Mayors raise budget crunch with Patrick

Some local mayors would like the administration to call for a tax increase to help them keep libraries, sports programs and basic services intact. Others are reluctant to step forward.
But the reception was cool, according to reports by State House News Service and WBUR.

Here is the State House News Service report:

REVENUE TALKS SIMMER AS TALK OF CRUNCH INTENSIFIES

By Michael P. Norton
and Jim O'Sullivan
STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, NOV. 13, 2007…..Municipal officials on Tuesday again danced around the topic of broad-based tax increases, telling Gov. Deval Patrick that structural deficits are embedded in local budgets even as local residents continue to get socked with property tax increases. Separately, Patrick's top budget aide said the state is staring down its own $1.3 billion structural budget gap next fiscal year.

The governor - whose proposals to sanction casinos, allow more local option taxes, and raise corporate taxes - have failed to win support in the Legislature, didn't directly comment on broad-based taxes but said he would lead the conversation on Beacon Hill regarding municipal issues, including budget problems. The developments came as legislative leaders and Patrick aides predicted another tough state budget season ahead, with Administration and Finance Secretary Leslie Kirwan projecting a $1.3 billion fiscal 2009 budget gap and saying the state will likely have to dip further into reserves just to balance this year's budget

In a briefing with reporters after she chaired a corporate tax code commission meeting Tuesday, Kirwan said the state suffers from "a spending problem."

"The experience of the last few years has been that we didn't have to dip into the stabilization fund," Kirwan said. "I'm not sure that we're going to have that luxury this time. From what I'm looking at it would take such a large amount of revenue in over the benchmark, that I'm feeling it's quite likely that we will in fact be using some of the stabilization fund to support a standard operating budget in a year with revenue growth. So, you know, I think that's an alarming condition." The state has more than $2 billion in its stabilization fund.

Kirwan said it was "too early to comment" on whether the administration would include casino revenues in its spending plan. Patrick's bid to introduce casinos in the Bay State has butted up against resistance in the House.

During a Local Government Advisory Council meeting, local mayors and selectmen, in a light Q&A session led by Patrick, also indicated few cities and towns believe they can avail themselves of major savings by enlisting their workers in the state's health insurance system or investing pension assets in the state-run pension fund.

Local officials also pressed Patrick to address in his next state budget proposal a funding formula that they say harms traditional public schools while benefiting charter public schools. Patrick said he would make sure his Readiness Project, the governor's effort to develop education improvement strategies, addresses the funding issues.

In September, Newton Mayor David Cohen, at a similar council meeting, told Lt. Gov. Tim Murray that municipal officials were ready to back the administration if it launched an effort to discuss broad-based tax increases. Murray indicated that discussion was premature. On Tuesday, local officials again broached the same topic, noting Patrick's local option tax proposals as well as his casino plan, seemed to be wilting while the need for more revenue remains.

"The numbers look really, really bad and I know we're not alone," said Northampton Mayor Mary Clare Higgins. "Where's the partnership here?"

Patrick, asking for a show of hands, found very few local officials have adopted highly promoted health insurance and pension-related cost saving reforms approved by the Legislature this year. About a dozen of the three-dozen local officials present indicated support for Patrick's plan to eliminate a loophole that allows telecommunications companies to avoid property taxes. But several local officials followed up on Cohen's call last September to begin discussing broad-based tax increases, mentioning the sales, gas and income taxes as examples.

Natick Board of Selectmen member Josh Ostroff said some state residents are ready to discuss higher taxes.

"I think people are. I think municipal officials are," Ostroff said after today's meeting. "I'm not sure the legislative leadership and the govern are ready to address this." Ostroff added: "There's no joy in talking about raising taxes."

During the meeting, Chesterfield Selectman David Kielson, president of the Massachusetts Municipal Association, told Patrick tax increases are sometimes "less painful" than the alternatives, noted that he was surprised at the local level of receptivity to a sales tax increase, and said he believed tax hikes were being discussed in the Legislature.

Patrick didn't address the references to broad-based tax hikes and invited Higgins to talk privately in his office after the meeting. Patrick told local officials he was "not ready" to say whether he was for or against a reform sought by municipal leaders that would ramp up local aid until it accounted for 40 percent of annual tax revenues. A Patrick aide estimated local aid currently accounts for between 30 and 35 percent of tax revenues.

Patrick told local officials he understands the connection between local budgets and quality-of-life issues and economic development in cities and towns, but added: "I don't have the up or down, yes or no answers you hoped I would have today . . . As it sit here, I don't get to answer those questions all by myself anyway."

Jerry Wasserman, a Needham selectman and president of the Massachusetts Selectmen's Association, told Patrick that more towns are seeking more expensive Proposition 2 ½ overrides and passage rates are declining. Saying cities and towns can't deliver expected services, Wasserman told Patrick local officials want a "different plan."

Asked by Patrick to offer areas where the state should cut spending, local officials declined to specify line items.

"I would cut the opposition to raising more revenue," added Colleen Corona, a selectwoman from Easton.

"Somehow the state has to expand revenue," said Wasserman, mentioning the roughly 40 tax cuts that were approved when Republican governors and House Speaker Thomas Finneran governed on Beacon Hill.

Kirwan said the $1.3 billion structural deficit she sees is "just a starting point." This year's spending plan leans on $569 million in onetime revenues, state agencies are facing roughly $400 million in projected deficiencies, and Lottery revenue shortfalls will likely click past $200 million, Kirwan said. Revenue collections for the first quarter of this fiscal year have come in $144 million above benchmarks. Last month, state officials said they expect to collect $400 million more in tax receipts than initially projected this year.

"In the short run, we have a spending problem, and that's caused the state to rely on, to me, a level of one-timers that is approaching a dangerous level," she said.

Between now and January 23, when Patrick's budget filing is due, Kirwan said her office would be vetting requests from agencies "in a very thorough way," with a balance-sheet briefing due to her this week. Kirwan said she would be operating under "a really detailed schedule … of what happens every single day."

"We have not acknowledged every dollar of potential exposure that agencies have told us about," Kirwan said, adding that the administration was encouraging agencies to plan within existing budgets.

Asked how she expected to deal with the revenue pressures without relying on new streams, Kirwan replied, "A and F's a lonely position."