Facing a projected state budget deficit of about $284.6 million, the legislature this week approved a $20.5 billion stopgap proposal for this fiscal year. Approval was mostly along party lines, with Democrats supporting and Republicans opposing (with one exception in the Senate).

The budget revision increases state spending by $143 million over what lawmakers previously approved for this fiscal year and includes new funding for the bipartisan education reform package.

The two percent increase keeps the budget under the state spending cap, but by a very slim $86.4 million.

And unfortunately, a large component of the budget revisions is raids on other state funds that could lead to additional shortfalls in the future.

Among other things, the midterm budget adjustment:

  • Diverts $222 million from an account that was set aside to pay down what the state borrowed to cover a deficit in 2009.
  • Cuts $50 million in spending by restricting eligibility and nursing home coverage in a Medicaid program that serves poor adults
  • Increases commuter rail fares by four percent, starting in Jan. 2013
  • Keeps in the General Fund $70 million pegged for the transportation fund
  • Borrows $30 million to pay for  municipal road repairs through the Town Aid Road program
  • Cuts by $7.6 million the state’s contribution toward healthcare costs for retired teachers and deducts the amount from the Teachers Retirement Board

GOP alternatives

Republicans in both the House and Senate offered separate alternative proposals that, among other things, included ending the earned income tax credit, privatizing certain state services, freezing longevity payments for unionized state employees, cutting funding for the Citizens’ Election Program, and setting aside dollars for a GAAP reserve fund. 

According to consensus revenue figures from the Office of Policy and Management and the nonpartisan Office of Fiscal Analysis, state tax receipts have dipped by $112.8 million, and spending has increased by $47.4 million.

OPM Secretary Benjamin Barnes vowed, however, that the administration was “committed to balancing the budget.”

The budget difficulty underscores the urgent need to continue to find cost savings in state government.

Controlling state spending and improving efficiency in many aspects of government will help maintain vital public services in a sustainable way and avoid additional tax increases that hurt our economy.

For more information, contact CBIA’s Pete Gioia at 860.244.1945 or pete.gioia@cbia.com.