STATE HOUSE, BOSTON, …..A projected $2 billion increase in spending far exceeds the likely $300 million lift in state tax collections in the fiscal year ahead, setting the stage for yet another round of belt-tightening and revenue searches on Beacon Hill, according to the Senate's top budget writer.
The projected spending, mainly a 12 percent surge in Medicaid's bottom line and a doubling of public employee pension funding, will far outpace an estimated 2 percent increase in state tax revenues in the fiscal year ahead, Senate Ways and Means Committee Chairwoman Therese Murray (D-Plymouth) told reporters Monday afternoon.
The spending and revenue trends, combined with the evaporation of one-time revenues used to preserve programs this year, underscores a $2 billion budget problem for fiscal 2005, which begins nine months from now. Gov. Mitt Romney, the House and Senate will spend much of the fall, winter and spring tackling the latest budget problem. Murray's $2 billion budget gap estimate is similar to those forecasted in recent months by other state budget analysts.
In late September, at the direction of Senate President Robert Travaglini (D-East Boston), Murray delivered her evaluation to her Democratic colleagues in a closed meeting. Asked about their reaction, Murray said the senators were "somber and concerned" but pleased to be updated on the fiscal outlook. Murray said the broad update was also needed to add perspective for colleagues who hope to entertain a mid-year spending bill soon.
Fewer Options
The main options for closing the gap are spending cuts and revenues. Murray did not discuss either in detail today. Asked about revenue options, she said: "You tell me. I haven't got any new ones at the moment." Murray said she has not heard calls for higher taxes from the public or legislators. "I'm not prepared to go there yet."
The Legislature in 2002 raised taxes by more than $1 billion, over the veto of then Acting Gov. Jane Swift. Gov. Mitt Romney took office in January and like his Republican predecessors pledged to veto any further tax hikes. Lawmakers both unable and unwilling to mount another round of tax hikes instead joined Romney last year in jacking up fees by roughly $500 million. Looking forward, sources of potential new revenues appear to be fewer.
Asked if she would like Romney to modify his firm opposition to new or higher taxes, Murray said Democrats in the Legislature and the Republican administration worked well earlier this year to close a $3 billion gap and should continue to do so. "We all have to be open-minded going forward, and not draw a line in anything." said Murray.
Murray distanced herself from a casino gaming proposal that Sen. Michael Morrissey (D-Quincy) and Sen. Brian Lees (R-East Longmeadow) are drafting. She said she is "not crazy about" expanded gaming and remains concerned that it may cut into a state Lottery that has long been a reliable source of local aid for cities and towns. "There are many people that are absolutely opposed to gaming," said Murray.
Democrats and Republicans alike are not eager to advance a new round of spending cuts. Romney has acknowledged that the cuts required to balance this year's budget went deeper than he imagined when elected Medicaid, Pensions Driving Spending Increases Spending on Medicaid, the health program that serves nearly one million poor, elderly and disabled residents, would rise by $785 million based on the 12 percent national average increase in spending on the program, Murray said. Medicaid spending increases are forcing level funding or deep cuts in most other state spending categories.
Addressing reporters in her office, Murray said that if the federal government would agree to cover those eligible for both Medicare and Medicaid, the state's Medicaid funding problems would ease significantly. "We would have enough money to cover all the other health needs in the Commonwealth," she said. The Senate analysis includes a projected $621 million increase in spending on pensions. That would represent a near doubling of the current level, a major spending hike in a time of fiscal austerity.
Since the state budget crisis hit in 2001, lawmakers and Republican governors have been cutting pension funding. But they now appear intent on increasing it. The state's unfunded pension liability is soaring once again and Murray suggested the pension funding increase is inevitable. "We have too," she said. "We took it off budget this year and moved it so that we have to make that payment upfront, outside of the budget."
Murray's analysis is based on a 2 percent, or $297 million increase in fiscal 2005 tax revenues. Romney aides are preliminarily projecting a 4 percent increase in tax revenues.
The administration and House and Senate leaders in January must agree on a joint revenue estimate for the fiscal year that begins July 1, 2004.
Through the first three months of fiscal 2004, tax collections are up 4.4 percent from the first quarter of fiscal 2003. But Murray said September sales and income tax collections were "very poor" and continuing job losses worry her.
Despite favorable interest rates, spending to retire state debt is on track to increase by $190 million in fiscal 2005, Murray said. Her analysis is built on an inflation-adjusted 2 percent increase in most spending accounts. That increase alone would require $193 million, or about two thirds of the new tax revenues projected by the Senate.
Murray's analysis also calls for a $75 million increase in Chapter 70 school aid to keep districts at the mandated foundation levels of spending, as well as a statutorily mandated stabilization fund deposit of $74 million. "I don't think we can back off the foundation budget," Murray said, though some funding inequities should be addressed.
Stephen Collins, executive director of the Massachusetts Human Services Coalition, said human service programs have absorbed $1.4 billion in cuts since 2001. Collins says core services to the needy have been axed and predicted entire programs may need to be cut if state officials don't dip into reserves, reform programs, or raise taxes.
Collins said the current budget could force the closure of group homes for the mentally retarded, layoffs of social workers who safeguard abused and neglected children, longer waiting lists for child care assistance, the loss of health insurance coverage for people with disabilities and the loss of nutrition services for women and children.
"We call on Governor Romney to break his no-new-taxes pledge as readily and repeatedly as he has broken his pledge not to cut essential state services," Collins wrote in a memo he circulated on the Hill Monday. Murray said she hopes her estimates are too conservative, but cautioned those looking to increase spending and restore programs cut since 2001. "Even if the numbers do get better, it's not going to be good enough to expand services or restore many of the cuts we have made over the last 48 months," she said. Senators are working on several proposals to help ease the fiscal crunch. In addition to an economic stimulus bill, Murray said, senators are looking at "absolutely critical" school building assistance program reforms, planning to release school aid formula recommendations in early November, examining a $128 millionand-growing deficit in the pool that pays providers of health care to the uninsured, investigating more efficient ways to purchase human services, and exploring state highway and turnpike consolidations that "absolutely" hold the potential for savings.
"These are all things we're looking at presently and working on presently," said Murray. Murray said she has no timeline for consideration of a supplemental budget to prevent layoffs of social workers and the release of youthful offenders. "The House has to originate money bills," she said. "I haven't talked to them lately about it." Murray said the Senate will keep its pledge to shore up some fiscal 2004 budget line items.