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Budget gap not as bad as originally feared

Posted March 31, 2010 12:59 PM

Governor Deval Patrick said yesterday that a midyear budget gap discovered earlier this month is not as large as initially forecast and proposed closing the shortfall through a mix of spending cuts and money from the state’s reserve fund.

Administration officials said the shortfall, which they initially predicted could reach $295 million, is instead $195 million.

Of that, about $77 million will be covered by the federal government in reimbursements to the state’s Medicaid program, leaving the state to cover the remaining $118 million.

Under the plan, this would be accomplished by reducing spending by $38 million in 10 accounts, draining a $50 million surplus from a state transportation fund, and taking $30 million from the state’s rainy day fund.

“We’re consistent with what we’ve done throughout this fiscal crisis,’’ Patrick’s budget chief, Jay Gonzalez, said yesterday. “We’ve identified budget issues through active monitoring, and we’re promptly addressing the deficiency after learning of it.’’

Steven C. Panagiotakos, Senate Ways and Means chairman, said the Senate will probably vote on the governor’s proposal next week.

“I think it’s reasonable and it’s prudent,’’ said Panagiotakos, a Lowell Democrat. “I do hate that we have to use any money from the rainy day account, but we really have no choice at this late time in the budget cycle.’’

About $600 million is left in the rainy day account.

Charles A. Murphy, House Ways and Means chairman and a Burlington Democrat, said he was happy to learn that the gap is not as severe as predicted. He said the governor’s plan for closing the shortfall relies on “reasonable savings.’’

The new shortfall, administration officials said, was largely driven by increased demand for services in the economic crisis.

The state spent $125 million more than anticipated on Medicaid, the joint state and federal health insurance program for low-income residents, as well as $19 million more than anticipated for homeless shelters, officials said.

The figure also includes $7.2 million that the state spent on the special US Senate election in January.

Administration officials insisted that the blueprint offered yesterday will not result in reduced services because it relies mostly on redirecting money from programs that were given more than they needed.

The plan, for example, reduces spending on reimbursements to local communities that host charter schools by $4.5 million, but officials said that too much had been set aside in that account and that communities would receive everything owed. The plan also takes $3 million from the Department of Children and Families, money that administration officials said the child protection agency does not need because it has been using less costly services.

In addition, administration officials said, the plan relies on savings in the state’s debt payments. For example, officials said, the administration has learned that $8.8 million in Big Dig debt and $11 million in debt on the state’s bridge repair program that it had initially expected to pay this year will not come due until next year.

The administration also proposed taking $50 million in surplus money from the Commonwealth Transportation Fund, a reserve account recently established to pay down debt on highway repairs and construction projects.

“In these challenging economic times,’’ Patrick said in a statement, “it is critical we maintain our safety net services for residents most in need.’’

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