You’ve probably been following the news of budget cuts from the Governor.
Here are some observations about where Massachusetts stands in the crisis,
how the state is responding, and how the cuts affects our local communities.
1) The Massachusetts economy, while beginning to weaken, is still relatively
strong compared with other states.
– Total employment stands at 3.2905 million in Massachusetts and, in
September, was only 5000 (0.1%) jobs below its 12 month peak which occurred
in June. By contrast, national employment peaked in December 2007 and was
0.6% below that peak.
– Unemployment in Massachusetts in August was 5.3% as compared to a
national 6.1%. The west and the mid-west regions have the highest
unemployment.
2) The state’s budget gap is vast at $1.4 billion, which is 5% percent of
the total budget. Yet, according to the Center on Budget and Policy
Priorities, 21 other states are experiencing midyear shortfalls, many much
greater, with New York at 10% and California at 22% of revenues.
Massachusetts also has relatively strong financial reserves.
3) It does appear that economic conditions are getting worse and that our
budget gap estimates do not reflect the most recent indicators of oncoming
recession. The Governor’s budget cut plan was final before the latest
report on falling consumer spending, a report which triggered another big
sell-off on the stock markets.
4) The Governor’s plan makes no cuts in the major local aid accounts. This
is a politically safe call and one that all members of the legislature
appreciate. Mid-year changes in school funding could be very disruptive.
The word is out though that municipalities should husband their resources
in case a further round of cutting is necessary. The Governor does not have
the power to make local aid account cuts without legislative approval. The
Governor did cut the METCO account and the special education circuit
breaker.
5) Within the executive branch, it appears that the Governor was surgical
and thoughtful about his cutting. He deserves real credit for attempting to
preserve core lifeline services for the most vulnerable, not always
politically the easiest choice.
– The total percentage cut within budgetary line items was $655 million
or 2.4%.
– The legislative branch itself took a voluntary cut of 10%.
– The executive branch areas that got the largest cuts in percentage
terms were housing (15.9%), environment (7.3%) and labor (25.0%). Housing
is an area where independent agencies, like the Massachusetts Housing
Finance Agency, can offset some of the cuts, but the cuts in employment
training grants are very deep. I was disappointed to see a substantial cut
in DCR’s Office of Dam Safety which has responsibilities relevant to
controlling flooding in the Alewife area.
– Transportation (2.1%), education (including Chapter 70 which was not
cut, 1.6%) and public safety (1.9%) absorbed relatively modest percentage
cuts.
– Areas that were untouched include legal services for the poor, food
stamp out reach, elder protective services, domestic violence programs,
homeless individual assistance. Many human service programs did experience
cuts, but many of these cuts were less than the average statewide cuts.
– The areas that got the biggest cuts in dollar terms were health care
accounts. Over $200 million in Medicaid cuts will mean benefit cuts and
provider rate cuts that are just beginning to be explained.
– After the proposed job cuts, the total state government employment will
still stand above its recent nadir in 2004 after the last downturn.
(6) Apart from the direct cuts of $655 million, the following measures
balance out the Governor’s budget gap of $1.4 billion:
– $146 million from decisions not to fund to fund projected overruns in
selected accounts which were contributing to the gap (this may prove to be a
weak area)
– $200 million from reserves
– $168 million from additional revenues (including an increased tax on
telecommunications companies)
– $100 million from extending the amortization of the Commonwealth’s
unfunded pension liability (this is a cost deferral, not a savings)
– $52 million from “pension reconciliation”
– $64 million in reduced support for the Boston Medical Center
– $15 million from reduced transfers to energy, life sciences and
e-health trust funds (cutting back on flagship initiatives from the last
session).
(7) The Governor used the occasion of the budget squeeze to cut most
earmarks out of the budget — a mixed bag of decisions, but a move that
furthers a perennial executive branch goal of reducing legislative control
over the budget. The Governor cut several small earmarks that helped
Arlington’s town budget. There were no earmarks that directly supported
Belmont’s town budget. A Belmont community institution, the Payson Park
Music Festival, lost a new 2009 earmark of $10,000.
(8) Similarly, the Governor is resubmitting a recommendation that state
employees pay a larger share of the salaries for health care benefits
(included in the $655 million of cuts). The employee share was increased in
the last down turn, but the legislature (including me) voted to reject
further increases in this budget cycle. It seems likely, however, that we
will now vote to accept employee share increases in the new downturn —
sacrifice will need to be shared broadly.
(9) Watch for additional use of the crisis to make politically difficult
cuts in the coming weeks and months. I am hopeful that we will be able to
make reforms in the pension plans. Notably, we need to align benefits more
closely with lifetime earnings. This will not affect most employees, but
will eliminate some of the most common excesses of the system — excesses in
which people inflate the last three years of their salary to gain a pension
that bears no relation to their lifetime contributions to the system. The
Governor has signaled an intention to file a reform package shortly.
(10) So far, the direct impact on our municipal budgets has been minimal and
the most vulnerable among us have not lost their lifelines, but the cuts in
many other areas are real and substantial and diminish the state’s ability
to provide services that most voters do value.