Modest spending cuts may be put to test

State braces for news on recession, revenue

While they are planning to impose higher taxes to balance the budget, Massachusetts political leaders have so far shied away from making significant spending cuts.

House Speaker Salvatore F. DiMasi is expected to release the House's proposed budget next week and has said he will identify a relatively modest $100 million in cuts, although so far he has refused to say what programs he will target. Governor Deval Patrick identified a mere $40 million in cuts, along with $84 million saved by capping some accounts, in the proposed spending plan he submitted in January.

But that light approach to cost-cutting could be tested soon.

With the House voting Thursday to raise $392 million in corporate and cigarette taxes, spending reductions would probably be the next step if a recession takes its toll and state revenues come up short of current projections and widen an expected $1.3 billion budget gap, officials say.

"Can things become worse?" Representative Robert A. DeLeo of Winthrop, House chairman of the Committee on Ways and Means, said in a recent interview. "My feeling is yes, and I think it will get worse before it gets better."

Budget writers from the House, Senate, and administration agreed in January to project 3.8 percent in revenue growth for next fiscal year, which begins July 1. Since then the national financial picture has gotten much gloomier.

If revenue growth came in lower than 3.8 percent, the state would have to make additional cuts. If state tax revenues grow by 2.5 percent instead, budget writers would have to cut $500 million. If there is no growth, they would have to cut $750 million. Budget officials are bracing for a deteriorating climate, but have not made new predictions.

"Spending will be restrained in a lot of areas," said Steven C. Panagiotakos, the Senate chairman of Ways and Means. "There's no way of getting around some difficult decisions that will be made."

Even while state officials have started talking about possible new budget cuts, they are not expected to be anywhere near the scale of reductions made in the last statewide budget crisis about five years ago, when lawmakers and Governor Mitt Romney slashed local aid to address a state budget deficit.

"By any measure so far, what the governor and Legislature are talking about in cuts are trivial in contrast," said Steve Crosby, who served as a member of Patrick's transition team and who oversaw the budget under Acting Governor Jane Swift, a Republican. "The predominant conversation is new revenue and new spending. The conversation about cutting comes in a very distant third."

Patrick announced midyear budget cuts last week and asked department heads to brainstorm about other ways to trim their spending. Administration officials believe they can save $200 million by using various tactics, including tightening controls on spending and not filling job vacancies. Another $150 million in reductions could come through so-called 9C cuts, which allow the governor to eliminate programs. There are no plans to make 9C cuts, but department heads are being asked to prepare for them in case budget conditions worsen.

"We're going to have to come to terms with some very painful choices," said Representative Jay Kaufman, a Lexington Democrat. "Our choices are going to be where and how deep to inflict pain."

The House is also expected next week to scale back some of Patrick's spending initiatives, cuts that could include $45.8 million for community first initiatives, which fund programs for the elderly and disabled; $15 million to fund an additional 892 prekindergarten classrooms; and $4 million for local policing.

The House budget is expected to be filed Wednesday. Members will have several days to propose amendments, and the full debate will begin about April 28.

"The speaker has always said cutting is an essential part to this budget," said DiMasi's spokesman, David Guarino. "And if need be, we will go beyond the $100 million that the speaker's talked about."

One way for lawmakers to avoid making budget cuts would be to tap the state's reserve account, which contains more than $2 billion but generally is used only during dire times. Patrick has proposed using $469 million in rainy-day funds to balance the budget, while DiMasi has proposed $427 million.

The Senate so far has stayed out of the budget debate, awaiting the House proposal. Early next month, the Senate plans to take up a $392 million tax hike plan the House approved Thursday night.

"I don't think the state's fiscal leaders have fully adjusted to the reality we're confronted within the Commonwealth," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog. "It's important for the House and the Senate to be realistic about what spending the state can afford as we head into a recession. And the sooner the better."

Patrick, in a meeting he called with State House reporters on the portico outside his office Thursday, said he is not frustrated that the fiscal downturn has hampered his ability to expand spending initiatives.

"There's no point getting frustrated about the economic times. I'm being realistic. We have proposed nothing that is beyond our means," he said.

Matt Viser can be reached at maviser@globe.com.

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