Charlie Baker unveils cuts, tax tweaks to bridge budget deficit

Charlie BakerAP/File

Governor Charlie Baker Tuesday unveiled his plan to bridge Massachusetts’ urgent midyear budget gap, aiming to make about a half-billion dollars in cuts, large and small, to myriad programs, including Medicaid, transportation, substance abuse counseling, and grants for Head Start.

The plan, which does not raise taxes or fees or cut aid to cities and towns, relies on $514 million in spending reductions along with $254 million in additional revenue coming into state coffers to solve a deficit the governor now pegs at $768 million.

“We’re here today to talk about a state government that lives within its means,” Baker said at a State House press conference.

Baker is making some cuts unilaterally, while others would require legislative approval.

The executive spending reductions include nixing programs that exist only on paper and have not yet started, such as $12 million for advanced manufacturing, technology, and hospitality training. They also include cuts in funding for grant programs for Head Start and gang prevention — but, the administration says, the cuts of about $1 million each do not affect grant money already promised or doled out.

Some cuts appear at odds with areas Baker has said are priorities. For example, Baker has pledged to tackle the state’s opiate addiction crisis and is expected to soon discuss parts of his plan to address it. But he is cutting $5 million for substance abuse counselors. Administration officials say that specific program was never implemented, so there is no reduction in the number of current counselors. They insist that Baker’s plan protects other substance abuse programs.

Baker’s budget chief said the unilateral cuts will not have a profound impact on services most residents use.

“Because most of the cuts are focused on administrative savings and those programs that have not yet got off the ground, it’s going to have very minimum impact to core state services” and on the average citizen who uses state services, said Kristen Lepore, Baker’s administration and finance secretary.

Social services advocates were combing through Baker’s plan Tuesday and some said they had not yet determined how — or if — the cuts might affect constituencies they represent. But others had first-look reactions.

Lewis Finfer, a longtime advocate on Beacon Hill and director of the Massachusetts Communities Action Network, expressed disappointment at the cut to the gang prevention grant program and a $350,000 reduction to a summer jobs program for at-risk youth. Finfer said the latter will cut about 175 youth jobs.

Al Norman, executive director of Mass Home Care, an association of nonprofits that help elderly people stay in their homes, praised the administration for not cutting funding for elderly home care, which he said often happens when budgets are tight.

Norman lauded what he called “the absence of pain’’ as well as Baker’s sensitivity to elder needs.

A big chunk, $168 million, of Baker’s proposed cuts come out of the state’s Medicaid program budget. Baker said part of that reduction includes making sure people who are on Medicaid — the state-federal health program for poor and disabled people — are actually eligible to receive benefits, something he said federal law requires. The savings will come from not paying for medical care for people ineligible for the program.

Another part of Medicaid cuts, Baker said, is not spending state money on programs the federal government has not yet authorized.

Among other cuts: $40 million in transportation funding that Lepore said would largely come from job vacancies going unfilled.

The plan relies on a little more than $100 million worth of “reversions,” money that is budgeted but not used and then given back to the state’s general fund at the end of the fiscal year, which runs through June.

It also banks on some money coming in from a proposed state corporate tax amnesty program as well as additional federal grants.

Baker’s plan includes temporarily suspending a state law that directs a certain stream of tax money to the state’s “rainy day” fund, meant for fiscal emergencies. After Massachusetts has collected about $1 billion from capital gains taxes in a fiscal year, the law requires subsequent collections of that type to go to the rainy day fund.

Baker unveiled legislation Tuesday that would, just this fiscal year, divert the excess capital gains tax money intended for the rainy day fund to the state’s general fund. That would help close the budget gap by $131 million, the administration estimates.

The tax law tweak would carefully adhere to Baker’s goal not to take money out of the rainy day fund to deal with the shortfall; it would just mean not putting a certain chunk of money into it.

House Speaker Robert A. DeLeo and Senate President Stanley C. Rosenberg have expressed support for that particular fix.

To bridge the gap, Baker will need legislative leaders’ help: According to the administration, $282 million of the fixes will require legislative approval. Rosenberg and a DeLeo spokesman did not commit to supporting or opposing the overall plan.

Eileen McAnneny, the new president of the business-backed Massachusetts Taxpayers Foundation, called Baker’s budget fix “reasonable” and described it as “spreading out the pain.”

Baker, she said, is taking “a combination of new revenue and spending cuts, which is really the best approach, given there are only five months left in the fiscal year.”

The cuts from Baker, who took office on Jan. 8, follow what his administration pegs as about $252 million of cuts and savings implemented by Deval Patrick, his predecessor.

Baker announced the estimated size of the budget gap last month and said it was primarily the result of the state spending more money than it had planned.

At Tuesday’s press conference, Baker noted the gap in the state’s more than $36 billion budget was a problem “we inherited,” but did not blame Patrick by name.

Before he took office, Baker pledged he would not raise taxes or fees, take money out of the rainy day fund, or cut aid to cities and towns to bridge the gap. He and his aides said state aid to homeless families and funding for the state’s troubled Department of Children and Families would be held sacrosanct.

The administration said Tuesday it is living up to those pledges.