BOSTON —
Although Beacon Hill leaders have touted Massachusetts's economic recovery, the annual spending plan released by Gov. Deval Patrick on Wednesday revealed a state still grappling with sluggish growth, dependent on ambitious savings proposals, some new targeted taxes, cuts to public health programs and government layoffs to balance a budget crushed by soaring health care costs.
Subsidized health care programs - most prominently MassHealth, which provides insurance coverage for more than 1.3 million low-income Massachusetts residents - are projected to consume more than $13 billion in the next fiscal year, consuming 40 percent of the governor's proposed $32.3 billion budget.
In addition, surging costs for debt service, pensions and collective bargaining deals have left budget writers aiming their knives at discretionary programs. A $145 million increase in local education aid proposed by the governor, as well as a Supreme Judicial Court decision that forces the state to provide health care coverage to tens of thousands of legal, documented immigrants - piling an estimated $150 million in additional costs onto the budget - will increase pressure on other discretionary programs.
Patrick's budget proposes more than $200 million in cuts, a modest amount compared to recent years. But his budget is also dependent on the Legislature's willingness to support $260 million in new revenues, fees and taxes - including a 50-cent-per-pack increase in the cigarette tax and the elimination a sales tax exemption on sweetened candy and soda - lopping $730 million off the growing cost of subsidized health care programs, the elimination of 300 government positions, a draw of $400 million from the rainy day fund, and the cancellation of a statutorily required $100 million transfer into the rainy day fund.
Without those fixes, the administration would be facing a budget gap of more than $1.8 billion, although administration officials refused to quantify the exact challenge they faced when crafting the budget.
"It is still raining," said Jay Gonzalez, Gov. Deval Patrick's budget chief, in a briefing with reporters after the governor reviewed the highlights of his plan. "Based on what economists tell us is the sustainable amount of revenue to budget against, the actual amount that we are projecting to get next year is still short of that amount. We have not yet hit full recovery."
The governor's budget isn't all cuts, however. He plans to increase community college funding by $10 million and empower the Board of Higher Education to coordinate curriculum, funding and leadership decisions for the 15 campuses. He also increased support for programs intended to combat youth violence, for full-day kindergarten grants, for legal aid and for efforts to combat homelessness.
The governor also increased support services for veterans by $11.25 million, following an influx of returning service members from Iraq. The governor also included about $4 million to support science, technology, engineering and math education programs, as well as $10 million to help close educational achievement gaps in so-called Gateway Cities.
BREAKING DOWN THE BUDGET
The budget was balanced primarily through cost-saving initiatives, Gonzalez said, ticking off a handful: the closure of a Norfolk County prison; calling for a new round of contract procurement in Commonwealth Care, a taxpayer-subsidized health care program for low-income residents; stepped-up support for programs to root out Medicaid waste and fraud; a merger of the Probation Department and Parole Board within the Executive Branch, and a greater reliance on public lawyers to work as defense counsel for the indigent.
"We are relentlessly focused on doing everything we can to change the way government does business. Our new fiscal reality absolutely demands that we do things differently," Gonzalez said.
Even with the proposed reforms, the governor's budget guts a slew of programs, including some that serve the state's most vulnerable residents. For example, the budget proposal slashes support for school nurses and for subsidized lunches for the elderly. Overall, 91 budget line items were cut, 243 were level funded and 297 were increased, according to administration budget officials.
One reporter wondered why Patrick sliced funds from small-dollar programs at all, suggesting that the cuts might amount to "short money."
"People point to this or that and say, that's short money. The problem is, all that short money adds up to big money," Patrick said at a press conference announcing his budget.
Patrick also said that uncertainty in federal aid to states were a factor in the administration's thinking.
"We aren't taking a whole lot for granted. We know this is going to be a challenging budget," he said. "There are uncertainties on the level of federal support. There have been uncertainties for years now."
Michael Widmer, President of the Massachusetts Taxpayers Foundation, described the governor's budget as "fiscally responsible" but said it was built on "question marks" about health care savings and initiatives that lawmakers are unlikely to support.
