Introduction
The House Ways and Means budget proposal released today relies on $489 million less in stabilization fund money than the Governor recommended and approximately $300 million less in new revenues (it does not adopt the Governor’s proposals to eliminate the sales tax exemptions for alcohol, soda, and candy or to increase the meals tax to six percent). As a result, this budget proposal imposes even more severe cuts than those recommended by the Governor. Unrestricted local aid, for example, would be cut by $424 million, or 32 percent, below the amount initially appropriated in FY 2009. This budget proposal also recommends significant cuts in education, human services, health care, and most other areas of state government.
While the state faces very serious fiscal challenges, the cuts recommended in the House Ways and Means budget are deeper than they would need to be if the state were to use all of the federal stimulus money to maintain services – as Congress intended – rather than also to reduce draws on the stabilization fund. The American Recovery and Reinvestment Act distributed billions of dollars to state governments to achieve two goals: to protect vulnerable people and important investments from excessive budget cuts, and to stimulate the national economy by giving states money to spend in their local economies on goods and services that their people need. If states use a portion of the federal money not to maintain spending on essential services, but rather to avoid spending their own reserves, it would lessen the impact of the federal stimulus, potentially undermining the national recovery effort and lengthening the recession.1
While the federal aid should be spent to protect against cuts that could have long-term negative effects on the people of Massachusetts and our state economy, the House Ways and Means Committee is correct to recognize that this temporary federal aid will not provide a permanent solution to our state’s structural budget problems. Massachusetts has suffered from structural budget problems for a decade. Those problems were caused primarily by large tax cuts that have permanently reduced state revenue2 and will eventually need to be addressed either with significant new revenue, with permanent budget cuts, or with some combination of the two.
This Preliminary Analysis of the House Ways and Means budget gives an overview of spending choices in each major category of the state budget. As the budget is not yet available in an easily searchable form and there have been changes in the structure of the budget, the information in this document should be treated as preliminary. MassBudget will publish a more complete Budget Monitor at the end of next week.
Staff
