Massachusetts state budget (2008-2009)
- 1 Impact of budget woes
- 2 Budget background
- 3 Ideas about why the crisis occurred
- 4 Proposed actions
- 5 Budget transparency
- 6 See also
- 7 External links
- 8 Additional reading
- 9 References
Massachusetts faced a $1.1 billion deficit for fiscal year 2009 and a $3.5 billion cut in projected spending for fiscal year 2010's budget. The state was expected to receive between $6 and $9 billion in federal stimulus funds, but Gov. Deval Patrick said that the state could not rely on the funds alone to pull the state out of the budget deficit. "These funds will certainly help, but this stimulus package will not be a panacea," he said. To deal with this deficit, in January 2009 Gov. Patrick recommended cutting $191 million in spending, raising $68 million through new fees and taxes, and taking $327 million from the state's reserves; combining this with anticipated federal funds from the federal stimulus would bridge the shortfall created by lower-than-projected tax revenues.
Impact of budget woes
- See also: State budget crisis, 2009-2010
- The governor had proposed a $0.19 gas tax increase or toll increases on the Massachusetts Turnpike in order to help close the state budget deficit. The governor’s proposal would almost double the state gas tax from $0.235 per gallon to $0.425 per gallon, which would be the nation’s highest gas tax. The proposal served as an alternative to raising tolls on the Massachusetts Turnpike.
- In March 2009 Boston police commissioner Edward Davis announced that 40 cadets and 20 civilian employees would be laid off on July 1, 2009. Due to the state's budget deficit Gov. Patrick made an immediate $128 million reduction to municipal aid and proposed a cut of approximately $375 million for fiscal year 2010. Patrick also reduced a $21.3 million grant for community policing by $5.1 million and called for eliminating it altogether in 2010.
- Beth Israel Deaconess Medical Center faced a $20 million loss in 2009. Officials said that they were cutting expenses by freezing salaries for some employees and reducing top executives' pay, and also considering layoffs.
- The Children's Trust Fund could have lost up to 10 percent of its funding and was potentially going to be cutting its programs. The state agency also offers a wide range of parenting programs, all focused on strengthening families and preventing child abuse.
- The Massachusetts unemployment rate jumped to 7.4 percent in January, compared to December 2008's rate of 6.4 percent. According to the Executive Office of Labor and Workforce Development, the real estate and construction industries reported the highest number of job losses. The construction industry lost 2,200 jobs, or 1.8 percent of its workforce, in January. The real estate and rental and leasing industries lost 1,000 jobs, or 2.7 percent of its workforce, in the month. However, the education and health services sectors added 1,600 jobs in January.
- See also: Massachusetts state budget and finances
Massachusetts' fiscal year runs from July 1 to June 30 of the following year. The governor submits his recommended budget in January or early February. The House Ways and Means Committee reviews this budget and then develops its own recommendation. Once the committee finishes its review, the budget is passed to the full House, which then passes the bill to the Senate's Ways and Means Committee. The Senate makes the final adjustments to the bill before passing it on to the governor. The governor has 10 days to review and approve it, or make vetoes or reductions. The governor may approve or veto the entire budget, or may veto or reduce certain line items or sections, but may not add anything. The House and Senate may vote to override the governor's vetoes. Overrides require a two-thirds majority in each chamber.
- Between fiscal years 2006-2009, the Massachusetts budget grew by 20%, according to the Tax Foundation.
- At the end of 2008, the budget deficit stood at $1.4 billion.
- Fiscal year 2009 spending increased by 1.6% in 2008.
The following table presents Massachusetts's spending history. The figures used are in millions of dollars:
|Fiscal year||Nominal government spending||Real government spending||Real change from prior year|
Ideas about why the crisis occurred
Gov. Patrick FY 2010 budget plan
- According to the Department of Revenue, preliminary tax revenue collections for February 2009 totaled $955 million, down $188 million or 16.4 percent from February 2008. Total tax collections were $86 million below the February monthly benchmark corresponding to the fiscal year 2009 tax revenue estimate of $19.450 billion, due largely to a decline in withholding taxes. At the time, fiscal year 2009 year-to-date tax collections totaled $11.805 billion, down $669 million or 5.4 percent from the same period a year ago, and were $62 million below the fiscal year 2009 year-to-date benchmark corresponding to the fiscal year 2009 estimate of $19.450 billion.
