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House Budget Could Spell 1,500 Layoffs, Slashes Higher Ed Spending

April 15, 2010

Public higher education would see a $132 million cut under the House Ways and Means Committee’s budget proposal for next fiscal year, the largest reduction in a list of $750 million in spending cuts contained in the document, filed Monday and up for floor debate later this month.

The state’s trial court system would also absorb a $30 million hit, the State Police would be down $8.9 million and a Springfield scholarship fund – the Springfield P romise program, which was formed with funds from a state bailout of the city several years ago – would be drawn down from $43 million to $7.5 million to help lawmakers close a $3.2 billion budget gap, according to the budget proposal.

The budget proposal cuts funding for the University of Massachusetts from $500 million to $430 million, which Ways and Means officials largely attributed to the drying up and redistribution of federal education stimulus funds. Similarly, state colleges would receive $194 million next year, down from $222.6 million last this fiscal year. Community colleges would receive $212 million, down from $244.4 million.

Ways and Means officials said the sharp reductions were a result of budget writers choosing to allocate a shrinking pot of federal stimulus dollars to municipal education aid rather than higher education.

The proposal would lead to an estimated 1,500 government layoffs, slash municipal aid by $234 million, cut MassHealth benefits – including dental coverage – to save $110 million, and, according to House lawmakers, may be the prelude to an even worse year the following fiscal year.

The $234 million local aid cut compares to a $100 million a year local aid bump that House expanded gambling bill supporters have touted this week, with the new aid derived from racetrack slot machines.

According to Ways and Means documents, the budget level-funded 120 line items contained in this year’s budget, reduced 294 line items, and eliminated 15 altogether.

The $27.8 billion proposal represents a 3.2 percent increase in spending over the current year’s budget, which appropriated $26.93 billion. With $2.5 billion in onetime revenue sources drying up and an additional $1.3 billion in growth expected to e xisting programs – offset by $590 million in anticipated revenue growth – the Ways and Means Committee plan features proposals to address an estimated $3.2 billion budget gap.

In addition to $1.4 billion in spending cuts and savings and $1.6 billion in federal stimulus funds, the proposal also cancels a $91 million scheduled transfer to the state rainy day account, sweeps $48 million from various trust funds and takes in $24 million from state authorities.

The budget funds the popular anti-gang Shannon Grants at $6.5 million, allocates $5 million for incentives payments for police with advanced degrees – a $5 million reduction from this fiscal year – and level funds all district attorney’s offices.

The budget proposal, $411 million less than Gov. Deval Patrick’s proposal released in January, would include no new taxes or fees, and would eliminate no tax exemptions or credits and draws nothing from the state’s $658 million rainy day fund. In part because the Ways and Means budget eschews these options, the committee was forced to slash more deeply into local aid and to make health care benefit cuts, according to the Massachusetts Budget and Policy Center.

Murphy told reporters he doesn’t expect his colleagues to add any new taxes during floor debate on the budget.

“There’s no appetite that I can see for increased taxes,” he said. “We live in extremely difficult times. Taxing at this particular time is probably not a good thing.”

But the proposal counts $70 million in “additional revenue” — $31 million attributed to Department of Revenue administration, $5 million from Gov. Deval Patrick’s regulatory move to cap the life sciences tax credit, $20 million in returns from boosting spending on DOR auditing by $950,000 and $14 million for waste, fraud and abuse recovery from a $1 million investment in the inspector general, auditor and attorney general’s budgets.

A coalition of groups – One Massachusetts, the Massachusetts Teacher’s Association, Mass Home Care, the Mass Public Health Association, the Mass Community Action Network and several others – is looking for legislative sponsors to raise revenue by increasing the tax on dividends and interest to 12 percent from 5 percent, which the groups estimate would raise $500 million.

The organizations also support the governor’s proposals to cap the state’s film tax credit at $50 million, limit the life sciences tax credit by $5 million, repeal a sales tax exemption on aircraft to raise $4.5 million, remove the sales tax exemption on cigars and smokeless tobacco to raise $15 million and implement a sales tax on candy and soda to raise $51 million.

