Expansion of budget powers is unlikely

Patrick seeking leeway on cuts

Senior state lawmakers remained reluctant yesterday to grant Governor Deval Patrick the broad powers he wants to make emergency budget cuts in all corners of state government, even as the faltering economy is drying up tax collections and causing potentially significant shortfalls.

Granting the governor such special authority would probably require the Legislature to return to Beacon Hill and vote. While such a move was a major topic of discussion in the State House, lawmakers did not commit.

"Those are things we'll discuss in the future," said Senate President Therese Murray. "There's been no decision made. We'll wait and see what the October numbers show."

But the ailing economy, worries about declining stock prices, and the crisis in credit markets that are rattling Wall Street and Washington also gripped the State House yesterday. Lawmakers carefully calibrated their comments and sought to project a united front, describing a collaborative effort with Patrick to keep the budget balanced.

But lurking in the background is a complex set of issues - ranging from federal reimbursements to capital gains taxes - that could at any moment deepen the state's fiscal problems. The administration said last week that tax collections for September are running $200 million less than September 2007; and no one knows yet how much more revenues could tumble.

Some officials declared "things are horrible," while others said "it's still up in the air."

"Things are changing every day," State Treasurer Timothy Cahill said as he emerged from a meeting with top administration, House, and Senate leaders. "We don't know what's going to happen tomorrow."

Patrick, whose unilateral budget-cutting powers extend to about two-thirds of the budget, needs Legislative approval to make any cuts to accounts outside the executive branch - including money for the judiciary and state aid for cities and towns.

That power has not been granted since 2003, when Mitt Romney, then governor, implemented sweeping midyear reductions in the face of a spiraling deficit. At the time, the Democratic-controlled Legislature was happy to give a Republican governor the powers, so he would take the blame for the cuts.

This time, the possibility of a budget crisis is unfolding in an election year. And lawmakers are trying to protect the $5.3 billion in education and other categories of local aid the state pays to cities and towns, a sacred cow in their districts and a prime target when Romney made his cuts.

Patrick said yesterday that "my hope is to hold local aid and education support harmless," but then added, "frankly, until we see how deep the fiscal challenges will be we ought to be careful about categorical pledges."

With forecasts grim even last summer, Patrick asked for the expanded budget-cutting authority when the fiscal 2009 budget was approved in July. But the Legislature balked, saying it would wait to see whether economic conditions worsened. Questioned by reporters, Murray and House Speaker Salvatore F. DiMasi would not say yesterday whether lawmakers would come back to vote to give Patrick those powers.

Early fall is historically a strong time for collecting revenues, in part because of a mid-October deadline for taxpayers who deferred payments in April. DiMasi and other lawmakers are hopeful that actions by Congress will help the national economy, and help states avoid a financial crisis.

"It's pretty fluid right now," DiMasi said.

In addition to declining tax revenues, a potential pitfall is a shortfall in federal reimbursements for state healthcare programs, especially for the landmark program to extend health insurance coverage to all Massachusetts residents. The state had planned to receive $3.5 billion for this fiscal year, but negotiations with federal Medicaid officials have dragged on past a June 30 deadline. If federal aid falls short, that could force more budget cuts.

"Things are horrible," said Representative John Binienda, a Worcester Democrat and House chairman of the Joint Committee on Revenue. "Things are going down, down, down. . . . It's our obligation as elected officials to put forth a balanced budget. The figures we're seeing now have some real holes in it."

Patrick has been planning for the possibility of budget cuts for several months by asking managers in all executive agencies to identify areas to trim. He has also implemented restrictions on hiring and has cut spending on salaries and benefits for employees.

Leslie Kirwan, Patrick's secretary of administration and finance, said the state was readying up to "several hundred million dollars" in budget cuts, but she said it would not be clear for several weeks how deep the cuts would be, or what areas would be hit the hardest.

After meeting with DiMasi and Murray yesterday, Patrick said he was confident he would be able to gain the authority if the state's economic conditions worsen.

"They're going to work with us. These are our partners and I think if we need it, and ask for it, we'll get it," Patrick said. But, he added, "I'd rather have that authority now than not because it would mean I would have to go back and ask for it again."

Even those who are most optimistic say the state will end up having to cut the budget. The only question is how deeply.

"It's starting to get a little bit scary," said Representative Brian Wallace, a South Boston Democrat. "It's creeping in everyone's conversations about what we do from here. The numbers aren't adding up and the numbers aren't looking good. There's a lot of indecision."

Budget officials are keeping an eye on capital gains taxes, which are expected to drop dramatically. Residents had to file their estimated payments on Sept. 15, but state officials are still compiling the figures.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, estimates the budget gap could grow to $1.5 billion, in large part because of losses in capital gains taxes.

"The battle has just begun," Widmer said. "I don't know when it officially becomes a crisis. But we're getting close to that, where it's not just adjustments but a full-blown crisis. . . . We're going to be on a wild roller coaster ride for a while."

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