Budget watchdog warns reliance on rainy day fund to balance $45.5B budget could set state up for fiscal storm
A reimagined $45.5 billion spending plan that relies heavily on the state’s rainy-day fund to balance the state budget in an era of freefalling tax revenues could be setting the state finances up for a “challenging” fiscal storm in the future, budget watchdogs warned.
To help make up for a gaping $3.6 billion shortfall in anticipated tax revenues spurred by widespread business shutdowns amid the pandemic, Gov. Charlie Baker’s proposed budget would drain $1.35 billion from the state’s rainy-day fund — a move he says is necessary to avoid cuts in services and layoffs.
“This budget plan reflects the new realities associated with COVID-19, but it continues to make significant investments in education and economic development and it does not raise taxes,” Baker said, speaking at the State House on Wednesday.
Baker’s plan actually represents a 3.8% — nearly $1 billion — funding boost over his initial January budget. Budget Chief Michael Heffernan blamed the increased spending on the strain coronavirus has placed on the state’s Medicaid system, which has seen thousands flock to enroll amid mass unemployment.
Baker is also proposing $101 million in new grants, loans and resources for the state’s struggling small businesses.
With anticipated tax revenues coming in $3.6 billion under early-year predictions, Baker’s plan would balance the budget by drawing on $1.35 billion in rainy-day funds, roughly $830 million in federal Medicaid reimbursements, $550 million in federal coronavirus aid, and using $422 million that rolled over from last year’s budget.
The governor said his plan allows “significant investments” while avoiding any broad-based tax increases, layoffs, or cuts to social and health safety net programs, and level-funds local aid, consistent with an agreement announced with the Legislature in July.
But budget watchdogs disagree.
Eileen McAnneny of the centrist Massachusetts Taxpayers Foundation warned of “challenging” times to come in the next fiscal year. The “vast majority” of one-time funding the governor relies on to balance this year’s budget is “not replicable,” she said.
“The state will have to hope for further federal assistance, an economic rebound and strong tax revenue growth because the $2.2 billion remaining in the Stabilization or Rainy Day Fund is not sufficient to weather this storm,” she said.
The plan still needs the sign-off from lawmakers, and legislative leaders on Wednesday shed little light on what’s sure to be agonizing and abbreviated deliberations.
A spokeswoman for Speaker of the House Robert DeLeo would only say the Joint Committee on Ways and Means has “been in discussions” with administrative leaders and “will review the budget.”
The left-of-center Massachusetts Budget and Policy Center criticized the budget that level-funds most services as not going far enough, saying it “fails … to support the hundreds of thousands of families in our state that can’t afford to put food on their table or keep their families safe and housed.”
Paul Craney of the conservative Massachusetts Fiscal Alliance, however, criticized the failure to cut spending saying the state “continues to head in the wrong direction.”
from Boston Herald https://ift.tt/33W76Od
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