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Revenue in last month declines

$243m below state estimates; could force more cuts and layoffs

By Matt Viser
Globe Staff / October 3, 2009

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Governor Deval Patrick announced yesterday that the state’s September revenues came in $243 million below expectations, a shortfall that is worse than initial projections and could trigger hundreds of millions of dollars in budget cuts and layoffs.

Budget cuts affect state’s ability to fight forest fires. B4

Revenues have slumped despite several tax increases this year, forcing state officials over the next two weeks to downgrade revenue estimates for the remainder of the fiscal year, which began just three months ago. That process will probably force Patrick to make deeper cuts to the state’s $27 billion budget, possibly slashing the local aid sent to cities and towns.

“It’s certainly on the table, because it’s unavoidable,’’ Patrick told reporters after meeting with his Cabinet at the State House.

At the same time, Patrick pointed to positive signs in the private sector, adding that Massachusetts is doing well compared with other states. State tax revenues typically lag behind improvements in the private economy.

Overall, revenues for the first quarter of this fiscal year have come in $212 million below expectations. The governor, working with legislative leaders, has until Oct. 15 to revise the revenue estimates for the next nine months.

“Although our private sector economy is beginning to recover, state government is still feeling the impact of the global economic collapse,’’ Patrick said. “Today’s news means we have more work to do.

“We will do it as we have in the past, by being tough-minded about the tough choices in front of us and by being mindful that these are not just numbers on a balance sheet that we’re talking about,’’ the governor added. “They are people, and they are vital services, and they are livelihoods in many cases.’’

Patrick said the administration has crafted several different scenarios, based on how dire the budget estimates become, but declined to discuss specifics.

In order to make broad-based cuts, Patrick would need approval from the Legislature. Patrick has already requested that authority, just in case, but lawmakers have yet to act on it.

Patrick’s announcement about revenue figures, which came as the nation’s unemployment rate rose to 9.8 percent, sent shockwaves through Beacon Hill.

“They’re about as bad as we possibly could have expected,’’ said state Senator Steven C. Panagiotakos, chairman of the Committee on Ways and Means. “They are disheartening, disappointing.’’

Panagiotakos estimated that the updated revenue figures for the fiscal year would probably trigger cuts between $500 million and $1 billion.

Revenues from nearly every tax the state collects missed expectations last month, including sales taxes. This was the first month to reflect the controversial sales tax increase that was approved earlier this year by the Legislature.

Retailers had warned that taxes would not come in as high as projected, in part because residents would flee to sales-tax-free New Hampshire.

State officials warned that it is difficult to draw conclusions from one month’s revenue, and they said that the budget picture would be direr, if it had not been for the sales tax boost.

“It would be a worse situation without the tax that was ultimately included in the budget,’’ said Leslie Kirwan, the administration’s outgoing budget chief.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said the state of the economy made it difficult to know whether the new sales tax was to blame for any of the revenue decline.

“It’s very hard to judge whether it was the sales tax increase or people just continuing to sit on their wallet,’’ he said.

Regardless, the lagging revenues could hurt Patrick politically as he heads into a reelection campaign next year.

On Thursday, Patrick announced that President Obama will come to Boston Oct. 23 for a fund-raiser for Patrick’s reelection campaign. The governor was asked yesterday whether that was a sign that he was concerned about his poll numbers.

“That’s hilarious. Really?’’ Patrick said. “Poll numbers are down, and so call the White House? I don’t think many other elected officials get to do that. My president, our president, is coming to support the reelection campaign.’’

Still, Patrick said he remained hopeful that the state will rebound. Asked if he saw a light at the end of the tunnel, he said, “I do, I really do.’’

“People would like to know when they could come to that light,’’ he said. “I’m not sure. ’’

The Patrick administration has used Fridays to make a series of bad-news announcements. Over the last four weeks, news has included the resignations of Transportation Secretary James Aloisi, Kirwan, and the release of a report on generous perks received by the heads of the state’s quasi-public agencies.

“I work on Friday, don’t you?’’ Patrick said, when asked if he was deliberately releasing bad news on Fridays, calling it a “coincidence.’’

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