Governor Charlie Baker unveiled his first budget proposal this afternoon, and it is all about the deficit. According to the governor’s own team, Massachusetts faces a budget deficit of $1.8 billion. And filling that gap is the chief preoccupation of the governor’s new proposals.
Missing, for instance, are many of the investment in economic development that the governor talked about on the campaign trail. There’s no money for them — at least not without raising new revenue, which the governor has repeatedly ruled out. Instead, there are a variety of cuts and savings, along with modest increases in areas like K-12 education, higher ed, and aid to cities and towns.
Here are some of the biggest stories in the governor’s budget.
The deficit is even larger than feared
Prior estimates had suggested that the state’s deficit for 2016 would be between $1 billion and $1.5 billion. But it’s actually $1.8 billion, or nearly 5 percent of the total budget.
There are three basic reasons the deficit has gotten so big: State health care costs continue to rise, tax revenues aren’t growing fast enough, and we’ve been kicking the can down the road for too long.
To fill the deficit, Baker focuses on health care
Faced with a big deficit, you can either cut spending or raise revenue.
The governor’s budget leans more towards cuts and savings, including nearly $800 million from our state’s Medicaid program (MassHealth.) It’s not entirely clear exactly how that $800 million figure would be reached, but part of it comes from removing ineligible people from the program (for a while, as the state worked out kinks in the sign-up system, they weren’t always able to confirm eligibility).
There’s also some can-kicking
Another strategy for fixing a deficit is simply to put off the reckoning for another day, and the Governor’s budget includes some of that as well. The basic idea is that you cobble together money from various sources, and use it now — even though you know it doesn’t really help the long-term problem.
For instance, the Governor’s budget relies on $300 million of capital gains taxes that was supposed to be put in the state’s “rainy day” fund. Instead, the Governor would use that money to plug the deficit, which is not great for the “rainy day” fund itself and which doesn’t address the bigger issue, namely the ongoing imbalance between the money we raise through taxes and the money we choose to spend.
There are modest funding increases
With so much money devoted to deficit-filling — and no appetite for new taxes — there’s little room for big spending initiatives. But there are a few targeted increases:
• Aid to cities and towns would be increased by 3.6 percent, helping to pay for things like road repair, police and fire departments, parks, and libraries. This is the fulfilment of a campaign pledge, and it relies on money from a soon-to-open slot parlor.
• Higher education funding would rise by 3 percent. In the past, state colleges and universities have agreed to freeze tuition and fees if the state provided sufficient support. It’s not yet clear if the 3 percent increase is enough.
• Transportation funding would go up 20 percent, but that may not really amount to a substantial increase. Back in 2013, the Legislature passed a transportation funding bill, including a plan to hit certain funding targets year after year. And while Baker’s number may be higher than last year, it seems to be lower than the target.
• Eliminating a controversial tax break for film companies would let Baker expand a separate tax break that helps low-income workers and their families
Little for early education or economic development
Despite the amount of attention the topic received on the campaign trail, Governor Baker’s budget doesn’t attempt to reduce the number of low-income kids waiting to get into child-care programs — though it does provide additional money to help children in DCF.
Perhaps more striking, given the breadth of candidate Baker’s economic development plans, is the absence of any substantial investments on that front. There are no tax breaks to offset the increase in the minimum wage or spur business development outside of Boston.
During his press conference, the governor hinted at a future bill to pursue some of those initiatives, but cost may be a major constraint.
This is just the first step in this year’s budget process, but it gives a good sense for what lies ahead. Unless the Legislature decides to raise new revenue, the 2016 budget will mostly involve digging out of our deep fiscal hole.