With revenue lagging, Mass. budget could come up $1b short

By Jim O’Sullivan
State House News Service / October 8, 2009

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NEWTON - The state’s revenue shortfall could reach $1 billion this fiscal year, legislative leaders expect fiscal specialists to tell them today, as budget writers scramble to gauge conditions that seem to worsen with each round of fiscal news.

House Speaker Robert A. DeLeo told the Chicopee Chamber of Commerce he expects the gap between budgeted and actual revenues will be pegged at between $500 million and $1 billion during the hearing, a House source said. The meeting will give information to officials who must produce a new fiscal 2010 revenue forecast by the end of the month, the source said.

The projected deficits in the $27 billion budget three months into the fiscal year follow hefty tax increases in the past two years, heavy use of reserve and federal funds, and a round of spending cuts that state leaders described as devastating to government services.

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said DeLeo’s expectation was “in the ballpark.’’ The group, one of several consulted by policy makers as they formulate revenue projections, will probably estimate the shortfall at between $600 million and $1 billion, Widmer said.

The forecasters will testify today at a high-profile State House hearing expected to inject new doses of sour fiscal data.

Governor Deval Patrick frequently points out that the state has already solved $7 billion in budget dilemmas between the last fiscal year and the current one, through cuts, higher taxes, layoffs, federal funds, reserve funds, and other maneuvers.

After burning through $1.4 billion in stabilization funds in fiscal 2009, there is less than $600 million left in the state’s so-called rainy day fund.

September revenues came in $243 million shy of the level on which the fiscal 2010 budget was calculated and $333 million below the year before, leaving state coffers $212 million short after the first fiscal quarter.

Sustained unemployment levels near double digits, a private economy that has flashed signs of life but is still struggling, and outside economic forces are expected to continue the doldrums for the state’s tax collections.

Patrick has said that further reductions to state aid to municipalities are a possibility, as the executive branch girds for unilateral cuts later this month and lawmakers consider the governor’s request for expanded authority to cut across different pockets of state government.

Administration officials declined yesterday to speculate about the revenue estimate.