3) It does appear that economic conditions are getting worse and that our budget gap estimates do not reflect the most recent indicators of oncoming recession. The Governor’s budget cut plan was final before the latest report on falling consumer spending, a report which triggered another big sell-off on the stock markets.
4) The Governor’s plan makes no cuts in the major local aid accounts. This is a politically safe call and one that all members of the legislature appreciate. Mid-year changes in school funding could be very disruptive. The word is out though that municipalities should husband their resources in case a further round of cutting is necessary. The Governor does not have the power to make local aid account cuts without legislative approval. The Governor did cut the METCO account and the special education circuit breaker.
5) Within the executive branch, it appears that the Governor was surgical and thoughtful about his cutting. He deserves real credit for attempting to preserve core lifeline services for the most vulnerable, not always politically the easiest choice.
* The total percentage cut within budgetary line items was $655 million or 2.4%.
* The legislative branch itself took a voluntary cut of 10%.
* The executive branch areas that got the largest cuts in percentage terms were housing (15.9%), environment (7.3%) and labor (25.0%). Housing is an area where independent agencies, like the Massachusetts Housing Finance Agency, can offset some of the cuts, but the cuts in employment training grants are very deep. I was disappointed to see a substantial cut in DCR’s Office of Dam Safety which has responsibilities relevant to controlling flooding in the Alewife area.
* Transportation (2.1%), education (including Chapter 70 which was not cut, 1.6%) and public safety (1.9%) absorbed relatively modest percentage cuts.
* Areas that were untouched include legal services for the poor, food stamp out reach, elder protective services, domestic violence programs, homeless individual assistance. Many human service programs did experience cuts, but many of these cuts were less than the average statewide cuts.
* The areas that got the biggest cuts in dollar terms were health care accounts. Over $200 million in Medicaid cuts will mean benefit cuts and provider rate cuts that are just beginning to be explained.
* After the proposed job cuts, the total state government employment will still stand above its recent nadir in 2004 after the last downturn.
(6) Apart from the direct cuts of $655 million, the following measures balance out the Governor’s budget gap of $1.4 billion:
* $146 million from decisions not to fund to fund projected overruns in selected accounts which were contributing to the gap (this may prove to be a weak area)
* $200 million from reserves
* $168 million from additional revenues (including an increased tax on telecommunications companies)
* $100 million from extending the amortization of the Commonwealth’s unfunded pension liability (this is a cost deferral, not a savings)
* $52 million from “pension reconciliation”
* $64 million in reduced support for the Boston Medical Center
* $15 million from reduced transfers to energy, life sciences and e-health trust funds (cutting back on flagship initiatives from the last session).
(7) The Governor used the occasion of the budget squeeze to cut most earmarks out of the budget — a mixed bag of decisions, but a move that furthers a perennial executive branch goal of reducing legislative control over the budget.
(8) Similarly, the Governor is resubmitting a recommendation that state employees pay a larger share of the salaries for health care benefits (included in the $655 million of cuts). The employee share was increased in the last down turn, but the legislature (including me) voted to reject further increases in this budget cycle. It seems likely, however, that we will now vote to accept employee share increases in the new downturn — sacrifice will need to be shared broadly.
(9) Watch for additional use of the crisis to make politically difficult cuts in the coming weeks and months. I am hopeful that we will be able to make reforms in the pension plans. Notably, we need to align benefits more closely with lifetime earnings. This will not affect most employees, but will eliminate some of the most common excesses of the system — excesses in which people inflate the last three years of their salary to gain a pension that bears no relation to their lifetime contributions to the system. The Governor has signaled an intention to file a reform package shortly.
(10) So far, the direct impact on our municipal budgets has been minimal and the most vulnerable among us have not lost their lifelines, but the cuts in many other areas are real and substantial and diminish the state’s ability to provide services that most voters do value.
P.S. Vote NO on Question One! The cuts forced by Question One would be 10 times greater than the cuts forced so far by the still worsening economic conditions.