State House News Service
Tuesday, December 16, 2008
Revenue declines put spotlight on new cuts, revenues
By Jim O’Sullivan and Kyle Cheney
As Beacon Hill struggles to
grasp its rapidly deepening budget shortfall, revealed Monday at over $2
billion since the start of the fiscal year, advocates are girding for a
second round of resistance to likely additional midyear cuts to programs
and further reductions to next year’s budget.
Some lawmakers balked at
calls for new taxes beyond rapidly coalescing legislative support for an
elevated gas tax, as the escalating fiscal crisis raises mounting cries
for additional revenues, including human service advocates trying to
build momentum for higher income and sales taxes.
State tax revenues for the
current fiscal year will fall by as much as $749 million below levels
that required a $1.4 billion budget fix two months ago, the Department
of Revenue projected Monday. Receipts will continue to plummet, falling
by 11 percent, or over $2 billion, between last fiscal year and the next
one, according to a Massachusetts Taxpayers Foundation estimate provided
to Beacon Hill budget authors Monday.
“This is serious, and we
don’t know how long it’s going to last,” said Assistant Majority Whip
Rep. Byron Rushing (D-South End), a proponent of an escalated gas tax.
But, he said, “We have to be careful about raising other taxes. Our tax
revenue is decreasing because of the economy.”
“I think the most important
thing is to understand that we will not, even with additional taxes, be
expending as much money,” Rushing said.
Major tax increases were
cornerstones of Beacon Hill efforts to rescue the state budget from red
ink that spilled over during the recession earlier this decade and
during the recession of the early 1990s. In 2002, over the objections of
Republican Gov. Jane Swift, lawmakers raised the capital gains tax,
froze the rollback of the income tax and scaled back income tax
exemptions.
Veteran human services
lobbyist Judy Meredith, who is organizing an umbrella group of
progressive groups behind new revenues, estimated that adding a penny
per dollar to the sales tax would generate $692 million and bumping the
income tax by a percentage point would raise $2.15 billion. Meredith
said the attention paid to the decay of physical infrastructure should
extend to imperiled social structures like safety-net services.
“What I’m looking for,
frankly, is someone to champion the notion of thoughtful comprehensive
tax reform that raises new revenues,” Meredith said. “And we need a
package of stuff that’s fair, that’s adequate, and that’s easy to
administer.”
Of the income and sales
taxes, Meredith said, “Those are the two broad-based taxes that we’re
looking at, that people are beginning to whisper about ... It’s time to
talk out loud about it.”
Legislators taken aback by
Monday's revelations said that members would likely still be hesitant to
vote for tax increases. Veteran state budget-watchers are predicting the
fiscal year that begins next July 1 to be the most harrowing in recent
memory.
Rep. Vincent Pedone
(D-Worcester), House chair of the Committee on Municipalities and
Regional Government, said, "There definitely has to be a reduction in
services, and revenues cannot be off the table, but we have to be
responsible" in realizing that taxpayers hit by the recession will be
reluctant to fork over more to the state.
"If we get to a point where
we are unable to deliver core services because of a lack a revenue, then
a lengthy discussion around how to find that revenue would be
appropriate," Pedone said.
While increasing the
23.5-cent-per-gallon gas tax has enjoyed a groundswell of support,
raising other broad-based taxes has found little public support in the
Legislature.
"Whether the appetite's
there remains to be seen," said Sen. Anthony Petruccelli (D-East
Boston). "I think people are aware of the severity of the problem."
Gov. Deval Patrick spent
most of the day in internal budget meetings, aides said. Senate
President Therese Murray met with the heads of the state’s top business
groups in her office. In a Boston Globe op-ed column, House Speaker
Salvatore DiMasi said Patrick’s proposed $100 million toll increases
were “not the place to start” for a comprehensive transportation reform
that should include a consolidated super-agency, gas taxes, and
potentially tolls at new locations like state borders or open-road
tolling.
Meanwhile, human service
advocates were busy Tuesday decrying the midyear cuts Patrick enacted in
October.
“How the budget cuts stole
Christmas,” read one of the many signs waved by mental health advocates
Tuesday morning on the State House steps.
In their continuing
campaign to restore services for the mentally disabled slashed by
Patrick in the wake of deteriorating revenue collections, several dozen
advocates – including one in a Grinch costume – paraded outside beneath
gray skies.
Bill Allan, executive
director of the Disability Policy Consortium, said the Patrick
administration’s cuts undermined the philosophy of placing disabled
patients in community care and would force some back into costlier
institutions.
“I think it’s
unconscionable,” said Allan.
Members of SEIU Local 509,
which represents human service workers, joined the rally and suggested
that state officials consider a “revenue package” to help offset the
cuts.
Patrick has said the cuts
were necessary to deal with a worsening fiscal crisis and that pain was
spread through many areas of the budget.
Patrick came face to face
with the victims of his budget cuts Tuesday in an impromptu encounter
outside his third floor office. When 50 protesters marched on his office
to demand the restoration of cuts to programs for the mentally ill,
Patrick emerged from an elevator that opened right into the crowd. As he
waded through to reach his office, protester Jessel-Paul Smith of the
organization MPower pleaded with him to remember the poor.
