GOVERNOR’S OFFICE REVEALS $325M STATE BUDGET DEFICIT IN FY 2015

• Gov. Patrick Plans to Announce $325M in Budget Cuts Next Week
• Municipal and Education Accounts Could be Targeted for Mid-Year Cuts

 $325M State Budget Shortfall Announced – Last week, Gov. Patrick’s Secretary for Administration & Finance announced that the state is facing a $325 million shortfall in its fiscal 2015 budget, and said that the Administration would be unveiling plans to close the budget gap at some point during the week of November 17th.  He said that the plan would not draw from the state’s $1.2 billion stabilization fund, but instead would rely exclusively on mid-year spending cuts.

          The MMA has Called on the Patrick Administration to Avoid any Mid-Year Cuts Targeted at Cities and Towns – In a face-to-face meeting with A&F Secretary Glen Shor and top Administration officials at the November 12 meeting of the Local Government Advisory Commission meeting, the MMA and local leaders presented a strong case that cities and towns should not be hit with mid-year cuts, especially since the shortfall is in no way related to local government or the overall performance of the economy, and is primarily due to state spending decisions and the administration of state government.  At this point in the year, cuts in municipal or school funding accounts would be extremely painful at the local level.  However, Administration officials responded that they appreciated the “input,” but did not take local funding off the table.  

          State Budget Gap Caused by Shortfall in “Non-Tax” Revenues, Spending in the New Economic Development Act, and a Cut in the Income Tax Rate –A&F Secretary Glen Shor stated that the $325 million shortfall is caused by several factors.  First, although state tax revenues are still expected to meet expected levels, the state income tax rate will be automatically reduced from 5.2 percent to 5.15 percent, effective on January 1, a cut that will be triggered by existing law.  This will reduce the state’s fiscal 2015 tax revenues by $70 million.  Second, lawmakers and the Governor approved an $80 million economic development bill late last summer, and state revenues are not growing fast enough to offset the cost.  Finally, and most importantly, the Patrick Administration is now reporting a $175 million shortfall in non-tax revenues and agency fees.  While the Administration is providing no specific explanation of the non-tax shortfall, independent budget analysts expect that a significant cause is the breakdown in the state’s health insurance exchange website, which forced state officials to enroll thousands of residents in temporary Medicaid plans, for which the state will not receive full federal reimbursement.  

          Governor Can Impose Mid-Year Cuts on Spending in State Agencies Under His Control, and Ask Legislature for Authority to Cut Local Aid, the Judiciary and Others – Facing a $325 million budget shortfall, the Governor has the authority to unilaterally cut spending in executive branch agencies under his control.  In addition, the Governor can ask the Legislature to grant him expanded budget-cutting authority over other accounts outside of the executive branch, such as Unrestricted General Government Aid, Chapter 70 school aid, constitutional officers, the judiciary and independent agencies, a step he has taken in the past.  With the Legislature in informal session and only able to pass items with unanimous consent, it is unlikely that legislators would grant Gov. Patrick expanded budget reduction powers targeting local aid, but if that is one of the Governor’s proposals, local officials will need to contact their Representatives and Senators immediately. 

          Important Municipal and School Aid Accounts May be Targeted for Mid-Year Cuts – The last time Gov. Patrick faced a mid-year budget deficit was in December 2013, when state was projecting a $540 million deficit.  The Governor used his budget powers to impose $28.75 million in mid-year cuts to important municipal and school aid accounts, which left cities and towns reeling from unexpected revenue losses.  In 2013, the mid-year reductions included a 5% cut to the Special Education Circuit Breaker program, a 47% cut to the McKinney-Vento homeless student transportation account, a 70% cut to the Chapter 70 pothole account, a 3% cut in Veterans’ Benefits reimbursements, a 1% cut in regional school transportation funding, a 1.4% cut to charter school reimbursements, and other important accounts.  In addition, the Governor asked the Legislature to cut $9 million from Unrestricted General Government Aid, a request that lawmakers rejected.

          PLEASE ASK YOUR LEGISLATORS TO OPPOSE ANY PROPOSAL TO IMPOSE MID-YEAR CUTS TO UNRESTRICTED GENERAL GOVERNMENT AID OR CHAPTER 70 EDUCATION AID – The MMA will strongly oppose any cut to unrestricted municipal aid or Chapter 70, because that would destabilize local budgets in the middle of the fiscal year, and force reductions in community services.  Unrestricted municipal aid has already nearly $400 million below original fiscal 2009 levels, and any additional cuts would be painful for cities and towns across the state.  In addition, please tell your legislators that you are very worried about potential cuts to important municipal and school accounts in the state budget, including the Special Education Circuit Breaker, McKinney-Vento funding, charter school and regional school transportation accounts, and other programs.

Please Call Your Representatives and Senators Today and Ask Them to Oppose Any Proposals to Cut Municipal or Education Aid, and Share Your Concerns About the Impact of Mid-Year Cuts to Local Programs and Services.