- February income tax collections totaled $498 million, down $34 million or 6.4 percent from a year ago, $52 million below the monthly benchmark. On a year-to-date basis, income taxes were $392 million, or 5.3 percent below a year ago and $42 million below the benchmark. Sales and use tax collections were down $135 million, or 4.9 percent below the same period a year ago and $16 million below the benchmark. Corporate/business taxes were down $125 million, or 11.7 percent below the same period a year ago and $4 million above the benchmark.
Governor Deval Patrick
The governor's fiscal year 2009 plan contained a $128 million local aid cut and a $63 million reduction in Executive Branch spending. Additionally, Gov. Patrick requested $327 million in withdrawals from the state's "rainy day fund" in order to close the state's $1.1 billion budget deficit. He also proposed a $25 million mid-year sales tax increase on candy, sugared drinks and alcohol. The new revenue would be put into a fund to pay for public health programs. According to Patrick's budget, those new taxes would generate $121.5 million.
In order to address a $5 billion debt at the Massachusetts Bay Transportation Authority, a $2.2 billion Turnpike debt and a projected $20 billion tab to maintain the existing transportation infrastructure during the next 20 years, Patrick suggested a gas tax increase. The governor’s proposal would almost double the state gas tax from 23.5 cents per gallon to 42.5 cents per gallon, which would be the nation’s highest gas tax.
Massachusetts Republicans said that they acknowledged the tough economic climate, but criticized the "feeding frenzy" of spending in the past two years. Senate Minority Leader Richard Tisei and House Minority Leader Bradley Jones said that the governor's proposed tax increases were not the way to address the decrease in state revenue. "These tax increases will have a chilling effect on our economic recovery, while giving those residents who are already struggling to make ends meet an additional financial burden to bear," they said. Republicans also commented that the recent string of taxes on fuel, hotel and meals, candy, soda and alcohol were a way of avoiding necessary reforms and reducing government spending during a time of financial crisis. “I think it’s a travesty that we’ve gotten to the point where we’re talking about raising the taxes and raising the bills without cutting the things that are wasteful,” Rep. Richard Ross said.
Despite criticism about Gov. Patrick's proposed tax increases, Democrat and Senate President Therese Murray said that the state needed a source of revenue. “There’s no question that we’re going to need more revenue. How we get that revenue? The devil’s in the details, and we’re working on it,” she said. Murray said that she welcomed Treasurer Cahill's plan to increase revenue by licensing three slot machine parlors around Massachusetts. For House Speaker Robert DeLeo, the proposal was one that he had advocated for years. "Anything that raises non-tax revenue should be on the table," said Senator Steven Panagiotakos, chairman of the Senate Committee on Ways and Means. "You absolutely have to look at it."
Build slot parlors
The state was in need of new revenue, but state treasurer Timothy Cahill said that he believed one way to solve the problem was to build slot parlors. More specifically, Cahill suggested that the state license three slot parlors, which he estimated could generate $2 billion to $3 billion in up-front licensing fees, plus up to $250 million annually in tax revenues if 9,000 machines were allowed. "We need revenue. We are deeply in the hole. We have drained our rainy day fund down to less than $1 billion, and it doesn’t look like it will get any better," said Cahill. "We can either cut spending or raise revenue." A similar proposal was defeated in the House in 2008. The governor said that he would consider the idea; however, he liked the idea of proposing three resort-style casinos instead. "I think the most important thing, in this area and others, is that we not make long-term decisions on the basis of short-term factors," said the governor.
Economic stimulus package
Massachusetts was expected to receive between $6 billion and $9 billion from the $787 billion economic stimulus package. All told, the federal stimulus plan would create or save 75,000 jobs in Massachusetts, based on White House estimates.