“Just to refresh your
memory and to make sure you’re fully cognizant, we are poor and the
Bible says speak up for the poor and needy,” Smith said. “There are few
people as poor and needy as those who are mentally ill.”
Patrick stood mostly
silent, listening intently. When Smith finished speaking, the group
behind him applauded loudly, and the governor said he understood their
plight.
As the budget morass
deepens, inventive revenue measures are expected to receive support, and
perennial proposals will likely enjoy rejuvenated attention.
Rep. Sarah Peake
(D-Provincetown) said she and Rep. Cleon Turner (D-East Dennis) plan to
file legislation in January that would allow communities to opt in to an
expanded room occupancy tax on short-term rentals. Taxing rentals at
cottages, condos, and houses would help the town of Chatham alone raise
$1 million, Peake said.
“Out in my area, where
tourism is a major business, it would be a tremendous enhancement for my
communities,” Peake said.
The Boston Globe
Wednesday, December 17, 2008
Cuts in local aid to be considered, Murray declares
By Matt Viser
Lieutenant Governor Timothy
P. Murray said yesterday that the Patrick administration will not rule
out cuts to local aid as part of its broad plan to close a deeper budget
deficit than previously forecast.
Administration officials
said Monday that tax revenues could plunge by up to $749 million, beyond
the $1.4 billion budget gap that the state addressed in October.
"No final decisions have
been made, but clearly, if you have to cut another $750 million, you
have to look at everything," Murray told reporters at a State House
press conference after being asked whether local aid would be cut.
He said the administration
would try to preserve the funding, which cities and towns use to pay for
programs, from teachers to trash collection, but after the first round
of budget cuts just two months ago, "there's not a lot of other places
to go."
Murray made the remarks
after announcing that the administration was awarding $8 million to
eight regional pilot programs around the state that are working to end
homelessness.
Meanwhile, mental health
advocates flooded the State House yesterday and confronted Governor
Deval Patrick as he entered his office. Carrying signs such as "How the
budget cuts stole Christmas," the group was protesting previous cuts to
programs that serve those who are mentally ill.
Patrick listened intently,
but offered no promises to restore the money or preserve remaining
funding in the next round.
"Nobody is enjoying this,"
Patrick told the group. "This is not simple. It's not easy. It's not
obvious what the choices should be. I see you. I see you. I'm not making
decisions not knowing that it has a real-life impact on people's lives.
I'm trying to find alternatives, I don't have them yet. . . . Whatever I
do in one place has an effect someplace else, and you know that."
At a hearing this week, the
Department of Revenue estimated that the state would take in $648
million to $749 million less than lawmakers had anticipated just two
months ago, when the governor announced plans to close the $1.4 billion
shortfall. That plan did not include cuts to local aid, but top state
officials are not ruling out reducing what is a large funding source in
many municipal budgets.
Other options could include
raising the gasoline tax or tapping the $1.7 billion in the reserve
account. State officials are also hoping that a stimulus package from
the incoming Obama administration could help, although it is unclear
what conditions the federal government would put on the spending and
whether state officials could use the money to make up current budget
shortfalls.
Local officials, who are
already preparing for deep cuts to budgets next year, are holding out
hope that the state will not reduce their current aid levels.
"Communities are struggling
financially and have been struggling financially for some time now,"
said Geoffrey Beckwith, executive director of the Massachusetts
Municipal Association. "They have been . . . looking at a terrible year
next year in how the recession will impact the state."
The Boston Globe
Tuesday, December 16, 2008
Forecast deepens fiscal gloom
State's shortfall put at over $2b this year
By Matt Viser
State forecasters said yesterday that tax revenues
will plunge by up to $750 million more, making it extremely likely that
Governor Deval Patrick will be forced to cut state services again to
balance the budget.
The new estimate, which comes just two months after
the last revision, puts the total midyear shortfall as high as $2.1
billion, which is nearly 8 percent of the total state budget.
The projection, issued by the state Department of
Revenue, will send state officials back for more private meetings on how
to respond to the deteriorating situation, as the state confronts a
growing unemployment rate and declining revenues in everything from the
state lottery to capital gains taxes. Patrick is expected to develop a
new plan to balance the budget as soon as next month, when the
Legislature returns from a holiday break.
"We've got some big, big challenges ahead of us,"
Patrick told reporters yesterday outside his office. "We have a plan for
several different contingencies, and we're looking at which of those
plans to pursue come January."
Patrick declined to discuss those plans, saying, "I
don't want to set off a panic."
Among options discussed yesterday during a four-hour
revenue hearing were raising the state's gasoline tax, tapping the $1.7
billion in the reserve account, and making deep cuts in spending. State
officials, who said Massachusetts probably entered a recession this
summer, are also hoping a stimulus package from the incoming Obama
administration could help alleviate some of the revenue problems.
