Mass. short by as much as $1.5b

Patrick set to announce deep cuts today

Governor Deval Patrick today is expected to announce that state revenues will decline this year by as much as $1.5 billion, giving greater urgency to the state budget cuts and layoffs he is expected to announce in a televised news conference this afternoon.

The governor is planning to announce the cuts at 5 p.m., giving him a local news broadcast platform so he can speak directly to Massachusetts residents and explain to them how the national and foreign economic chaos has hit home.

"People will feel this in their services," Patrick said yesterday in remarks to reporters. "This is not about, you know, cutting so-called fat. This is going to cut muscle, because the scale of the issue requires that. We're going to feel it in services, we're going to see a smaller work force."

Patrick has been working with top officials in his administration to develop the targeted, specific reductions. But in public he has kept his pronouncements general, saying only that he plans to eliminate hundreds of millions of dollars from the $28.2 billion budget that is only three months old.

The governor met for nearly 1 1/2 hours last night with top House and Senate leaders in Senate President Therese Murray's office. Those involved declined to discuss any details of the meeting.

The growing size of the revenue shortfall, pegged just two weeks ago at $400 million, is in large part a result of plummeting amounts collected in taxes on capital gains. Losses in the stock and real estate markets mean that there have been fewer such taxes to collect. Other revenues, including sales and income taxes, are also expected to decline as consumer spending dries up and the unemployment rate rises.

The state disclosed the larger budget gap, which it said would be $800 million to $1.5 billion, in a disclosure document filed jointly for bond investors by state Treasurer Timothy P. Cahill and Secretary of Administration and Finance Leslie A. Kirwan. The document was filed on Friday, but was not previously released.

On top of the revenue shortfalls, the state also is facing an imbalance on spending items. The state reported to investors in August that there were about $600 million in unbudgeted items. This involves things such as probable increases in energy costs or healthcare, or additional social services that will be needed during a sour economy.

The unbudgeted expenses category is an annual gamble for budget writers. In recent years, it has not been a problem because revenues exceeded predictions; now, in an economy mired in negative territory, unbudgeted expenses came up a loser. Kyle Sullivan, an administration spokesman, said last night that the $600 million estimate had been lowered, but would not provide a new figure before today's announcement.

Fiscal observers are adding the $600 million and the $1.5 billion together and saying Patrick's problems are just beginning.

"This is at least a $2 billion problem, and it could be worse," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation. "It reflects the calamitous events of the last three weeks."

Widmer said everything from longer lines at the Registry of Motor Vehicles to longer waits for environmental permits could result from budget cuts. They also could trigger increases in various state fees, as well as tuition hikes at public colleges and universities. The Globe reported last week that higher education administrators are scrambling to reduce spending after receiving word from state officials that their subsidies will be cut by an estimated 5.6 percent.

Budget observers also expect the governor to tap the state's $1.8 billion reserve account, but it was unclear last night to what extent. The current state budget relies on about $400 million from the rainy day fund; Patrick would need approval from the Legislature to spend more.

Patrick indicated yesterday he is not planning to cut money given to cities and towns - yet. Patrick also would need approval from the Legislature to cut local aid.

"We're doing our level best not to go at either local aid or Chapter 70 [education] funding," Patrick said. "So far, I think we'll be able to do that, or at least not touch it in significant ways."

Patrick met in private yesterday with labor union leaders but did not release many specifics, apparently fearing leaks of his plan. Lieutenant Governor Timothy P. Murray, who met last Friday with mayors, held a conference call yesterday with town officials.

Those who have participated in the meetings said they appreciated the governor soliciting their input, but they came away from the meetings with few indications of how the cuts will affect their areas.

Patrick vowed earlier this month to trim his office budget by 7 percent - which amounts to $600,000 - and the Legislature responded by agreeing to cut 10 percent, or $9.1 million. He has also acknowledged that some of his long-term spending initiatives and campaign promises might have to be curtailed, and he has not ruled out reviving his casino gambling legislation to raise money.

Massachusetts has faced several difficult budget years recently that triggered midyear cuts.

Acting Governor Jane Swift cut $202 million from the state budget in October 2002, and then cut $60.7 million more in December. Governor Mitt Romney used his emergency budget powers to slice $344 million from spending in January 2003, including $114 million from local aid and $133 million from health and human service programs.

In November 2006, Romney cut $425 million, but several weeks later restored $41.4 million when tax collections came in stronger than expected.

Patrick, who had just won election, then restored the remaining $383.6 million in emergency spending cuts made in the previous month by Romney, saying they were harmful to thousands of needy residents and not necessary to balance the state's books.

Republicans yesterday began pointing to that decision as one of the reasons the state is facing budget difficulties.

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