(Globe Staff Photo / Dina Rudick)
Governor Deval Patrick may soon learn what happens when the politics of hope and change collide with the fiscal realities of shrinking revenues, a looming economic recession, and a skeptical Legislature.
In the budget he unveiled earlier this week and began championing in his annual State of the State address last night, Patrick included a political wish list of expanded social and law enforcement programs, depending heavily on possible casino fees and new tax revenues from business that have uncertain prospects among lawmakers.
Critics from both sides of the political spectrum found fault with his $28.2 billion budget plan yesterday. They said Patrick dodged many of the difficult choices facing state government and produced an unrealistic spending plan, built on shaky revenue estimates and failing to prepare the state for a recession.
"Optimism and hope for the future is one thing," said Representative Marty Walz, a Boston Democrat who supported Patrick's election in 2006. "But we have to be clear-eyed when putting together the budget and making sure it's balanced. I'd rather be more conservative in an uncertain economic climate."
Governors have traditionally used their budgets to present policy priorities, even if the proposals are unpopular with the Legis lature and face high political hurdles. But during 16 years of Republican governors, the Democratic-held Legislature got used to controlling the process and not having to yield to the priorities of someone in their own party.
"They made no bones that a Romney budget went into a circular file," said Thomas Trimarco, who oversaw the budget under Governor Mitt Romney. "They are not used to it. They have not adjusted to this new dynamic."
But some observers criticized the budget yesterday for including few radical shifts for a governor who came into office with a referendum to bring change.
"There were some big thoughts last year, and we haven't seen any of that this year," said Jim Stergios, executive director of the Pioneer Institute, a conservative think tank. "This is really an improbable budget. It's basically throwing your hands up and saying, 'We couldn't deal with it.' "
Patrick has argued that he is laying the groundwork for important programs by including a host of spending items that are popular among advocates and legislators, including a $368 million boost in education spending and $100 million for public safety initiatives. Some regard this as a smart strategy. It means there are few outside groups protesting his budget outside the State House this week, and it will force lawmakers like House Speaker Salvatore F. DiMasi and Robert A. DeLeo, chairman of the House Ways and Means Committee, to make tough calls: They can either reject the governor's ideas or find sources of revenue they can support. DiMasi and DeLeo were not commenting on the budget yesterday.
One key lawmaker, Steven C. Panagiotakos, Senate Ways and Means Committee chairman, has applauded the governor's approach. But Republicans and some other lawmakers say the strategy could backfire on Patrick in the poor economy of 2008.
"The governor's a bit tone deaf," said Senator Richard Tisei, minority leader. "This isn't the year for new spending initiatives and new programs."
To help pay for his new spending and help plug a projected $1.3 billion deficit, Patrick wants to tighten the state's corporate tax codes, which could generate $297 million in the next fiscal year, and $490 million annually after that. There has been general agreement that the tax codes should be amended, but only if businesses are helped by lowering the state's corporate tax rate. Patrick has proposed lowering it - from 9.5 percent to 8.3 percent - but his changes would not be fully implemented until 2012.
Business advocates say that taking money away from them at a time when they're already struggling would be unwise in a state trying to diversify its economy. They also contrast Patrick's plans to impose more taxes with national Democrats who struck a tentative deal with President Bush's administration yesterday for a stimulus package that includes tax benefits for American families and incentives for businesses to spend more.
"This isn't the package I would have recommended," said Christopher Anderson, president of the Massachusetts High Technology Council, a business lobbying group. "As we're looming toward this talk of recession, the last thing you want to do is impose a tax increase on those responsible for maintaining jobs and the state's economy."
Patrick announced last night that he is establishing an economic council - headed by Cathy E. Minehan, former president of the Federal Reserve Bank of Boston - to direct him on ways the state can expand the economy.
Perhaps the most controversial plan in Patrick's budget is his decision to include in the budget some of the anticipated revenue from auctioning three casino licenses, which he estimates would bring in about $800 million. Expecting declining projections in lottery revenues - a resource vital for municipal budgets - Patrick wants to fill the gap by immediately using $124 million from the casino licensing revenues.
But budget observers say that even if Patrick's controversial casino legislation is approved by the Legislature, the state would probably not be able to collect the licensing money in time to help finance the fiscal 2009 budget, which begins July 1.
The casino legislation still has not had formal hearings, which are expected to last for months. And if the bill is passed, the state would have to establish a seven-member gaming authority, allow communities to hold referendums, solicit proposals from casino developers, and auction the licenses. Patrick's budget assumes all that could take place within the next 17 months.
"It boxes the Legislature into his projections," said Representative David L. Flynn, Democrat of Bridgewater. "I don't think there can be any casinos in a short time frame, but still he's talking about that money. It puts us in a bind. People will expect movement from us, and it's pretty tough to do that in a tough fiscal climate."
In addition to raising $124 million in casino licensing money and $297 million through so-called corporate tax loopholes, Patrick is also proposing to use $369 million from the so-called rainy day reserves and $166 million in expected revenue from tobacco taxes and more collection from tax delinquents. Some of those revenues would be available in the next fiscal year but would not recur.
"It's clearly a really tough year," said Noah Berger, executive director of the Massachusetts Budget and Policy Center. "He made some serious efforts both to reduce spending where possible and to close loopholes to avoid tax avoidance."
The governor said he believes he is being innovative, and this week reflected his exasperation with the Legislature's slow pace in taking up his initiatives.
"The people don't expect us to agree on everything, but they do expect us to engage," he said last night. "They expect us to work together toward the best solution. They expect action. And they deserve it."
Matt Viser can be reached at maviser@globe.com.
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