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With fiscal year waning, Patrick issues plan to close budget gap

E-mail|Link|Comments () May 7, 2009 05:04 PM

By Matt Viser, Globe Staff

Governor Deval Patrick is planning to use $412 million in federal stimulus money and about $461 million from a state reserve account to make sure state government can stay afloat for the next two months.

Governor Deval Patrick

State revenues have plummeted in recent months, particularly in April, and have caused a large shortfall in the current budget. With just two months left in this fiscal year, and 80 percent of the budget already spent, there are few spending items to cut that would close the gap.

Patrick’s proposal would ensure that the state can get through this year, but could also hamstring state budget writers in future years by tapping one-time funding sources.

"We have done our best to implement reforms, cut costs and protect the core services of government that people rely on more than ever in times like these," Patrick said in a statement. "There are no easy or pleasant options.”

The governor’s proposal to use about $461 million in reserve funds, which will need approval from the Legislature, will take the fund down to about $800 million, the lowest level since 2003. The state began this year with about $2.1 billion in that account. Patrick is also proposing to suspend a $100 million planned transfer to the rainy day fund.

Patrick is also planning to use $412 million in federal stimulus funding that is earmarked for education. Using the money involves some accounting tricks: the state will first cut its planned education payment by $412 million but then replenish it using federal stimulus money. Cities and towns will receive the same amount as they expected this year.

The stimulus money is being spent from $813 million that the federal government is giving to Massachusetts to restore state aid to school districts and higher education institutions over fiscal years 2009, 2010, and 2011.

Patrick had previously proposed using $168 million for local school districts that would otherwise fall below state-mandated funding levels, and $162 million to distribute among the state’s public colleges and universities and offset planned student fee hikes. That would leave only $70 million left for the state to spend.

The solutions Patrick is proposing today addresses only part of the problems. State House officials are still trying to stitch together a budget for next year as revenues continue to fall. Economists and fiscal watchdogs warn that this year is only the first in a four-year cycle that will put strains on the state budget and could increase calls for new taxes.

The governor and House lawmakers originally built their budgets on an estimate that the state would receive $19.5 billion in revenues next year. The House, Senate, and governor agreed this week to lower that estimate to $18 billion.

"There is no area of state government that will be immune to cuts in the budget," Senator Steven C. Panagiotakos, chairman of Senate Ways and Means, said yesterday in a statement. "We all have to share in the pain. This, unfortunately, is the stark reality we are facing."

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