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Table of Contents
- Overview
Table of Contents
- Overview
Overview
The Commonwealth is facing a severe fiscal crisis, caused both by the deep national recession and by policy choices made over the past decade in Massachusetts.1
One option to close the state’s $3.5 billion budget gap would be to develop a plan that resembles a stable four-legged stool: budget cuts; federal stimulus money; new tax revenue; and reserves.
The House Ways and Means (HWM) proposal seeks instead to balance the budget on only two of these legs, suggesting no withdrawal from the Stabilization Fund and no new tax revenue. As a result, the committee proposes deep cuts in local aid, human services, education, and virtually every other area of state government.
To maintain the investments in the Commonwealth’s people and infrastructure that will provide a foundation for economic growth as the recession ends, the state would likely have to use more of its reserves in the short term and develop a long-term plan to restore revenue lost to tax cuts over the last decade.
After a period of economic recovery in which the Commonwealth’s finances were never strong, the national recession has exposed structural budget problems caused by income tax cuts (to the rate on ordinary income and dividend income and by increasing the personal deduction) that are costing the state more than $2 billion dollars a year.2
Restoring long-term fiscal stability without restoring a significant portion of that lost state tax revenue would be extremely difficult. It would likely require both long-term cuts across state and local government, such as those proposed in the HWM budget, and significant new revenue from property taxes, which likely would be a long-term consequence of deep cuts in local aid.
This Budget Monitor provides an overview of the House Ways and Means proposals for each category of state government, comparing spending levels to the FY 2009 budget and to the Governor’s proposals.
Both the Governor and the House Ways and Means Committee have proposed significant reorganizations of how certain spending is allocated among line items. Whenever possible, this Monitor seeks to make adjustments to allow meaningful comparisons between line items in the new structure and the old structure.
For example, both the Governor and HWM have consolidated information technology spending in new technology line items as part of an effort to improve technology management. Therefore, the amount of each existing line item that had been spent on technology is taken out of those line items and moved to the new technology line items. If one were simply to look at these line items alone it would appear that they had been cut when, in fact, some of their funding was just moved to other line items.
To adjust for these technology transfers and allow for comparison with prior years, the Monitor uses information made available through the Governor’s budget website to estimate the effects of these technology transfers for specific line items.
In addition, the Monitor includes in both the House Ways and Means and Governor’s totals federal stimulus funds that are included in the budget proposals. For example, the education funding for FY 2010 budget recommendations include more than $300 million that both the Governor and House Ways and Means rely on to fully fund education. Similarly both budgets rely on substantial federal stimulus Medicaid reimbursements. The budget totals in this Monitor do not include stimulus funds that do not directly impact the state budget.
1. See Substantial Surpluses to Dangerous Deficits: A Look at State Fiscal Policies from 1998 to 2008.
2. See Understanding Our Tax System: A Primer for Active Citizens, Personal Income Tax Chapter.
