Senator Tsei look at Fiscal yr 2009 State Budget

tseMalden -
The Legislature approved a new state budget for Fiscal 2009 last week. Now, the question is, can Massachusetts afford it?

For the first time in memory, a budget emerged from conference committee with a higher bottom line than either legislative branch had proposed. At $28.22 billion, the budget is $160 million more than the senate version and $30 million higher than the house proposal.

Despite all the talk about fiscal restraint and belt-tightening, state spending will actually increase by 5.2 percent this year.

A closer look at the conference committee report shows that more than 140 accounts were increased by more than 9 percent. For some agencies, the increases were much higher, including 77 percent for the Division of Energy Resources, 87 percent for the Department of Higher Education and a whopping 106 percent for the Department of Public Safety.

What these numbers tell me is that state agencies are expanding and growing at an unsustainable rate. Some of the increases are for new and expanded programming, which makes no sense considering we can barely afford to pay for many existing programs.

We are in denial if we think we can afford this budget. Considering the latest job reports, stock market volatility, and continued revenue uncertainty, I can’t see how we can possibly justify maintaining these spending levels.

The Fiscal 2009 budget is built on a house of cards that could come tumbling down at any moment. It relies too heavily on borrowing from the Rainy Day Fund, new taxes, overly optimistic revenue projections, and federal funding that may not be forthcoming.

The conference committee report not only withdraws $310 million from the Rainy Day Fund, but also uses $91 million in interest, and spends another $107 million instead of transferring it into the fund. That’s $508 million in reserve funding being used to balance the budget.

The Rainy Day Fund was established during the 1990s so the state would have a reserve to draw on during economic downturns to preserve vital programs and services. In previous years, the state has been able to replenish the fund every time money was taken out, but that won’t happen this year.

Instead of using this fund as a savings account, the Legislature is treating it like a line of credit, a risky proposition that will have negative repercussions for the state down the line.

The recent implementation of a series of new taxes has also put the state on a dangerous path. On June 30, the Legislature approved a new $1-a-pack cigarette tax that took effect less than 24 hours later.

This increase is expected to generate an additional $175 million in revenues, although collections from previous cigarette tax increases have historically come in lower than original projections.

Add in a $485 million corporate tax increase approved on July 1 and $156 million in revenue enhancements for the Department of Revenue that were included in the budget, and more than $800 million in new taxes has been approved in a span of less than a week.

The Legislature seems to be doing everything it can to ensure that the income tax repeal ballot question passes in November. The public is fed up with high gas, food and energy costs, and this “tax and spend” attitude only gives further ammunition to those who are calling for a repeal.

Rising health care costs are another reason why the budget numbers are unrealistic. Commonwealth Care, the state-run program that provides free and subsidized health care to the state’s low- and moderate-income residents, has been funded at $869 million, a figure we know is at least $200 million short. Administration and Finance has already admitted that the true cost will be more than $1 billion.

The state is also still in a holding pattern on the federal Medicaid waiver, which was due to expire on June 30 but has been temporarily extended for two weeks as negotiations continue. The budget is not only counting on a waiver extension, but also a 14 percent increase in federal funding, which seems overly optimistic at this point.

We may have a budget in place, but if spending starts to outpace revenues, we could be looking at mid-year cuts. Reductions made early in the fiscal year can be done fairly painlessly, but the further we go into the fiscal year, the more disruptive and harmful it will be to implement cuts.

The legislature would have been better off waiting a little longer to see what happens with the federal Medicaid waiver and what the June revenue figures look like before finalizing a new budget.

Given the many uncertainties that still exist this year, waiting just a little longer would have given us a better sense of the state’s true fiscal picture and an opportunity to craft a more realistic spending plan.

Loading commenting interface...

Mass Legislation in Session

HOW LONG WAS LAST WEEK'S SESSION? Beacon Hill Roll Call tracks the length of time that the House and Senate were in session each week. Many legislators say that legislative sessions are only one aspect of the Legislature's job and that a lot of important work is done outside of the House and Senate chambers. They note that their jobs also involve committee work, research, constituent work and other matters that are important to their districts. Critics say that the Legislature does not meet regularly or long enough to debate and vote in public view on the thousands of pieces of legislation that have been filed. They note that the infrequency and brief length of sessions are misguided and lead to irresponsible late night sessions and a mad rush to act on dozens of bills in the days immediately preceding the end of an annual session.

During the week of June 30-July 4, the House met for 18 hours and 41 minutes while the Senate met for 12 hours and 48 minutes.