Gov. Charlie Baker on Friday moved to slash $395 million from this year's state budget, the result of months of disappointing revenue performance. Meanwhile, a new economic report suggests revenue expectations may not be the only flaw in the current budget plan.
Baker's secretary of administration and finance, Kristen Lepore, said a combination of "savings initiatives and spending reductions" throughout the executive branch would reach around 1 percent of the overall spending figure of around $40 billion.
"Accounts such as local aid to cities and towns, local school aid, and core services at DCF will not see reductions," Lepore wrote in a statement from her office. "We will work with our executive branch agencies to identify solutions to close this gap."
Lepore on Friday determined that revenue will be $175 million below expectations and recommended that Baker authorize cuts to bridge a gap of $395 million for the year. The nearly $400 million, Lepore's office said, will fill gaps created by the poor tax revenue as well as overspending Democrats baked into the budget when they passed it.
Slow sales tax performance is a driving factor behind the cuts. After an estimate of 5.2 percent sales tax growth last year, the administration now expects only a 2.3 percent increase all year, which is what revenue have been so far in fiscal 2017.
According to Baker, another contributor to the budget falling out of balance was the more than $200 million in spending Democrats restored to the plan over his veto when they passed the budget this summer.
"Those vetoes were based on an assumption that we would hit the benchmark that's currently being discussed as part of the September revenue conversation," Baker told reporters Thursday, according to the State House News Service.
Baker said at the time that the budget passed by the Legislature would be out of balance even if the state met revenue projections. Since it's fallen short of those estimates, Baker is now in the position to make mid-year corrections and cuts.
But the state's long-term spending health has deeper problems, according to the Massachusetts Budget and Policy Center (MassBudget), a left-leaning fiscal think tank.
"There are problems in the budget as it was enacted," MassBudget director Noah Berger told WGBH news. "There's a significant reliance on temporary revenue and other fixes that create problems from a long-term perspective."
Berger said the state's current budget is balanced on around $500 million in temporary solutions that policymakers won't be able to rely on again, creating a scenario where even small failures to reach revenue benchmarks —like we saw in 201 —can wreak havoc on government budgets unable to recoup.
The scrutiny of the problematic one-time budget fixes is appropriate, but the problems go deeper, Berger says.
"There's not scrutiny of a lot of the special tax breaks that we have baked into the budget that are special tax breaks for different businesses or industries that, once they get into law, they continue from year to year with no analysis of whether they're working or not," Berger said. According to MassBudget, the manufacturing, motion-picture production and other industries that managed to carve out tax breaks in state law, sometimes decades ago, still absorb tax revenue the state could spend elsewhere.
"At some point you have to look at those costs that are embedded in our tax code and ask, 'Are they serving the purpose that we expected them to serve and if not and if not, why are we still spending $80 million or $100 million on a tax break like that?'"
