Senate panel sees $2b deficit

No respite likely from budget cuts

By Scott S. Greenberger, Globe Staff, 10/6/2003

After enduring three years of its worst fiscal crisis since the Great Depression, the Commonwealth may face a $2 billion budget gap next year that could force another round of cuts in state services, according to a report to Democratic senators.

With Governor Mitt Romney still vowing to veto any tax increases, the likely deficit will force legislators to scrape for even more savings in a budget they have struggled mightily to pare down by cutting money for education, health care for the poor, and other programs.

"We just warned all the members at the same time that we are not out of the woods," said Senator Therese Murray, a Plymouth Democrat who is chairwoman of the Ways and Means Committee. "We still have a structural deficit we have to address and we really can't add much to that deficit and expect to climb out of this recession any time soon."

It is still early in the budget process -- Romney will kick off the formal process when he submits his budget blueprint in January -- and the deficit number is likely to fluctuate. But Murray's analysis is the most detailed to date on the prospective gap, and its conclusions are being echoed by the Romney administration, House Speaker Thomas M. Finneran, and independent budget analysts.

"We're all in agreement that even though the number is less than the gap going in a year ago, it's going to be a more difficult year because the cuts will come on top of what has already taken place," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation.

The shortfall state officials had to close in the current fiscal year was $3 billion, and for several months there have been rumblings on Beacon Hill that the deficit for the coming fiscal year would be large.

Finneran had been projecting a gap of between $1 billion and $1.5 billion, but last week he said he now envisions a final number of about $2 billion. The House Ways and Means Committee is working on its own analysis. The Romney administration, meanwhile, is predicting a deficit of between $1.5 billion and $2 billion, and it has already begun telling state agencies to begin planning for tighter budgets in the coming year.

To close the budget gap this year, Romney and state lawmakers imposed what one report has estimated to be $500 million in fee increases, making it more expensive to get a marriage license or a divorce, file a court case, buy a house, or renew a driver's license. Even with the fee increases, Romney and the lawmakers cut spending on K-12 education and health care spending for the poor, and other state services.

Romney has threatened more immediate cuts in programs ranging from housing to juvenile offenders to land-buying efforts. The Legislature is expected to take up bills to restore some of the social services money.

But when lawmakers turn to next year's budget, a Romney spokeswoman emphasized that once again broad-based taxes are off the table.

"We don't want to raise taxes -- definitely not," said Nicole St. Peter, a spokeswoman for Romney. "Raising taxes only hurts the working people of Massachusetts, and also cuts jobs."

Murray's forecast relies on conservative projections: It assumes a 12 percent increase in Medicaid spending, the national average, and 2 percent increase in revenue, rather than the 4 percent the Romney administration hopes for. It assumes that the state's contribution to the pension fund will double, and that overall spending will increase 2 percent, conforming with the expected rise in the consumer price index.

Widmer said Murray's analysis is overly pessimistic in at least one respect: It doesn't account for the federal government's contributions to the Commonwealth's Medicaid program, which would knock about $400 million off Murray's $2 billion figure.

The disclosure last month that the state had quietly built up $726 million in its main reserve account -- twice the estimate that circulated during last year's budget debate -- raised hopes that the state could restore some services.

"Before I did the presentation to the members, I had already received $102 million in requests," Murray said, referring to the reaction to the rosy reserve numbers.

Now, however, some advocates are girding for the worst. Stephen E. Collins, executive director of the Massachusetts Human Services Coalition, said that after three years of cuts, his group is expecting some programs to be eliminated.

"Our basic concern is that we're going to see what has already happened at the Department of Public Health, the most heavily hit agency, spread to other human service agencies," said Collins, who noted that in recent years deficit projections have tended to get worse, not better, as the formal budget process gets underway. "There is no way that you're going to deal with a $2 billion deficit without more devastating cuts."

Collins's hope is that as residents begin to feel the impact of cuts in health care, education, and public safety, there will be an outcry for a tax increase. So far, legislators on Beacon Hill say they have yet to feel the pressure from outraged constituents.

"Once people realize just how far and deep these cuts have already gone, there will be less of a stomach for deep cuts in 2005," Collins said.

Scott S. Greenberger can be reached at greenberger@globe.com.