, Gloucester, MA

December 4, 2012

Governor eyes cuts in local aid

From Wire and
Staff Reports

---- — BOSTON — Seeking to address an estimated $540 million mid-year budget gap, Gov. Deval Patrick on Tuesday slashed spending by $225 million and asked the Legislature to allow him, as part of the plan, to unilaterally reduce unrestricted local aid to cities and towns by 1 percent across the board.

Unrestricted local aid pays for services covered under municipal police and fire department budgets, and is delivered separately from state aid to fund local education spending, which is not targeted for cuts under Patrick’s plan.

“I don’t think this is draconian,” Patrick said. “Obviously every city and town worries about an impact on their local aid, but as I say this is relatively modest. We are spreading the pain as broadly as possible and sensibly and we have a solution for closing that gap in unrestricted local aid if the Lottery continues to help.”

The other spending cuts ordered by the governor will hit nursing homes, special education funding, school transportation for the homeless and reimbursement rates for hospitals that treat low-income patients.

Patrick is asking to trim local aid by $9 million, and said that, if Lottery revenue exceeds expectations the surplus would be used to restore the reduced funding at the end of the year.

As an example of the potential impact, the city of Gloucester’s net state aid for the 2013 fiscal year, as outlined in Mayor Carolyn Kirk’s State of the City presentation Monday night, is pegged at just over $5 million, meaning that a 1 percent cut would amount to a loss of some $50,000.

Kirk’s report noted that state aid, which accounted for 17 percent of the city’s overall budget 11 years ago, now accounts for just 5 percent. Nonetheless, in Gloucester and in Cape Ann’s towns, municipal officials are going forward with current year spending based on the promised level of aid and any cut would mean some financial juggling in city and town halls across Cape Ann, and across the state.

Senate budget chief Stephen Brewer told the State House News Service Monday that he did not sense an appetite within the Legislature to grant the governor any local aid-cutting powers. Lawmakers are scheduled to return to Beacon Hill in January, when the governor’s proposal will await their attention.

State Senate Minority Leader Bruce Tarr, R-Gloucester, said the governor’s action shows that he is “confronting the harsh reality of a faltering economic recovery and budgetary paralysis in Washington to meet the requirements of a balanced budget.”

“Yet it’s also a harsh reality that this situation could and should have been addressed by more aggressive action to create a better climate for economic growth,” Tarr said in a prepared statement. “Too many action items have been left on the table, and we are now beginning to see the costs of that inaction on matters that really count.”

“I am disappointed to hear of Gov. Patrick’s request for the Legislature to allow for expansion of his 9C powers,” added state Rep. Brad Hill, the Ipswich Republican whose district includes the town of Manchester. “As proposed, this move would ultimately give the Governor the authority to make severe cuts to local aid. In these times of sluggish economic growth, Gov. Patrick and the Legislature must not use reductions in local aid as a means to solve the state’s budgetary shortcomings.

“Our cities and towns are already feeling the adverse effects of the impending ‘fiscal cliff,’” he added, “And any further budgetary reductions would further diminish any hope of an economic recovery at the local level.”

Patrick used his existing budget management powers to reduce $225 million in spending through so-called 9C cuts, a 1 percent reduction to the total state budget that will result in the defunding of 700 positions in state government and, according to the governor, affect services to the state’s “most vulnerable” residents.

Patrick is also calling for $200 million to be drawn from the state’s $1.65 billion rainy day account to plug holes and prevent deeper spending cuts amid a weak economic recovery.

Patrick said $300 million this fiscal year and $1 billion in the next fiscal year is at risk for state budget writers depending on the outcome of negotiations between President Obama and Congressional leaders. “The cost of inaction is immense,” he said.

The state budget is also facing significant and still unknown costs associated with an evidence tampering debacle that has forced public officials to revisit thousands of drug cases previously thought to be settled.

Spending on Medicaid, the state’s largest program, is a perennial concern and administration officials said they are on track to meet or exceed roughly $500 million anticipated savings in that program and $730 million in overall health care savings associated with Medicaid and other health insurance programs.

Though not as bad as past years during the depths of the recession, Patrick said the state’s budget problems are “serious” and could worsen depending on federal machinations.

After a disappointing month of tax collections in October opened a $256 million budget gap four months into the fiscal year, November revenues rebounded slightly and came in $21 million above projections, but still $235 million short for the year to date.

Under the cuts Patrick announced, however, no agencies will see budgets reduced below fiscal 2012 levels.

Massachusetts Taxpayers Foundation President Michael Widmer, who monitors budget developments on behalf of the business-backed group, said he agreed with Patrick’s revised state revenue estimate.

“The budget-cutting steps, while painful, are certainly necessary,” Widmer said.

Widmer identified the impact of the midyear budget problems on the fiscal 2014 budget as the “larger issue,” estimating about $800 million in onetime revenues in the fiscal 2013 budget won’t be available for fiscal 2014, which begins on July 1, 2013.

“That’s a huge hole the state faces for fiscal ‘14,” Widmer said.