If Massachusetts is able to access hundreds of millions to close the fiscal 2009 deficit, it would reduce the scope of budget cuts.
Option 4 (gas tax): This is an outside possibility, but state leaders have been discussing the need to hike the gas tax to deal with the state’s transportation funding crisis (and as an alternative to massive toll hikes). This issue is expected to be widely discussed over the next several months.
Local Aid and Finance Gov. says deficit persists, more cuts ahead
Gov. says deficit persists, more cuts ahead
Gov. Deval Patrick today called a group of reporters into his office to announce that, despite budget cuts made just two months ago, the state still faces a fiscal 2009 budget deficit of at least $1 billion, due primarily to plummeting state tax revenues, especially capital gains tax collections and declining sales taxes.
In October, the governor used his budget authority to close what was then projected to be a $1.4 billion shortfall. The deep recession has hit Massachusetts with full force, however, and the state budget remains dangerously out of balance. The governor stated that he will use his budget-cutting powers to eliminate the deficit at some point in January.
When asked about possible areas that would be cut, the governor said, “Everything is on the table, including local aid.”
The administration is asking the Legislature to expand its budget-cutting authority under Section 9C, similar to the authority used by then-Gov. Mitt Romney to institute mid-year local aid reductions in 2003. The Legislature is expected to grant that authority within the next several weeks, after it reconvenes on Jan. 7.
The governor’s words echo what Lt. Gov. Timothy Murray, House Speaker Salvatore DiMasi and Senate President Therese Murray have all said in the past two weeks, following a Dec. 15 public hearing on state revenues that revealed a widening budget gap.
The MMA is warning state leaders and the public that local aid cuts would have a deep, painful and immediate impact on cities and towns, triggering reductions in vital services that are important to the state’s economy. Education, public safety and public works would all suffer immediate cuts, which would lengthen and deepen the recession in Massachusetts.
The MMA is pressing for major reforms to give cities and towns the tools and resources they need to navigate the recession, protect services and reduce reliance on the property tax. Those tools include local-option meals and lodging revenues, closing telecommunications property tax loopholes, giving municipalities control over health insurance plan design and other personnel matters, and fixing the flawed charter school funding system. None of those tools would be available, however, to offset mid-year local aid cuts, which is why the state must avoid such cuts.
State officials have only four practical options to close the $1 billion state budget deficit: further mid-year cuts; additional withdrawals from the state’s “rainy day” fund; use of federal budget assistance that may be included in a stimulus package being developed by President-elect Barack Obama and Congress; and a large increase in the gas tax.
Option 1 (further mid-year cuts): The administration is not publicly discussing any specific amounts or programs to be cut. Ultimately, the extent of the cuts will be determined by how much that state is able to make use of options 2, 3 and 4. The mid-year local aid cuts of fiscal 2003 totaled $114 million, but the overall state budget gap was smaller at that time.
Option 2 (use of the “rainy day” fund): The state still has $1.7 billion in its stabilization fund, but that money will also be needed in fiscal 2010 and 2011 to close structural budget gaps of at least $2.5 billion. State leaders are expected to conserve as much of this fund as possible in order to avoid fiscal collapse next year.
Option 3 (federal stimulus): This is the biggest question mark. A stimulus package is likely to contain billions of dollars for states to use in closing their budget deficits – most states are in the same condition as Massachusetts – but it is unknown how much Massachusetts will receive and when. If Massachusetts is able to access hundreds of millions to close the fiscal 2009 deficit, it would reduce the scope of budget cuts.
Option 4 (gas tax): This is an outside possibility, but state leaders have been discussing the need to hike the gas tax to deal with the state’s transportation funding crisis (and as an alternative to massive toll hikes). This issue is expected to be widely discussed over the next several months.
Written by MMA Executive Director Geoff Beckwith
