Mass. State Facing Huge Budget Shortfall

Significant belt-tightening measures are in store for Massachusetts State leaders looking to close a widening projected $6 million budget deficit for the next fiscal year in light of the economic recession, according to state lawmakers.

State Representative Charles Murphy and Secretary of Administration and Finance Leslie Kirwan stressed the need for budget cuts and budgetary redistribution, particularly in the health care sector, to ease economic strain in a panel discussion at the Kennedy School of Government last night.

The panel also included Kennedy School Senior Associate Dean and Lecturer in Public Policy Peter B. Zimmerman.

Murphy and Kirwan, who both play large roles in determining the state budget, emphasized that the recession will get worse before it gets better.

“We are in the midst of a global economic shift,” said Murphy, who is also chair of the state’s House Ways and Means Committee. “Things will bounce back, but we are a long way away from that.”

Kirwan said that at the start of Governor Deval Patrick’s term, the deficit stood at $1.3 billion. She estimated that within a few fiscal years, this amount would rise to approximately $3.5 billion.

The Massachusetts state budget, according to the speakers, is very reliant on capital gains tax revenue, which has decreased due to the recession.

“It’s a perfect storm. We have a loss of tax revenue, and an increased need for spending,” Kirwan said.

Both speakers noted that raising taxes is not the answer to the budgetary concerns, despite the increasing gap between tax revenues and spending.

The Massachusetts Division of Unemployment Assistance recently released reports that unemployment has reached 7.8 percent, which is still below the national average, but represents a 4 percent increase from January.

Both speakers focused on the impact of budgetary shortfalls on Massachusetts’ education system and health care system.

The budget for fiscal year 2010 will almost certainly include significant cuts in health care spending, while maintaining funding for Massachusetts schools, they said.

Massachusetts currently devotes 31 percent of its budget to MassHealth, the Massachusetts Medicaid system, according to Kirwan, while approximately 20 percent goes toward schools. Kirwan noted that the health care system has “significant reserves,” which they can access to cover costs.

Murphy said the state would first tap into funds allocated by Obama’s national stimulus package to cover spending in the next fiscal year, only resorting to the “rainy day” fund if the recession persists.