EVEN AFTER Governor Patrick's recent budget cuts - and after the failure of a ballot measure to abolish the state income tax - the Commonwealth is not out of the woods financially. Even with the approximately $900 million in so-called 9C cuts that the governor wants to make, Massachusetts is likely to face a deficit of at least $1 billion in the new year.
Come January, we will see how much the recent collapse in the stock market and housing sectors will hurt capital gains tax collections. The governor is predicting a 30 percent drop in these revenues, but we'll be lucky if that happens. During the last recession, capital gains plummeted by 70 percent, from $1.16 billion to $337 million in just one year, and forced massive cuts throughout the budget, including local aid. The same could happen again.
We still have a long way to go to get through fiscal 2009, which began July 1, and can expect a difficult year. And we are not dealing with only a short-term fiscal crisis. Our current economic woes will continue at least into fiscal 2010. We need to plan accordingly.
In the two years that Patrick has been in office, the state budget has grown by nearly $2.5 billion - close to 10 percent, a rate of growth that is unsustainable. He's added two new secretariats and spearheaded efforts to borrow $13 billion for capital projects. The new reality is that government needs to tighten its belt, just as every resident of the Commonwealth is doing.
But out of adversity comes opportunity. State leaders may be more willing to embrace key reforms in the way government operates - even ideas they might have rejected in better times.
In coming weeks, House and Senate Republicans will be using five basic principles to guide us through the budget-balancing process:
1. We need to decide which services government should provide. I give the governor credit for making a lot of tough decisions, but some of his priorities don't make sense. For instance, his recent cuts included the closing of the Ferguson Industries for the Blind, a workshop that has been employing blind people since 1906. How can we slash human services programs and tell people to expect longer lines at the Registry of Motor Vehicles when we're still paying "volunteers" through the governor's new $3 million Commonwealth Corps program?
2. We must not divert scarce funding to new programs like the Commonwealth Corps or to expand programs, no matter how well-intentioned. For example, funding for after-school grants - a worthy endeavor - was increased by 177.5 percent in the fiscal '09 budget. Even after the governor's 9C cuts, there are still significant expansions of programs like this that are taking place throughout the budget. How can we expand programs if we cannot adequately fund the basic education programs we already have?
3. We must freeze hiring immediately, and conduct a thorough review of the 2,000 positions throughout state government created since Patrick took office. Although the governor has announced plans to eliminate some positions through attrition and voluntary retirements, government is still growing faster than it should. We must strive for efficiencies and eliminate waste in government.
4. We must use our reserves sparingly, and only after identifying cost reductions throughout state government. The fiscal '09 budget was passed with a $400 million drawdown from reserves, and the Legislature recently authorized the use of up to $200 million in additional reserves this fiscal year. That would leave $1.6 billion in the rainy day fund. If we aren't careful, we might not have the reserves necessary to carry us through future fiscal years. We could also jeopardize the state's bond rating and make it even more difficult for the Commonwealth to borrow for future projects.
5. Most importantly, every effort must be made to hold local communities harmless and preserve local aid. Many communities have yet to recover from the local aid cuts in 2003. Imposing additional local aid reductions at this time would wreak havoc on municipal budgets and decimate essential local services.
Richard R. Tisei, Republican of Wakefield, is the minority leader of the Massachusetts Senate.