According to preliminary reports, Massachusetts was expected to receive:
- $284.7 million towards transportation projects
- $153.2 million for “shovel-ready” projects
- $40.7 million to preserve police jobs and prevent other law enforcement cuts
- $319 million for rail and bus network improvements
- $345 million through the U.S. Department of Housing and Urban Development
- $1.6 billion over the next three years in federal Medicaid funding
- $800 million in federal education assistance
As of 2009, Massachusetts had no statewide, official spending database online. However, the Massachusetts Budget and Policy Center, which "provides independent research and analysis of state budget and tax policies," tracks actual spending in real and nominal terms using a "Budget Browser."
Legislators in favor of transparency, headed by Massachusetts State Senator Cynthia Creem, had introduced a budget amendment that would require the Secretary of Administration and Finance to create a spending transparency website.
The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:
|State database||Searchability||Grants||Contracts||Line item expenditures||Dept./agency budgets||Public employee salary||Exemption level|
Economic stimulus transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.
- Massachusetts was expected to receive an estimated $3,579,139,180.
Public employee salary information
- See also: Massachusetts state government salary
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- Pioneer Institute for Public Policy Research
- Citizens for Limited Taxation
- Massachusetts Executive Office for Administration and Finance
- Fiscal Year 2009 Budget Summary
- Massachusetts state and local spending
- Massachusetts General Court
- Official Website of the Commonwealth of Massachusetts
- Office of the Comptroller
- The Boston Herald, "Patrick: Mass. getting up to $9 billion from feds," February 18,2009 (dead link)
- UK.Reuters.com, "Massachusetts unveils plan to close $1.1 bln deficit," January 28, 2009
- The Needham Times, "Governor's Deval Patrick's proposed gas tax increase could take a toll on Needham drivers," March 3,2009 (dead link)
- The Boston Globe, "Cities cutting police work," March 5,2009
- The Boston Globe, "Hospital braces for $20m loss this year," March 6,2009
- WBZ, "Local cuts could hurt vital programs for kids," March 3,2009
- Boston Business Journal, "Mass. unemployment jumps to 7.4 percent," March 5,2009
- State of Massachusetts, "FY2010 Budget Process Begins," accessed March 10,2009 (dead link)
- Tax Foundation, "State Budget Shortfalls Present A Tax Reform Opportunity," February 2009 (dead link)
- Massachusetts Taxpayers Foundation, "FY 2009 Budget Summary," December 31, 2008
- Massachusetts Budget and Policy Center, Online Budget Database, results derived when searching for "Select All Items" between the years 2001 and 2008
- State of Massachusetts, "February 2009 mid-month revenue report," February 19,2009
- State of Massachusetts, "February Revenue Collections Total $955 Million," March 2,2009
- The Boston Globe, "House rebuffs Patrick on sales tax hike," March 10,2009
- Medfield Press, "GOP lawmakers blast Patrick's toll hike, gas tax," March 6,2009 (dead link)
- Scituate Mariner, "Toll hikes don't preclude increasing gas tax," March 5,2009 (dead link)
- Worcester Telegram, "Patrick seeks 19-cent gas tax hike," February 21,2009
- The Boston Globe, "Patrick skeptical of plan to license three slot parlors," March 4,2009
- Associated Press, "Treasurer Cahill: Build slot parlors instead of casinos," March 3,2009
- State of Massachusetts, "Massachusetts and the American Recovery and Reinvestment Act of 2009," February 28,2009
- American Recovery and Reinvestment Act, "Estimated job effect," accessed March 10,2009
- State of Massachusetts, "Governor Patrick announces first federal recovery funds for statewide road and bridge recovery," March 6,2009
- The Boston Globe, "Patrick's stimulus wish list set to go," March 7,2009
- Massachusetts Budget and Policy Center
- Daily News Tribune, "Bringing Transparency to the Budget," June 9, 2009
- National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009 (dead link)
- Wall Street Journal, "Stimulus Spending by State," March 12,2009
State of Massachusetts
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