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Patrick says budget 'without gimmicks'

Plan would raise corporate taxes

Governor Deval Patrick greeted the crowd in Melrose before unveiling his first budget and took questions afterward. B4. (PAT GREENHOUSE/GLOBE STAFF)

Governor Deval Patrick yesterday unveiled the broad themes of a $26.7 billion spending plan for next year that would close a gaping deficit with $515 million in unspecified spending reductions and $295 million in new corporate taxes, while fully funding the state's health insurance law, boosting aid to cities and towns, and launching several education initiatives.

During a televised speech in Melrose, Patrick called on citizens and political leaders to rally around the plan, saying it would stimulate a sluggish economy, fund education initiatives, and meet social service obligations.

"We need a new spirit of active and civic responsibility, less about party politics and more about problem solving, less about the status quo and yesterday and more about innovation and tomorrow," Patrick said.

The nuts and bolts will be released today at noon, when Patrick files his budget for fiscal 2008, which begins July 1, launching a monthslong budget debate in the Legislature. The governor, whose early tenure will in many ways be judged by the success of the plan, will begin selling it to the public, legislators, and the business community in a series of interviews and speeches today.

Patrick's speech touched on many of the themes and even the phrases of his campaign as he pitched his fiscal plan, which must close a $1.2 billion deficit while funding some of the initiatives he promised as a candidate.

Earlier in the day, he took the unusual step of presenting his budget plan to a joint House and Senate caucus and asking them not to reject it out of hand.

"We are building a foundation of lasting change and meaningful progress, and we had better get on with it, because Massachusetts is at a crossroads," Patrick told the audience, which filled Soldiers & Sailors Memorial Hall.

During the half-hour speech, he vowed to end homelessness in Massachusetts through a streamlining of state programs. An aide said the initiative would increase spending by nearly 5 percent.

Short on details, Patrick said the budget does not take the short cuts he contends have been relied on in the past.

"This budget is balanced without gimmicks," Patrick said. "We did not defer difficult decisions. We did not use Band-Aids to treat symptoms and ignore their root causes. We did not square our ledger with under-the-radar fee increases. And we did not shift the financial burden onto cities and towns or public schools or poor people."

The most controversial part of Patrick's budget blueprint is his plan to raise $295 million in fiscal 2008 by closing what he calls corporate tax loopholes, a proposal the Legislature is leery of and the business community has protested.

Patrick, who is to address the Greater Boston Chamber of Commerce this morning, argued that the changes would force businesses to pay their fair share of the tax burden. He contends that the changes will place Massachusetts on equal footing with other states that have similar tax laws.

"Closing these loopholes is a matter of basic fairness, Patrick said. ". . . In fact, our total tax burden for businesses is among the lowest in the nation." He cited an Ernst & Young report estimating that Massachusetts businesses have the 47th-lowest tax burden.

Still, the governor will have to make a strong argument to legislators.

"The stock market plummeted . . . today because a lot of people are worried about an economic slowdown and possible recession," said Richard R. Tisei of Wakefield, Senate Republican leader. "Now isn't the time to make the state less competitive for businesses."

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, called the budget a "good faith effort to deal with a very difficult problem," but said it has two significant flaws: an increased corporate tax burden -- which would hurt the state's economy and, therefore, employment -- and the fact that about $400 million of the funds used to close the gap are one-time revenues and savings, which would leave a built-in deficit in next year's budget.

Still, in sharp contrast to the cool reaction to the spending plans submitted by Republican governors, Democratic legislative leaders offered a warm reception for the first budget submitted by a Democratic governor in 16 years.

"There is a lot of area of common agreement," Senate President Robert E. Travaglini said after he leaving the governor's office, where Patrick briefed legislative leaders on his plan before the speech in Melrose. "We all understand this is the framework that begins our deliberations on the budget appropriation for this year, and we're ready to be as helpful to the administration as we can be."

Representative Robert A. DeLeo, chairman of the House Ways and Means Committee, said, "It's the first time I've experienced the willingness of the governor to speak with the Legislature, to speak with the leadership, and to give us a heads up, in terms of what his particular priorities were before it being released."

The one-time revenue sources include $50 million of the state's tobacco money.

And though Patrick promised he would not use gimmicks to balance his budget, his spending plan depends on using $100 million that would otherwise be put into the state's rainy-day fund, plus $75 million in interest that fund is expected to earn next year. The governor's office said the $75 million accounts for 84 percent of the interest the fund is projected to earn in fiscal 2008.

The budget would also have the treasurer's office pursue a variety of strategies for recovering more money through different techniques in bonding and cash management, as well as by hiring lawyers and staff at the appellate tax board so cases could be expedited and the state could recover the money it is owed faster.

Patrick's budget also requires about $515 million in cuts and "efficiencies" from across state government. Of that, $179 million would be derived from Medicaid cost controls and savings. But aides to the governor refused to provide further details about how the saving would be realized.

During his campaign, Patrick promised to put an additional 1,000 police officers on the streets. His budget provides about $13 million in additional funds for community policing, money the administration says would help to hire 250 police officers. That $13 million includes $3 million to expand training.

Local aid would increase by $312 million next year, or about 5 percent, including $200 million dedicated to education. The budget would also spend an additional $13 million on expanding about 800 half-day kindergarten classrooms into full-day programs and double funding for extended school day programs to $13 million. And, as the governor announced last weekend, it would spend about $72 million more next year on public health.

Lisa Wangsness of the Globe staff contributed to this report.