State budget plan under microscope: Social costs on the rise

State budget plan under microscope: Social costs on the rise

By John J. Monahan TELEGRAM & GAZETTE STAFF
jmonahan@telegram.com

BOSTON — State officials have begun assembling what will be Gov. Deval L. Patrick's final state budget with expectations of a steady increase in tax revenues next year that could be undercut by rising costs for health care, education and social programs as well as uncertainty over federal funding.

According to a budget analysis being offered by state Secretary of Administration and Finance Glen Shor at pre-budget planning hearings, a growing allocation of state funds for health care subsidies and state employee insurance now account for 54 cents of every state dollar in the budget.


When spending on social service programs, education, debt service and pensions are added, only 13 cents on the dollar are available for all other needs including courts, police, transportation, housing, prisons, economic development and environmental programs.

State legislators will hear from economists Wednesday on projections for economic growth to plan for state revenue increases for the fiscal year that begins July 1, 2014. Those revenue estimates will be used to set a base line for affordable spending.

A chart in Mr. Shor's budget overview shows state revenues that fell to $18.2 billion in 2009, grew to $22.1 billion — an amount higher than pre-recession levels — in fiscal 2013.

Senate Ways and Means Chairman Stephen M. Brewer, D- Barre, who has presided over tight state budgeting since the 2008 recession, said an expected increase in revenues from economic growth will be a positive factor in working out next year's budget.

But, he said, uncertainty over federal funding, pockets of continuing high unemployment and rising fixed costs could create a challenge to his hopes to increase aid for home elder care, veterans services, and workforce training. He said lawmakers will also try to increase higher education funding enough to avoid tuition increases at state colleges and universities next year.

"What we are dealing with are a number of uncertainties in Washington. If we don't get a grand bargain (on the federal budget) soon, we could see a second year of sequestration," Mr. Brewer said of the across-the-board automatic federal budget cuts that could go into effect again next year without congressional agreement on a debt and budget deal.

While the state hiked the gas tax 3 cents this year, Mr. Brewer said, "Heck no," when asked if any tax hikes may be sought next year. In fact, he said, revenues were adequate to provide an automatic cut in the state income tax rate from 5.25 to 5.2 percent this month, a cut he said he supports.

He said the state dealt with a loss of a variety of federal funds under the current year sequestration cuts that amounted to $85 billion nationally, using one-time fixes and adjustments. A second year of sequestration, he said, would likely take a deeper toll on state services. Moreover he said with half the sequestration cuts in defense, the sector of the state's economy dependent on military base operations and defense contracts could take another hit.

Mr. Brewer said while the state is looking to better control health care costs, those efforts have to be balanced with a recognition of the jobs provided by the medical industry and hospitals.

"We understand our providers, our hospitals, are also some of our largest employers and we want to make sure we are thoughtful about health care cost containment, so that we are not doing harm to those regional economic engines," Mr. Brewer said. Adopting a medical ethics slogan, he said his approach to health care funding will be, "Do no harm".

Mr. Shor cited numerous reforms over the last six years that have improved the state's budget situation, including pension reforms to save $5 billion over 30 years; transportation agency consolidation and employee benefit reforms that have saved $500 million to date; replenishment of the rainy day reserve fund to $1.5 billion, one of the highest in the nation; and credit rating improvements that have reduced future debt service by $100 million over the next 30 years.

He said the governor continues to pursue four strategic initiatives likely to be reflected in his final budget proposals. They are: job stimulation, control of health care costs for government and business; elimination of the academic achievement gap for lower income and minority students; and reducing urban and youth violence.

The governor expects to file his budget with the Legislature no later than Jan. 22.