Baker confirms $765M shortfall in state finances

20 Jan 2015 | Author: | No comments yet »

Baker confirms $765M shortfall in state finances.

Former Gov. Before Deval Patrick left office earlier this month, he gave Charlie Baker, his gubernatorial successor, traditional gifts, including a pewter key, a gavel, and a 19th-century Bible. But Patrick also left Baker something more pernicious: a mid-year budget gap the administration says is about the size of the gross domestic product of the country of Samoa. The Democrat ordered $200 million in budget cuts to agencies under his direct control, and asked the Legislature to take other steps including a cut in state aid to cities and towns — something Baker and legislative leaders have ruled out.

On Tuesday morning, Baker told his Cabinet and was set to tell the news media that deficit is $765 million — a significant sum — and argue that the shortfall is primarily the result of the state spending too much. The announcement will confirm a gap estimated last month by an outside group, the Massachusetts Taxpayers Foundation, raise the specter of painful cuts to services, and begin in earnest the first true challenge of the Republican’s tenure: how to quickly bridge the fiscal chasm. On Monday, the state’s top finance official, Kristen Lepore, previewed the administration’s take on the state’s finances, did not specifically address whether there will be cuts, but offered hints about parts of a solution.

She said that the tax money coming into state coffers so far this fiscal year, which runs from July 2014 through June, has met or exceeded expectations. And while the administration’s analysis finds part of the current gap results from overly optimistic predictions for some types of money coming in — fees, for example — Lepore said the main driver of the deficit is greater than expected spending. “This is definitely a spending problem and not a revenue problem,” Lepore, the secretary of administration and finance, said in a State House interview with the Globe. Higher than anticipated state and municipal employee health care costs; more cases at the Department of Children and Families, a greater need for public defenders, and more homeless families needing shelter than were budgeted for, are among the other pieces of the budget gap, according to the administration. And when I say weeks: A couple of weeks, at the most.” Since the state’s fiscal year ends in June, each day that goes by means that any potential cuts will have to be spread over a shorter period of time, which could increase how painful they are for the agency impacted and the people it serves.

While governors have some unilateral authority to chop budgets and wrangle savings, she indicated that the scope of the problem will require action from the Legislature. After Massachusetts has collected more than about a billion dollars in tax revenues from capital gains income in a fiscal year, the statute steers subsequent collections of that type to the “rainy day” fund. That spending includes paying for health care of people newly enrolled in Medicaid, who had previously been in a temporary Medicaid program, the administration said. The temporary program was instituted to make sure people would not lose coverage after the state’s health insurance website — for people who do not get insurance through their employer — failed.

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