The $36.2 billion budget proposal that the Massachusetts House Ways and Means Committee released this afternoon includes a host of important decisions that affect our state and the people who live here. (If you’re looking for a primer on the budget, read my preview.)
For the sixth year in a row, these decisions are being made against the backdrop of a large state deficit. When it comes to deficits, Massachusetts is not like the federal government. Every year, the state has to close its deficit and balance the budget. That’s a constitutional requirement.
Currently, there’s a gap between the amount of money the state expects to take in next year (through taxes and fees) and the amount it would cost just to keep running the programs we already have, much less add new services.
How big is our deficit?
To their credit, the House Ways and Means Committee actually provides an estimate: $780 million. That’s a big number, but then the budget is full of big numbers so you really need to ask: is this actually a lot? And the answer is yes, it is. It’s about 2 percent of the total budget, and more than we spend on early education or the environment. More generally, it’s troubling that we still face persistent deficits even as the economy begins to improve and other states begin to leave their recession-era deficits behind.
How would the House proposal close the deficit?
There are a couple of different ways to close a deficit. You can increase taxes, you can cut spending, you can borrow from our state’s savings account (colloquially called the “rainy day” fund), or you can try to cobble together money from smaller sources like gambling revenue, trust fund transfers, and tax settlements. The governor’s proposal, which came out in January, used several of these approaches: $130 million in new revenue initiatives, $185 million from the rainy day fund, and another $150 million of cobbling.
Let’s take these approaches one by one, and look at what the House committee proposes:
- There is no new tax revenue in the House Ways and Means Budget. Zero. So that’s not part of their solution.
- They take just $150 million from the rainy day fund, which is less than the governor proposed.
- Cobbling yields about $450 million. The biggest part of this, about $240 million, comes from tax settlements.
If you’re keeping score, that adds up to about $600 million of the $780 million needed to close the deficit. The rest, $180 million, has to come in the form of cuts to existing programs.
Actually, there’s a bit more to it than that, because what’s needed is $180 million in net cuts. If there are areas in the budget where the House actually increases spending, then every one of those increases has to be matched with offsetting cuts. By the House’s own calculations, the proposal includes $155 million in new investments, which means there are actually $335 million in cuts required ($155 million in new investments + $180 million needed to close the deficit).
So where are the cuts? Transparency fail!
The Legislature makes it very hard to figure out what it is cutting. In order to determine where these cuts are, we need to know exactly what it would cost to maintain existing programs. We can’t just assume things will cost the same next year as they did this year. To take just one example, as the population ages the number of elderly people requiring care goes up, which means that elderly care programs will cost more, even if they’re providing the very same services.
The actual cost of keeping programs running for another year is surprisingly well guarded. The people who oversee individual programs know how much they are likely to cost, and they tell the Legislature, but the Legislature won’t tell us. Massachusetts does not publish this information (it’s called a “current services baseline” or a “maintenance budget”). About 18 other states do (The Center on Budget and Policy Priorities has the details).
Is there really nothing we know about these cuts?
While we can’t know exactly where these maintenance cuts are being made, we can compare the House Ways and Means proposals with current spending. That kind of information takes a while to pin down, but it will be available in the coming days.
So, what now?
Now, we wait for more information about how the budget proposal would affect various programs. And we watch as the House considers amendments. And, of course, we hope for a more transparent budget process.
Note: You may have noticed that the governor’s numbers don’t add up. There’s a reason for that. Some of the money that I’ve counted as “cobbled” revenue for the House was left out of the governor’s own accounting. But it’s there in the background. To make an apples to apples comparison, the governor’s equation is more like: $130 million in taxes + $185 million from the rainy day fund + $450 million in cobbled money = $765 million toward the deficit.