In local aid, the plan funds school aid at $3.93 billion, when federal stimulus funds are factored in, down from $4.04 billion this fiscal year. Unrestricted aid to cities and towns would reach $899 million, a $37 million cut. Regional school transportation would be increased by 5 percent, special education circuit breaker funding would jump 1.4 percent, PILOT programs, municipal library aid and tax abatements for veterans, widows, blind people and the elderly would be level funded.

The budget also includes proposals to invest 95 percent of any capital gains taxes over $1 billion into the rainy day fund, with the other 5 percent directed toward paying for retiree health care and other post-employment benefits.

The budget includes $300 million derived from a debt restructuring proposal endorsed separately by the Ways and Means Committee. The panel also voted for a six-point bill aimed at easing press ure on municipal spending, in part by allowing local systems to defer rising pension system liabilities, authorizing a municipal early retirement incentive program, and promoting shared public safety resources.
With health care cost increases at the forefront of public debate, the committee budget allocated nearly $9 billion for Medicaid health insurance coverage to 1.2 million enrollees, a $601 million increase to fund a projected 3 percent increase in enrollment. Separately, the bill includes $838 million for Commonwealth Care, the subsidized insurance program that serves 170,000 individuals and was at the core of the state’s 2006 health care reform law.
Murphy said the bill reduces spending on an immigrant health insurance program by $15 million, to $60 million, while capping enrollment in that program. The budget spends $160 million in one-time federal funds in connection with a recent announcement regarding prescription drugs.
He called the budget “reasonable and balanced.”

Murphy said the bill includes $1.5 billion in one-time federal stimulus funds that the state may not be able to rely on in fiscal 2012. The budget also does not eliminate any tax exemptions, or tax breaks and credits, Murphy said.
"From a fiscal point of view, this is an improvement over the governor’s budget," said Massachusetts Taxpayers Foundation President Michael Widmer, focusing his praise on the committee’s decision to stop spending state reserve funds that he said will be needed in fiscal 2012.
"The cuts are going to be difficult but they’re absolutely essential," Widmer said. Asked about the local aid cut, Widmer said, "They need to share in the pain, given our fiscal realities. Human services has borne the brunt of cuts to date."
Widmer said the debt restructuring plan was a "legitimate" attempt to take advantage of lower interest rates but said he would have preferred that the savings be socked away in the rainy day fund rather than spent.
Rep. Viriato deMacedo (R-Plymouth), the committee’s ranking Republican member, said the committee budget cuts spending by $400 million more than Patrick’s budget. He said he was pleased that the committee budget didn’t include tax increases or spending from reserves.
"How they spend the 27.8 billion dollars, that’s something that we’re going to take a look at," deMacedo said. "Frankly, this isn’t going to be the worst year. Next year is going to be the worst year. We’re still operating off of $1.5 billion dollars of stimulus dollars that aren’t going to be there next year." Republicans will look at ways to address the local aid cut. "We didn’t write the budget," deMacedo said. "We’ll take a look and see if we have any different ideas to help address the local aid cut issue." When the budget hits the House floor for debate the last week in April, deMacedo said, observers will see "a lot of amendments." But he added, "There’s not a lot of resources. You can only do what you can do."
The Plymouth Republican said he was more optimistic that Democrats will not add taxes to the committee budget, as they did last year, because, he said, people are hurting more this year than last year.
"Every day I run into a new person who tells me, ‘Hey, I just got laid off.’ . . . If they do go back to work, they’re going back to work at far less money than they previously made."
Last year’s major sales tax increase, he said, caused Massachusetts to lose business, and associated tax revenues, to New Hampshire retailers who are seeing more customers file in from Massachusetts.

"Everybody is watching every dime," he said. "The Dunkin’ Donuts, which used to be the place to go, is not seeing the business that it used to see because people are now making coffee at home."