Massachusetts budget gap

[mdo...@crocker.com]

BOSTON – Monday, May 4, 2009 – Governor Deval Patrick today announced
the state is facing an estimated gap of $953 million for the remainder
of the fiscal year, the result of a historic national economic
downturn. The Governor will work with the Legislature and file plans
to solve for this FY09 budget gap this week.

The Patrick-Murray Administration has aggressively managed through the
downturn since early last year. Using a series of cost-cutting and
savings measures, federal recovery aid, and stabilization funds, the
Administration has solved for a $3 billion budget gap, which includes
revenue loss and other exposures to date. April revenue collections
fell $456 million below the benchmark, bringing the FY09 total budget
gap to nearly $4 billion. April revenues, traditionally the
Commonwealth’s biggest revenue month, declined nearly $1 billion
compared to last April.

“The economic downturn we have faced this year has had a significant
impact on every area of state government and on the individuals,
families and businesses it serves,” said Governor Patrick. “Every one
of our priorities has been affected through each round of cuts we have
made to balance the budget. We will continue to make the necessary
tough choices to keep our budget in balance and manage the
Commonwealth through this challenging period responsibly and
effectively.”

To close budget gaps earlier in the fiscal year, the Governor relied
on a balanced approach of spending cuts and controls, personnel
reductions and furloughs, new revenues, and reserves. Since October,
the Governor has cut more than $1.3 billion from the budget and
proposed $236 million in new revenues. With less than two months left
in the fiscal year, state agencies have spent more than 80 percent of
their budgets, leaving little room for additional cuts.

Preparing for further decline in FY10, the Governor announced just two
weeks ago that he would further reduce state employee positions by 750
and implemented furloughs for all Executive Branch managers.
Additionally, he directed Administration and Finance Secretary Leslie
Kirwan to begin negotiations with state collective bargaining units
over a full range of potential cost-cutting initiatives to help
address the economic crisis going forward.

Proactively Managing an Economic Crisis

One year ago, anticipating the impact of the economic downturn,
Governor Patrick began to plan for budget cuts and eventual economic
recovery. Since October, when Massachusetts began to feel the impacts
of the global and national recession as revenue collections weakened,
the Administration has had to solve a budget deficit of approximately
$3 billion for FY09. To do so, the Governor has implemented $1.24
billion in budget cuts and spending controls; identified $236 million
in new revenues; proposed drawing $527 million from the Rainy Day
Fund; and used $806 million in enhanced federal Medicaid funds.

Starting last April, the Patrick-Murray Administration directed
agencies to prepare to make mid-year cuts if necessary. When the
Governor signed the budget in July, he laid out a five-point
management plan that included $122.5 million in vetoes, a request for
expanded 9C budget cutting authority, and $140 million in shared
responsibility health care solutions. He also implemented cost-savings
measures across agencies through spending and hiring controls and the
suspension of merit pay raises.

In October, the Governor implemented a Fiscal Action Plan that
included more than $1 billion in cuts and spending controls and
proposed new revenues. He also worked to secure unprecedented
assistance from the Legislature, the Judiciary, constitutional
officers, and independent authorities in identifying additional cuts,
savings, and reforms.

As the economy continued a rapid decline in January, the Governor
announced another round of 9C reductions and identified new revenues
to close a $1.1 billion gap, and released a budget blueprint for FY10
that held spending growth to an unprecedented 0.5 percent.
Additionally, the Administration worked with collective bargaining
units to secure zero percent pay increases for FY09, saving the
Commonwealth an estimated $115 million and helping avoid further
reductions in key services.
These proactive measures and continued response have allowed the
Commonwealth to weather the economic recession, while still providing
core services to the state’s most vulnerable citizens.