New wave of state cuts looms
Calling the economic downturn unprecedented and predicting it may last well into 2010, the Patrick administration on Tuesday lowered its estimate of available tax revenues for the current fiscal year by another $952 million and joined legislative leaders in announcing they expect to see an increase in state tax collections in fiscal 2010, which begins on July 1, of only $130 million.
The revised fiscal 2009 estimate is nearly $2 billion lower than the estimate used to build the $28.2 billion budget that Gov. Deval Patrick signed in July, a spending plan that was shredded by Mr. Patrick in October and is about to undergo substantial further cuts that are likely to affect local government services.
In a letter to Mr. Patrick, his Administration and Finance Secretary Leslie Kirwan attributed the latest revenue downgrade to "the national and international financial condition."
The House and Senate yesterday were scheduled to debate Governor Patrick's plan to allow him to snap the budget into balance by carving deeper into accounts like local aid that have so far been exempt from fiscal 2009 cuts. A House redraft of Mr. Patrick's proposal, announced late Tuesday, would cap his ability to cut local aid to a third of his total cuts for the fiscal year. The redraft would also prohibit the governor from slashing funds from the judiciary, Legislature, the comptroller, the inspector general, or other constitutional offices. The proposal effectively caps the governor's ability to cut local aid at just over $550 million and may force the administration to make deeper cuts in state services and programs.
Speaker Salvatore DiMasi suggested Monday he wouldn't be surprised if as much as $500 million was slashed from local aid this fiscal year, but Ms. Kirwan said that his estimate "seems like a high figure to me." She added, however, that, "we haven't formulated our plan."
State officials painted a grim overall economic picture Tuesday, citing reduced tax receipts from bonus payments, the ongoing foreclosure crisis, weak home sales, a dramatic drop in capital gains tax collections, rising unemployment and slowed consumer spending.
With the fiscal 2010 budget just two weeks from release, the revisions indicate an increasingly constrained environment for budget writers who must fully fund debt service and health care accounts before using the remaining revenue for other budget priorities.
Ms. Kirwan said the administration would take the full 15 days allotted to it to develop a plan to address the midyear deficit. Asked whether agencies and other constitutional offices would again volunteer to axe their own budgets, she said, "I would say there's not a long line of volunteers outside the office."
Ms. Kirwan said she was "not sure yet" whether an additional dip into the state's rainy day reserves was forthcoming. Such a move would require legislative approval, she said.
"From our standpoint, everything should be on the table," she said.
The Pioneer Institute, a local think tank, urged the governor to avoid raising taxes, refocus the government on "core services" such as public infrastructure, safety and education, to push ahead with long-term reforms, to avoid one-time solutions and to limit rainy day withdrawals to $300 million a year. The institute recommends a $200 million local aid cut coupled with bringing local pension funds into the state system, giving municipalities the option to bring local employees into the state health insurance system and eliminating prevailing wage requirements.