Patrick closed a $1.4 billion budget gap in October
without cutting local aid, but whether municipal leaders could escape a
second round of cuts is unclear. House Speaker Salvatore F. DiMasi last
week projected a local aid cut of up to 10 percent for next year's
budget, but in light of the latest revenue forecast, a cut this year
could also be in the cards. Administration officials would not rule
anything out.
"The problem is so large, there's going to be a lot
of damage," Michael Widmer, president of the Massachusetts Taxpayers
Foundation, said during testimony yesterday. "Damage to the economy.
Damage to human beings. Damage to institutions."
The fiscal year 2009 state budget was initially built
on estimates that $21.4 billion would come in. On Oct. 15, after
national economic woes began hammering Massachusetts, top lawmakers and
administration officials revised that figure to $20.3 billion. Yesterday
was the first time state officials said the revenue estimate would go
lower.
During an annual hearing yesterday to devise new
revenue estimates, the Department of Revenue estimated that the state
would take in $648 million to $749 million less than lawmakers had
anticipated just two months ago. State officials are operating on two
different tracks on the budget: trying to solve shortfalls for the
current budget year, and creating revenue estimates to begin crafting
the budget for fiscal year 2010.
"The figures today were very sobering," said Leslie
Kirwan, the governor's top budget official. "We're going to have to work
with our colleagues in the Legislature to decide how to react. I think
everything will be on the table."
Nearly all revenues collected by the state are
declining, but the biggest dropoff is expected in capital gains taxes.
Because most of the stock market has plummeted in recent months, it is
still difficult for state officials to determine how large that dropoff
will be before taxpayers file estimated payments next month.
"I can't stress too much the uncertainty right now,"
said Alan Clayton-Matthews, an economics professor at the University of
Massachusetts. "One thing is certain: Things are bad now, and getting
worse quickly."
The national economy is pummeling state budgets
nationwide. More than half of states have reported additional budget
gaps, totaling $29.7 billion, according to a report released yesterday
by the National Governors Association and the National Association of
State Budget Officers.
State Treasurer Timothy Cahill offered a dismal
picture of lottery revenues, which have traditionally been a sure bet to
fill state and local coffers.
Overall lottery sales are down nearly 4 percent for
the first five months of the current fiscal year, and the proceeds used
by the state could come in $14 million to $30 million less than
expected, Cahill said. The ice storm last week cut power to about 800 of
the state's 2,000 lottery vendors, which resulted in a $2 million hit,
Cahill said.
As an example of impacts, Cahill mentioned school
construction. The Massachusetts School Building Authority is funded
through state sales taxes, which are declining, and the agency may have
to focus on renovating existing schools rather than building new ones,
he said.
"It will get worse before it gets better; 2009 will
be the most challenging and difficult year that we face," Cahill said.
The Department of Revenue also estimates that this
year's unemployment rates - between 0.5 percent and 1.1 percent - will
double next year. Navjeet Bal, the state's revenue commissioner, said
Massachusetts entered a recession this summer, and it will last through
the first half of next year.
Retail sales are projected to decline, as are
corporate profits.
While the administration estimated the revenue
shortfall this year could be $749 million, some outside budget observers
put the figures even higher. The Massachusetts Taxpayers Foundation
estimated that tax collections would drop $900 million further this
year. The business-funded watchdog group also estimated a further
decline of $800 million for fiscal year 2010, which begins July 1, 2009.
The Beacon Hill Institute pegged the additional losses this year at
nearly $740 million, with an additional loss of $584 million next year.
The Boston Herald
Tuesday, December 16, 2008
Revenue drop may spell doom for local aid
By Hillary Chabot
A whopping $648 million to $900 million dive in state
revenues could put local aid for cities and towns on the chopping block
as soon as next month, prompting massive cuts and layoffs, fiscal
watchdogs warned today.
Melrose Mayor Robert Donelan said he expected deep
cuts to local aid given the plummeting economy, but urged state
officials to act quickly.
“Every day they wait to make these cuts means they’re
going to hurt twice as much,” said Donelan, who has spent much of the
state cash already.
The state Department of Revenue projected a $648
million to $749 million drop in revenues from their last prediction in
October, when Gov. Deval Patrick slashed $1.4 billion.
Fiscal watchdog Michael Widmer believes revenues will
fall more steeply - some $900 million - below October estimates.
“To make a dent in the problem would be hard to do
without going to local aid,” Widmer said. “I think the numbers are
shocking, but the global economic calamity is taking everything in its
wake.”
Administration budget officials met with lawmakers,
lottery officials and financial experts at a revenue hearing today.
While all agreed the sobering numbers would trigger close review in
January, Patrick held off on saying additional cuts would be necessary.
“I don’t want to set off a panic,” Patrick said
outside his office. “We’ve got some big, big challenges ahead of us. . .
. We have a plan for several different contingencies, and we’re looking
at which of those plans to pursue come January.”
House Ways and Means chairman Robert DeLeo said any
additional cuts would probably mean a hit to local aid, and Senate Ways
and Means chairman Steven Panagiotakos said additional cuts are likely.
Those at the hearing also looked at using more of the
$1.7 billion rainy day budget, increasing the gas tax, and a potential
windfall from a federal stimulus package from the incoming Obama
administration.
