with our online database
 |
All Documents |
|
Budget Monitor |
|
Fiscal Health & Budget Transparency |
|
Taxes |
|
Work, Wages and Economic Growth |
|
Education |
|
Health Care |
|
Human Services |
Staff
Board of Directors
Our Funding
|
In The News |
|
Contact Us |
|
Request a Speaker |
|
Donate |
Table of Contents
- Overview
Table of Contents
- Overview
Overview
Following two years in which the state budget was cut deeply and taxes were increased to address substantial budget deficits, the Governor’s Fiscal Year 2011 budget recommends additional cuts, suggests modest revenue increases, and relies heavily on assistance from the federal government.
While Massachusetts has struggled with structural budget problems for over a decade, the acute problems of the last two years have been caused by a national recession more severe than any downturn since the Great Depression.1 Across the country this recession has led to state budget gaps of close to $200 billion in FY 2010 and $180 billion in FY 2011.2
For the sake of the national economy, it is important that states receive federal assistance to close budget gaps caused by a national recession. Economists estimate that if states were to close $180 billion in budget gaps with just spending cuts and tax increases, those actions would reduce the nation’s gross domestic product by close to a full point, which could cost the economy 900,000 jobs.3
Overview of How the Governor Proposes to Address the $2.75 Billion Budget Gap
Federal Stimulus and Federal Jobs Creation Funding: $1.39 billion
To protect the national economy, and state budgets, Congress included significant state fiscal relief in the American Recovery and Reinvestment Act (ARRA, the stimulus law enacted last year).4 The state is scheduled to receive approximately $786 million from that law to help balance the state budget in FY 2011. This includes $690 million in increased Medicaid reimbursements (FMAP) and $96 million in education and flexible block grant funds. In addition, the Governor’s budget, like those of eight other states,5 assumes that Congress will provide additional state fiscal relief that would be worth $608 million to Massachusetts in FY 2011. Because deep state budget cuts and tax increases could cost hundreds of thousands of jobs, this new state fiscal relief was included in jobs creation legislation approved by the U.S. House and pending in the Senate. If Congress does not provide this funding, it would cause significant fiscal problems for Massachusetts and other states, as well as economic problems for the nation.
Cuts and Savings: $797 million (net savings of $670 million because some cuts reduce federal reimbursements)
This includes cuts in most areas of state government and other savings initiatives such as debt restructuring and having quasi-public agencies pick up costs previously paid for in the state budget. These cuts and savings are described in the subject area sections of this Budget Monitor.
New Revenues: $230 million (net revenue to close the budget gap is $199 million)
This includes several initiatives, the most significant of which are capping the cost of tax subsidies for the motion picture industry at $50 million (for a savings of $75 million) and eliminating the sales tax exemption for candy and soda, which will generate $61.6 million. It also includes a number of smaller tax changes, departmental revenues and administrative provisions related to tax collection. These are described in the revenue section of this Budget Monitor. The net available to close the budget gap is less than the total new revenue because some of the revenue is dedicated to specific purposes (tobacco taxes to health care, revenue for the expanded bottle bill to recycling, and a portion of the sales tax reforms to school building).
Other Temporary Revenue and Savings: $489 million
This includes a $175 million withdrawal from the Commonwealth's Stabilization Fund (the “rainy day” fund), $100 million from shifting debt payments from FY 2011 to future years (which is in addition to $200 million in savings from a similar shift to smooth out a spike in debt payments that would have occurred in FY 2011), and $160 million that the state hopes to receive from the federal government as repayment for costs that were billed to the state Medicaid program that should have been paid by the federal Medicare program.
1. See http://massbudget.org/doc/638/655 [Back to text.]
2. See http://www.cbpp.org/cms/index.cfm?fa=view&id=711 [Back.]
3. See http://www.cbpp.org/cms/index.cfm?fa=view&id=2988 [Back.]
4. See http://massbudget.org/doc/701 [Back.]
5. See http://www.cbpp.org/cms/index.cfm?fa=view&id=1214&emailView=1 [Back.]
