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State Revenue Forecast? Cloudy, With A Chance Of Rain

May 07, 2017 08:47AM ● Published by State House News

State House

STATE HOUSE, BOSTON — April showers are supposed to bring May flowers, but very little was coming up roses this week for state budgeteers who saw their hopes of avoiding another scramble to balance state finances washed away in a torrent of economic floodwaters.

Recap and analysis of the week in state governmentTax collections in April, when millions of Bay Staters file their returns, were, if all went according to plan, supposed to put the budget back on track.

The $220 million shortfall in revenue through March - again, if all went according to plan - would become much more manageable when the cash came pouring in during the largest month for tax collections in the year.

Not only did that not happen, but the exact opposite occurred.

New reports showed an economy contracting in the first quarter, business confidence is on the decline and the revenue gap more than doubled to $462 million when April revenues not only failed to live up to expectations, but dropped off $83 million from last year.

"It's hard for us to really figure out what's happening because our unemployment rate is low, the economy is very well in Massachusetts, the jobs are there. We're sitting back saying what is stymieing our benchmark figures?" Rep. Paul Donato, second assistant House majority leader, said.

Gov. Charlie Baker does not seem to have hit the panic button yet, and suggested he and his budget team have been preparing for the possibility of a shortfall for some time. The governor said he was working on a solution to preserve local aid and critical services for taxpayers, and House and Senate lawmakers were in agreement on one thing - hands off the "rainy day" fund.

But Revenue Commissioner Michael Heffernan said the numbers should give state leaders pause.

Heffernan said that not only will revenue this fiscal year fall short of projections, but he recommended rethinking the 3.9 percent growth lawmakers are counting on for fiscal 2018.

The House has already passed its budget plan for next year, and with the Senate preparing to take its turn this month, House Speaker Robert DeLeo said he wasn't ready to junk the work of the House quite yet. "The assumptions for FY18, I think, were based upon conservative estimates," he said. "So I'm hopeful we won't have to come back and do the exercises we had to do this year."

Except that's exactly what he and others said last year, only to find themselves in the very same predicament.

The budget woes played fittingly into the early 2018 gubernatorial election dynamics that could pit one former state budget chief against another.

Jay Gonzalez, who ran Gov. Deval Patrick's budget office for roughly four years, used the budget news to prod Baker, who has built a reputation as a nuts-and-bolts governor, for letting things get out of hand.

"We've got a governor whose whole case for being governor is he's a great manager. And he is failing at that," Gonzalez, one of two Democrats officially in the race, told the Boston Globe. Gonzalez's own budget management during the Patrick years bears dissecting as well, but maybe for another time. For now, suffice it to say budgeting chops could become a major issue in next year's election, and how Baker pulls this rabbit out of his hat could be a big theme.

But it's hard to blame the governor and not put a good chunk of the responsibility for the current situation on the Democrat-led Legislature.

Democrats scoffed when Baker vetoed $265 million in spending last summer and warned that the budget was unbalanced, promptly restoring most of the money to the budget with assembly-line efficiency. Then they howled in December when he cut $98 million in December for the same reasons, calling it a "premature" move by a Republican overeager to shrink the size of government.

Now they want Baker to resolve the mess that slow-revenue growth has created, throwing their hands in the air and suggesting none of this could have been predicted.

"I know that Ways and Means is, I don't want to say disappointed, but they're just sitting back shrugging their shoulders as we have," Donato said.

Whether it's overspending, a tax code that has failed to keep up with the modern economy or simply bad estimating, the chorus from elected leaders of both parties this week made it seem like the budget problems currently facing the state would be child's play compared to what will happen if the American Health Care Act becomes law.
The GOP-led House in Washington successfully pushed through a revised replacement for Obamacare with the slimmest of margins, but while D.C. Republicans celebrated, Massachusetts officials blanched.

Baker said he was "disappointed" with the proposed law that could jeopardize $1 billion or more in federal Medicaid funding for Massachusetts, and urged the Senate to reject the bill as written. Democrats offered more vivid and dire prognostications.

All of this taken together will surely light a fire in the coming weeks under lawmakers who believe that government has a revenue problem, not a spending problem. But apart from broad support for the surtax on millionaires headed toward the ballot in 2018, there remains little appetite for tax changes.

It's no wonder progressives are feeling a little left out these days on Beacon Hill.

Some progressives gathered at the State House week to try to figure out why with Democratic supermajorities in both branches they can't get more of their agenda accomplished.

"Something's been missing," said Harmony Wu, who serves on the Progressive Massachusetts board.

Wu posited that one cause of stagnation on Beacon Hill is the lack of grassroots organizing with a singular voice, but another problem is often money.

A group of liberal senators led by Sen. Sal DiDomenico released its "Kids First" agenda this week that called for raising wages for early educators, eliminating the waiting list for early education and care, ensuring access to after-school and summer programs, and expanding state education aid to cover younger children.

The House has often been painted as the obstacle to priorities like these in the Senate, but Speaker DeLeo and other House Democrats would likely embrace the goals if someone could just tell them how to pay for it.
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