Mass. facing $635 million budget gap, officials say
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For the second straight year of his young administration, Governor Charlie Baker will face a sizable budget gap.
Administration and Finance Secretary Kristen Lepore said Tuesday that Massachusetts is staring down a shortfall of $635 million for the fiscal year that begins in July. The gap is likely to mean cuts for a few state agencies, only modest increases for a few others, and effectively flat funding for the rest of state government.
"It's a lot of belt-tightening," she said. "We kept spending below projected revenue and solved a significant budget gap without cutting core services."
Baker will announce the specifics of his nearly $40 billion spending plan at a news conference Wednesday.
But whatever the details, they are sure to disappoint some liberal lawmakers and advocates, who are pressing for dramatic new spending on the MBTA and early education — spending that would almost certainly require new taxes.
"I think Baker is focused on running the government as effectively and efficiently as possible, and that's a very good thing," said Noah Berger, president of the liberal-leaning Massachusetts Budget and Policy Center. "But I think the problem he's going to come up against more and more is that solving some of our big problems like fixing our transportation system, making higher education more affordable, strengthening our public schools, and expanding pre-K require revenue as well as reforms."
Baker, though, who pledged not to raise taxes or fees, said state spending was increasing at an unsustainable rate when he took office. He has repeatedly pitched his leaner budgeting as a necessary corrective.
"You got to get to the point where your spending is going up at a rate that's consistent with the growth in your economy," he told reporters at the State House Tuesday.
House Speaker Robert A. DeLeo, a Democrat, has also ruled out new taxes for the upcoming fiscal year.
The budget gap that lawmakers and the governor will be wrestling with is the difference between estimated revenue — from sources like taxes, fees, and federal money — and obligatory spending.
Administration officials say they expect about $893 million in new revenue available for the upcoming fiscal year's budget, but also more than $1.5 billion in new, essentially mandatory spending, driven in large part by rising health care costs. Thus, the shortfall.
Baker administration officials say obligatory spending increases include $424 million more for MassHealth, the state's Medicaid program; $227 million more for other health and human service programs; $127 million more in debt service; and $75 million more for the Group Insurance Commission, which oversees health insurance for state and some municipal employees, retirees, and their dependents.
While the Democratic-controlled Legislature has the last word on appropriating taxpayer dollars, the size of the final budget that becomes law is unlikely to stray too far from what Baker proposes Wednesday. That's because the governor and the Legislature have already agreed on the state's expected income and because tax increases are off the table.
Budget gaps on Beacon Hill are not new. The state has faced a shortfall every fiscal year since the official end of the Great Recession in June 2009.
And while the projected gap is smaller than previous years — and smaller than the shortfall earlier predicted by a Beacon Hill watchdog — yet another deficit will add fuel to a larger, more divisive debate.
On one side is Baker, who says residents are tired of being nickeled-and-dimed by state government. With him are his fiscally conservative allies, who insist that government must learn to do more with less and that tighter budgets often make for a more efficient public bureaucracy.
On the other side are progressive legislators and activists, who argue that more revenue is desperately needed for state government to do big things and invest in future generations, like fixing the beleaguered public transit system.
Democratic Governor Deval Patrick and the Legislature did raise the sales tax in 2009 and the gas tax in 2013. A broader fight is likely to come to a head in November 2018.
That month, both Baker, who is expected to run for reelection, and a referendum to raise income taxes on the wealthy are likely to be on the ballot.
State Senator James B. Eldridge, perhaps the chamber's most outspoken liberal, said, "We've never addressed that lingering structural deficit" by raising the income tax in the recent past, so there are inevitably efforts to cut key parts of the budget every year.
"It's an extremely frustrating cycle," the Acton Democrat said. "And I really hope that over the next couple years we can have a more comprehensive conversation."