State faces $1b more in cuts

Patrick says pain will be spread; local aid may suffer

Governor Deval Patrick said yesterday that he was preparing for up to $1 billion in additional budget cuts, raising the specter of reductions in aid to municipalities, more layoffs of state employees, and drastic cutbacks in the services that state government provides to its residents.

"There's a lot of pain, and it's going to have to be spread around," Patrick told reporters during a 30-minute briefing in his State House office. "Nobody's enjoying this. This is incredibly difficult."

The cuts will come on top of those made just two months ago, when the governor announced a $1.4 billion budget shortfall that triggered cuts in almost every state department and spurred several protests on Beacon Hill.

That round of cuts spared the $5.3 billion the state would provide in local aid, which is a mainstay for municipalities. But Patrick said protecting that aid appears less likely now.

"Everything's on the table," he said, "including local aid."

The governor's announcement is yet another indication of the toll that the national recession is taking on local services. Nearly every tax that the state collects is well below expectations, with the biggest impact being seen in capital gains taxes.

State officials also expect retail sales taxes to decline as a result of a weak holiday shopping season, and Patrick cautioned that his estimate of an up to $1 billion shortfall is as much in flux as the national forecast.

Cuts to local aid - coming in the middle of the fiscal year, when municipal budgets have already been set - would probably force some municipal officials to immediately begin slashing services and laying off teachers and police officers.

Local and state officials still hold out hope that a federal stimulus package could soften the blow to their budgets. After briefing reporters and meeting with top House and Senate lawmakers, Patrick participated in a conference call yesterday with US House Speaker Nancy Pelosi, when he planned to continue making the case that state governments deserve a major infusion of federal funds.

President-elect Barack Obama is hoping to sign a federal stimulus package shortly after taking office on Jan. 20, and Patrick said he and other governors are pushing for $350 billion for infrastructure projects, $250 billion for education, and $250 billion in funding for programs such as Medicaid, food stamps, and unemployment benefits. But it is unclear what conditions the federal government would put on the spending and whether state officials could use the money to make up budget shortfalls.

Patrick said yesterday that he plans to ask the Legislature to grant him expanded budget-cutting authority next week that would allow him to unilaterally reduce the amount of money the state gives to municipalities without first seeking permission from the Legislature.

"Reducing local aid midyear will absolutely have a very painful impact on communities across the state," said Geoff Beckwith, executive director of the Massachusetts Municipal Association. "The result would be very painful cuts that would take years to recover from."

The last time there were midyear cuts to local aid was in January 2003, when Governor Mitt Romney sliced $114 million. Romney cut more than $500 million in state aid between 2002 and 2004, and about 14,500 teachers, police offices, librarians, and others lost their jobs in those years.

Romney was lambasted for making those cuts, and local officials say they have never recovered; after adjusting for inflation, cities and towns receive $566 million less than before Romney's cuts, Beckwith said.

Patrick has forged a more amicable relationship with municipalities, and local officials avoided criticizing Patrick directly yesterday. Still, cuts that slash deep into municipal budgets could begin to strain the relationship.

"We're going to see a replay of several years ago if this goes through, drastic cuts to public education, public works, public safety," said Joseph A. Curtatone, the mayor of Somerville, where local aid makes up nearly a third of the $165 million operating budget.

The state's current budget allocates $5.3 billion in what is considered local aid, which includes education funding, lottery aid, and other assistance. An additional $1 billion is provided primarily for reimbursements for things such as school lunches, regional public libraries, and police training programs.

In the first two weeks of December, tax collections were $130 million below where they were the same time in 2007, according to a mid-month report by the Department of Revenue. State officials say they will have a better idea of revenues in January, when businesses and residents begin to file their estimated capital gains tax forms. Leslie A. Kirwan, secretary of administration and finance, has until Jan. 15 to issue a new revenue estimate.

House Speaker Salvatore F. DiMasi, who warned local officials three weeks ago that next year's budget could include local aid cuts of between 5 and 10 percent, suggested yesterday that those cuts could come sooner.

"The necessity of further cuts will mean nothing can be off the table," DiMasi said in a statement.

Senate President Therese Murray also indicated that drastic cuts would be needed.

"If this revenue comes in short, as we suspect it will, the governor, along with the Legislature, will again need to find places in the budget to make reductions," Murray said in a statement.

"At that point, everything, including local aid, will have to be on the table."

Patrick said he was looking at several different scenarios on how to make cuts, but he deflected several questions about his plans so far, saying he did not want to set off a panic or cause different interest groups to "freak out" about cutting spending in their areas.

"You're getting down to bad choices and worse choices," said Senator Steven C. Panagiotakos, chairman of the Senate Committee on Ways and Means. "You really are cutting to the bone of basic programs."

Patrick plans next month to unveil his budget for fiscal year 2010, which begins July 1, 2009.

Although the cuts could increase calls for other sources of revenue, Patrick appeared lukewarm yesterday about increasing taxes.

"It's a crummy time to ask people for broad-based taxes," he said. "But I think there's a lot we have to do to demonstrate greater efficiencies and the impact on services before the public will accept broad-based tax increases."

Patrick has also called on the Legislature to pass legislation to allow municipalities to impose a meals tax as well as collect property taxes from telecommunications companies for poles and wires that run over public ways.

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