The governor's budget proposes to curb $730 million in health care cost growth, in part by slashing $40 million in reimbursements to hospitals, cracking down on Medicaid fraud and waste, wringing savings out of health insurers that cover members of Commonwealth Care by requiring a new round of contract procurement, cutting costs for behavioral health services, and beginning to move away from the fee-for-service system provider reimbursements.
Even with the savings, the costs of the state's Medicaid program - known as MassHealth - Commonwealth Care, and state employee health care offered through the Group Insurance Commission are projected to climb about $550 million. Last year, the governor proposed squeezing $1 billion out of those programs, and although Patrick claimed victory on that effort Wednesday, Widmer said the results had been mixed. And he said a second straight year of slow health care cost growth would be "enormously challenging."
"Another round of provider rate reductions puts enormous pressure on the hospitals in this state," he said. "The governor's putting great pressure on the private side. They're underpaying on the public side. There's a contradiction there. Can they achieve it? And then what are the repercussions?"
Widmer noted that lawmakers are unlikely to entertain Patrick's proposals to merge probation and parole agencies, and he noted they have previously rejected several of his tax proposals.
Asked whether the governor hoped the probation and parole merger would gain support if a patronage scandal within the state Probation Department remains in the news, Gonzalez rejected suggestion.
"Our proposal is not a function of any scandal or anything that might be under investigation right now. It's about how do we do a better job reintegrating people into our communities," he said.
The governor's budget also factors in the elimination of 1,100 state government positions, offset by hundreds of new hires, to amount to a net reduction of 300 jobs. Among the 1,100 eliminated positions are 400 from the Executive Branch that Gonzalez said would save $30 million. He said the staff reductions would leave the state workforce with 60,000 positions, about 6,000 fewer than it had before the national recession.
The budget also assumes no revenue from expanded gambling facilities, although Gonzalez noted that a slots-only facility contemplated in the newly signed gambling law could be producing revenue before the end of the next fiscal year.
"We think it's possible we could have revenues from the licensing of the slots. But it's not something we can count on," he said.
The governor also agreed to a request by Treasurer Steven Grossman, proposing to increase the advertising budget of the Lottery from $2 million to $5 million. Grossman argued that a more robust advertising budget would increase lottery sales and generate additional revenue for local aid.
In his briefing with reporters, Gonzalez said he anticipates publishing what he called the first-ever long-term policy for the prudent use of rainy day funds.
POST-BUDGET SPIN
The governor's budget proposal drew a torrent of reaction from stakeholders. Developmental disability providers ripped the proposal for cutting support for family respite services, and small business advocates said it failed to curb regulations. Tobacco Free Kids and the American Lung Association hailed the governor for proposing to increase the cigarette tax and immigrant advocates praised the governor for providing funds to uphold the SJC decision and include legal immigrants in Commonwealth Care. Human service providers praised the governor but called for a salary reserve to support low-income workers who care for vulnerable residents.
Health Care For All, a consumer advocacy group, saluted the governor for a "strong commitment to health care coverage, public health and cost control" and for proposing to increase the cigarette tax and eliminate the sales tax exemption on candy and soda. However, the group called on lawmakers to restore MassHealth's "substantially reduced" dental benefits for adults.
House Minority Leader Bradley Jones said the governor's proposals to increase taxes and draw down the rainy day fund "come at a severe cost to the taxpayer."
"In these dire economic times, we must explore and exhaust all other potential avenues before we consider raising taxes and fees as the Governor plans to do," he said. "While I commend the Governor for realizing the importance of fostering job growth in Massachusetts, I fail to see how his various proposals will meet that expectation."
The criticism wasn't strictly partisan; Sen. Richard Moore (D-Uxbridge) slammed the governor for proposing tax increases.
"We've made a good deal of progress in putting people back to work and making state government work better, but there is certainly more we can, we must do," Moore said in a statement billed as a reaction to the governor's State of the Commonwealth address delivered Monday. "However, I think the Governor's agenda, leads Massachusetts in the wrong direction."
Moore added that he supports the governor's calls to curb health care costs and crack down on violent habitual offenders.
