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Table of Contents
- The Fiscal Year 2010 Budget Gap: FY 2009 Component
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Table of Contents
- The Fiscal Year 2010 Budget Gap: FY 2009 Component
The Fiscal Year 2010 Budget Gap
The budget gap entering Fiscal Year 2010 can be broken down into two major components: an initial structural gap carried forward from Fiscal Year 2009 and an expansion of that gap associated with anticipated changes in revenue and spending in FY2010.
Initial Fiscal Year 2009 Structural Gap
Fiscal Year 2009 currently has a structural deficit of more than two billion dollars. This total consists of a structural gap identified at the beginning of the year, as well as increases in the gap associated with declining revenue forecasts occurring throughout the year.
July 2008: Some of the FY 2009 structural gap existed at the beginning of the fiscal year when the Legislature passed a $33.3 billion dollar budget that was paid for with $32.8 billion in ongoing revenues, of which $21.6 billion were tax revenues. To balance this budget, the Legislature approved the use of approximately $538 million in “one-time” revenues, including more than $400 million drawn from the state’s Stabilization Fund.2
October 2008: By the end of the first quarter of the fiscal year in October, the budget needed “re-balancing” due to an estimated additional budget gap of $1.4 billion. The Administration projected that FY 2009 tax revenues would be $1.1 billion less than originally forecast, and estimated that the cost of funding FY 2009 services would be $321 million more than originally estimated. These increased costs were due to unanticipated increases in caseloads for certain programs and other as-yet unbudgeted items such as costs for snow and ice removal.
Figure 1.
To re-balance the budget, the Commonwealth relied on $731 million in state savings from permanent spending cuts (primarily so-called 9C cuts). These cuts left a new structural gap of $690 million on top of the previous structural gap of $538 million. To fill this gap, the Commonwealth made another $200 million withdrawal from the Stabilization Fund and identified approximately $290 million in new – but temporary – revenues.3 This re-balancing of the budget in the fall of 2008 did not completely eliminate the budget gap, leaving just over $200 million in an unmet budget gap.4
January 2009: On January 13, the Governor announced that because of continued weakness in the economy, tax revenue estimates for FY 2009 were likely to be $952 million less than as estimated in the preceding October. The Governor has not yet announced a plan to close this gap.
Current FY 2009 Structural Gap
By the mid-point of FY 2009, given the $538 million structural gap at the beginning of the year, an increased structural gap of $690 million identified in October and the recent news of an additional drop of more than $952 million in revenues, the Commonwealth currently has a $2.18 billion structural gap for FY 2009. Since the fiscal year is just more than half over, these estimates could change by the end of FY 2009.
2. See Massachusetts Budget and Policy Center, Budget Monitor: The FY 2009 Conference Committee Budget, July 11, 2008.
3. Some of the solutions to fill the gap came from the use of $24 million transferred from certain mental health trusts, as well as $98 million of funding from quasi-public agencies to maintain ongoing services, which may or may not be able to continue into the future. See “Summary of off-budget and voluntary contributions.”
4. Because the 9C cuts included reductions to the state’s Medicaid program (MassHealth), the Commonwealth would be receiving a lesser amount of federal revenue as reimbursement for state Medicaid spending. (Massachusetts, on average, receives a fifty percent reimbursement for every dollar spent on the Medicaid program.) This reduction of approximately $122 million in Medicaid revenue was not fully accounted for in the fall budget “re-balancing.” In addition, the final budget plan passed by the Legislature fell $80 million short of completely closing the $1.4 billion gap identified by the Governor.
Table of Contents
- The Fiscal Year 2010 Budget Gap: FY 2009 Component
