Governor Proposes Half-Billion in Cuts to Deal with Low Revenues, 'Fiscal Cliff'

In anticipation of the “fiscal cliff” combined with projected tax revenues that are more than half a billion dollars lower than previously expected, Gov. Deval Patrick released a revised budget designed to deal with the gap Tuesday.

“The uncertainty of the fiscal cliff and the resulting slow down in growth, is the direct cause of our budget challenges,” Patrick said. “Congress and the President must come to terms on a solution so the private sector will continue to make the kind of investments that create jobs, grow state and federal tax revenue collections and contribute to a lasting economic recovery."

The state is now expecting to bring in roughly 21.5 billion in tax revenue, and Patrick's plan to bridge the gap between this amount and the $22 billion originally expected stresses budgetary reductions and no cuts in education funding. 

"It is still early to know exactly how these cuts will impact us," said John Coderre, Northborough's town administrator. "Northborough’s total FY2013 Unrestricted General Government Aid (primarily Lottery revenue) is $943,470, so a 1 percent reduction would mean a cut of $94,347 during Fiscal Year 2013. However, according to the MMA, the State’s Regional School Transportation Reimbursement Account will also be cut by $1 million, but it is unclear what the exact impact will be on ARHS. Other reductions to municipal and school reimbursements are also possible."

"The governor’s proposed plan ensures virtually all impacted programs and services will receive no less funding than last year and that no cuts will be made to Chapter 70 education funding," an administration press release from the governor's office stated.

In summary, the governor plans to balance the budget with the following reductions:  

• $225 million in spending reductions through cuts in Executive Branch agencies. Combined with hiring controls the administration imposed in October, the total state workforce will have more than 6,000 fewer positions at the end of fiscal year 2013 than it did before the recession. A number of new investments for projects and programs in FY13 have been also been reduced or eliminated, including limiting new or restored funding for investments across a range of government services.
• $200 million from the Rainy Day Fund, bringing the total draw to $550 million in FY13 – leaving a balance of $1.2 billion, one of the highest in the country. 
• $98 million in additional federal revenues in support of safety net programs operated by the state on behalf low-income residents.
• $25 million from a 1 percent reduction in the budgets of the Judiciary, Constitutional Officers and other non-executive departments.
• $20 million from a total of $113 million in savings in state borrowing and health care reform costs. The remainder of this funding will be used to offset some unavoidable deficiencies which must be funded this fiscal year.
• $20 million from a reduction in the amount of sales tax revenues that will automatically be transferred to the Massachusetts School Building Authority to support local school building costs.
• $11 million from certain reserve fund surpluses.
• $9 million from a 1 percent across-the-board reduction to unrestricted local aid. The governor has filed legislation that ensures if lottery profits exceed the $1.026 billion amount currently budgeted in FY13, all of such excess proceeds be committed to increasing the amount of unrestricted local aid.

One component of the ongoing debate in local aid, added Coderre, is the disposition of "lottery revenues." These, he said, are essentially unrestricted general government aid that is being proposed as a cut. 

"By statute, lottery receipts are a direct source of local revenue and are not interchangeable with state revenue-sharing distributions," said Coderre.

In FY2009, Northborough's lottery revenues were cut mid-year by $129,327. 

"Despite state legislative assurances that lottery funds would not be targeted for cuts back in FY2003, Northborough’s Lottery aid was reduced by $101,041 halfway through that fiscal year as well," said Coderre. "During the economic recession prior to that in the early 1990s, the state placed an artificial cap on the lottery distribution to cities and towns and used the balance of revenues for State budgetary purposes, disregarding the original enabling state legislation.

"Looking forward, municipalities need to stress to the state legislature and administration that lottery revenues should not be capped or diverted for non–lottery aid purposes, thus maintaining Lottery funds to their originally intended use as local revenues."