Governor Deval Patrick announced an array of state budget cuts to help cover a $540 million shortfall Tuesday, including a further reduction in the money local communities use to pay teachers and firefighters.
Patrick said the midyear budget gap is a direct result of the economic uncertainty caused by failed fiscal cliff negotiations, which could trigger federal spending cuts and tax increases at the start of the new year.
The cuts in the $32.5 billion budget, some of which need legislative approval, are expected to have a direct impact on residents. They include cuts of $9 million in local aid, $11 million in special education, $5 million in reimbursements for towns to bus homeless students, and across-the-board reductions in spending on the overburdened court system.
Patrick also said restrictions on state hiring that began in October would result in 700 fewer state workers than the budget projected.
Less than half of the state’s shortfall would be closed by withdrawing $200 million from the state’s rainy day fund, which is expected to have about $1.2 billion left at the end of the budget year on June 30. The Patrick administration said the state would still have one of the biggest reserve funds in the country.
Municipal leaders vowed to fight the $9 million local aid cut in the Legislature, noting that it comes on the heels of five tough budget years that brought $416 million in cuts. They said that the overall impact of Tuesday’s cuts on cities and towns will amount to $37.75 million. In addition, localities face a $20 million cut to the school building fund that was automatically triggered by weaker-than-expected sales tax collections.
Patrick cast the budget situation as serious, but not catastrophic. He said the state faced a gap that was six times larger during the height of the fiscal crunch in 2009. And he said the state would not need to raise taxes to fill the current void. But he continued to warn of a potential tax increase to cover longer-term problems in transportation, which lawmakers are expected to take up in the new year. “We’ve been here,” Patrick said at a news conference in the State House. “We know how to do this.”
“I don’t think this is draconian,” he added. “We are spreading the pain as broadly as possible.” Though many programs will be taking small hits, Patrick’s budget chief, Jay Gonzalez, said Tuesday that his office would release $20 million to pay for an approximately 2 percent salary increase for 29,000 low-wage human services workers. The workers had been without a raise for five years and have been protesting outside the governor’s office. The money for the raise, though previously budgeted, had been frozen while Patrick devised a plan to fix the budget gap.
The state still expects to collect more in tax revenues this budget year than it did in the previous budget year. But a year ago, budget writers, in consultation with economists, pinned their revenue estimates on a more robust economy. They expected an economic growth rate of 3 percent, resulting in nearly $900 million more in tax collections than last year, for a total of $22 billion in tax collections. They are instead seeing a 1.9 percent economic growth rate, and now expect about $381 million more in tax collections than last year.
Patrick on Tuesday renewed his call for a resolution to the budget negotiations in Washington, before automatic cuts and tax increases at the federal level take effect on Jan. 1.
“By all accounts, that uncertainty and resulting slowdown in economic growth is the direct cause of our budget challenges,” he said. “The private sector will be unwilling to make the kinds of investments that create jobs, grow state and federal tax revenue collections, and contribute to a lasting economic recovery until Congress and the president come to terms on a solution.”
Patrick, a Democrat and an active supporter of President Obama, cited statements from economists and business leaders in asserting that the fiscal cliff negotiations are hampering economic growth. He conceded that the state’s November tax collections — tabulated during a time of heightened anxiety over the fiscal cliff — were actually above projections. But he said state economists still believe the year will end with lower collections than originally forecast. And he said that the situation would only worsen — with a loss this year alone of $300 million more in state revenue — if Obama and Congress fail to reach a compromise.
Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said the fiscal cliff is only partly to blame.
“If you look at the recovery, since the bottom of the recession about three years ago, nationally and in Massachusetts, it’s been an anemic recovery,” said Widmer, whose group is backed by businesses. “But that’s not the fiscal cliff. It’s been a variety of factors.”
He said he did not expect the Legislature to agree to the $9 million local aid cut, given the political wrath they would face from mayors and local officials.
The Massachusetts Municipal Association said it would ask lawmakers to take the $9 million out of the rainy day fund instead of risking losses to school budgets, public safety, and public works projects.
“There’s a major question mark looming over every single community’s budget,” said Geoffrey Beckwith, the association’s executive director. “They would have to reopen their budgets and they would wonder, if the governor’s granted additional authority, would there be further cuts down the road?”
Mayor Thomas M. Menino’s spokeswoman, Dot Joyce, said the cuts announced by Patrick would add up to between $3 million and $5 million for Boston residents. “We certainly understand the Commonwealth’s need to cut spending and will work closely with both the Legislature and state partners in the hopes that local aid and special education cuts would be a last resort and not the first option,” she said.
Democratic leaders in the House and Senate were noncommittal, releasing a joint statement Tuesday indicating that they plan “to better analyze the effect these cuts would have on the programs and services we provide to the citizens of the Commonwealth.”
Republicans were more critical, calling local aid cuts a last resort and blaming Patrick for the sluggish recovery.
Senator Bruce E. Tarr, a Gloucester Republican who serves as minority leader, said in a statement that Patrick “is confronting the harsh reality of a faltering economic recovery.”
“Yet it’s also a harsh reality that this situation could and should have been addressed by more aggressive action to create a better climate for economic growth,” he said, criticizing Patrick for resisting legislative calls for more business tax breaks.