June 28, 2016

Deliberations on the fiscal 2017 state budget have been thrown into disarray by a major slump in state tax collections, which the Baker administration yesterday said could be $200 million worse than the gloomy projections made less than two weeks ago.
 
Gov. Charlie Baker announced yesterday that fiscal 2017 tax revenues are now projected to be $650 million to $950 million lower than the consensus projection that the administration and the House and Senate used when building their budget plans.
 
The revision is largely due to widespread financial volatility stemming from the Brexit vote, combined with lower-than-expected tax collections as the state closes fiscal 2016. Capital gains taxes are particularly sluggish and vulnerable to economic instability.
 
A revenue loss of this magnitude will force deep cuts across all areas of the state budget for fiscal 2017. The budgets set by the governor, House and Senate were all based on the original, higher revenue growth projection of $1.1 billion, which means that all of the plans are out of balance.
 
The governor yesterday signed a one-month, temporary budget to cover state obligations through the end of July and provide some breathing room for legislators while they dramatically scale back their budget bills for fiscal 2017, which begins on July 1.
 
The grim news comes at a time when cities and towns have already set their budgets based on estimates of local aid and education funding that were contained in the three budget bills. Any cuts to municipal or school accounts would trigger major budget problems in all 351 cities and towns.
 
“Any local aid reductions at this point would be incredibly disruptive, and would force communities to reopen their already-passed budgets and impose mid-year cuts,” said MMA Executive Director Geoff Beckwith. “Reliance on the property tax to fund municipal and school services is at a 30-year high, and it is too late to pursue tax overrides to replace lost local aid. Any local aid reduction would translate into cuts in essential services and programs that are necessary for our economic growth and stability.”
 
A gap approaching $1 billion is relatively small portion of a nearly $39.5 billion state budget. But roughly two-thirds of state spending is locked in, for items such as health care, debt service and pensions, leaving little room to maneuver in order to bridge the gap.
 
State law requires the budget to be balanced, and doing so is the biggest challenge facing the Legislature before the formal session is scheduled to close on July 31.


from the MMA website

posted by Jeff Bennett