THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Patrick asks state to cut even more

Seeks to trim $1.5b from tight budget

FULL RECOVERY STILL ELUSIVE Despite an economy on the rebound and higher tax collections, cuts are still necessary, finance secretary Jay Gonzalez said. FULL RECOVERY STILL ELUSIVE
Despite an economy on the rebound and higher tax collections, cuts are still necessary, finance secretary Jay Gonzalez said.
By Michael Levenson
Globe Staff / December 15, 2010

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Governor Deval Patrick will propose a budget for next year that would cut $1 billion to $1.5 billion across state government, reductions that could hit aid to cities and towns and programs that have been repeatedly slashed in recent years.

Jay Gonzalez, Patrick’s secretary of administration and finance, said yesterday that although the economy is improving and state tax collections are rebounding, cuts are necessary because revenues have not fully recovered from the recession, federal stimulus money has run out, and demand is rising for state services.

Gonzalez, offering the administration’s most extensive remarks to date about next year’s budget, said the governor would seek savings through stricter pension controls and limits on the rising cost of health care. But he warned that the options were limited, and that the pain would, once again, be spread across an array of state programs.

“Tough choices are going to have to be made,’’ Gonzalez told a packed State House hearing.

Gonzalez acknowledged after the hearing that local aid, which pays for police officers, firefighters, and other municipal workers — and was cut by 4 percent this year — may be sliced again.

“We’ve got to look at everything in terms of how we balance this budget,’’ he said. “It’s going to be a challenge next year, and everything is on the table.’’

The governor’s grim budget for the next fiscal year, which begins July 1, would mark the fourth year in a row the state has cut spending on services to cope with the recession and its aftermath.

Those reductions have already frayed the state’s social services network and forced cities and towns to lay off teachers, close firehouses, and trim staff.

Next year’s cuts may hit even harder, because they come on top of the previous years’ belt-tightening, said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed watchdog group. He said there is no way to trim $1.5 billion from the $27.6 billion state budget without further reducing local aid.

Mayor Thomas M. Menino of Boston, who pulled staff out of eight community centers, closed the city’s printing plant, and laid off workers in part because of local aid cuts this year, said he is already bracing for the fallout.

“I believe that we will have a . . . further reduction in state aid over the next fiscal year,’’ he told reporters yesterday. “It’s very complicated for us.’’

Menino said the expectation that local aid will be reduced bolsters the argument for giving cities and towns the power to set their employees’ health benefits without union approval, which state law currently prohibits. The governor has been reluctant to embrace such a proposal, which is strongly opposed by public employee unions.

“Health insurance costs us $300 million a year,’’ Menino said, according to the State House News Service. “It’s eating away at the functional services of city government.’’

Independent budget specialists have estimated that the state is facing a $2 billion shortfall for the budget year.

But Gonzalez said the governor, who will file his proposal with the Legislature next month, will cut only $1.5 billion to close that gap, because he will make up the rest through cost-saving measures, which he declined to detail. The House and Senate will each produce its own budget blueprint in the coming months. Patrick and legislative leaders have all said they have no plans to raise taxes.

Gonzalez reiterated that the governor wants, over the long term, to further overhaul the pension and health care systems, but Patrick has not specified what changes he wants to make. And any savings from those changes would take years to materialize.

Gonzalez also declined to outline the cuts the governor will recommend next month. Nevertheless, his decision to assign the $1.5 billion figure to those cuts marked a shift for the administration, which had sidestepped questions about the budget during the governor’s reelection campaign.

“It’s not going to be easy,’’ Gonzalez said. “There are going to be a lot of areas where the budgets are less than they are this year. And it’s going to mean we have to be effective at controlling costs, particularly in areas like health care that have been growing at rates that are unsustainable.’’

One major cost driver is MassHealth, the state Medicaid program, in which enrollment has grown as more families suffer job losses and other ill effects of the economic climate.

Officials noted that the state is also coping with the loss of $1.5 billion in federal stimulus funds that helped avert deeper cuts in the current budget year. Tax collections are $515 million above expectations, a positive sign, but that windfall is being eaten up by rising demand for health care for the poor, homeless shelters, and public defenders.

“It’s going to be one of the more painful years we have seen in this Commonwealth, from a budgetary standpoint, in memory,’’ said Steve Grossman, the incoming state treasurer. “We all have to recognize we’re not out of the woods yet, despite some of the green shoots. We’re in a very fragile time.’’

That sentiment was echoed by Steven C. Panagiotakos, the Senate’s outgoing budget chief, who said after yesterday’s hearing that cuts were one of the only options left for solving the budget gap.

“It’s not something that’s easily fixed,’’ he said. “It’s going to mean tremendous sacrifices in everything — cuts, salaries, wages, services. Everything.’’

Michael Levenson can be reached at mlevenson@globe.com.