Sunday, March 7, 2010

How balanced is this state budget?

The Federal budget deficit is frightening the bejeebers out of me.

Good thing we have a law requiring a balanced budget in Massachusetts. Yes, it's a really good thing…

Let’s take a look at this fiscal year’s state budget, which runs from July 1, 2009 through June 30, 2010. The total budget is $26.9 billion (by the way, this figure does not include the $11 billion of “off budget” expenditures, making the real total budget around $38 billion, give or take a billion—we’ll save that discussion for another day), against which we are projected to spend $27.5 billion. Click here for the detail.

I don’t know about you, but that doesn’t exactly seem balanced to me. By my calculations, it looks like we’re $600 million out of balance.

When did we find out about this problem? Would it surprise you to learn that the writing—in big, fat red letters—was on the wall on April 15, 2009, when the governor’s budget gurus forecasted an April (one-month) shortfall of $497 million? That should have been enough to send the revenue projectionists back to their booth to mull over the impact this trend would have on the fiscal year 2010 budget.

But they were wrong.

April 2009’s actual revenues fell short a whopping $953 million. That’s pretty close to being 100% off on a prediction made when half the information was already available. See the CNN Money report here.

In the ensuing eight weeks, the House, Senate and Conference Committee crafted a fiscal year 2010 revenue projection that again overestimated revenues in an effort to “balance” the budget.

The governor signed the FY2010 budget on Monday, June 29, 2009, and one month later we found out that July revenue collections were already $24 million below forecast. See that press release here.

By the end of September, the state’s first quarter, revenues had missed the wishful-thinkers’ projection by $139 million. That’s when the $600 million full-year shortfall was announced by the governor, who was quickly given authority by the legislature to slash spending so that legislators wouldn’t have to do the heavy lifting and take the blame for an unrealistic budget.

The governor whacked cities and towns with so-called 9C cuts and special town meetings were held all over the state to approve lower budgets and to lay off teachers, firefighters and police. But, to his credit, the governor said he would let go some 2,000 of the nearly 5,000 people he has plugged into the state payroll since taking over the corner office.

At the time, State Treasurer Tim Cahill, now candidate for governor with a self-professed ignorance of where the state might be wasting money (that is, until he gets elected, at which time he’ll be able to sort all that out), said that the budget shortfall would be more like $1.4 billion, rather than $600 million.

Cahill said, “Our budget is built on phantom figures and based on a hope and a prayer.” Gov. Patrick’s Secretary of Administration and Finance, Jay Gonzalez, disputed State Treasurer Cahill’s figures, “I don’t know where the treasurer is getting his estimates.”

Quite frankly, I don’t know where any of them are getting their estimates. And that brings me back to my main point. Balancing a budget on unrealistic revenue forecasts may satisfy the statutory aspects of Chapter 29 of the Massachusetts General Laws, but it does not deal with the real problem: unsustainable spending.

In Sandwich, we took on the exercise of showing how the town could close its structural deficit over three years, without additional state aid. The difficult, but necessary, cuts are called out in the plan in terms of personnel reductions and other spending restraints. Unlike the state, which can simply slash local aid to “balance” its budget, towns and cities have nowhere to go except to reduce payrolls and cut services.

With that in mind, the governor and legislature must elevate the priority of local aid in its budget discussions, start estimating revenue in a realistic way, and implement a top down reorganization of state government where the focus is on us, not them.

Copyright 2010 Randy Hunt

1 comment:

  1. Randy, you are not suggesting that our state government is not giving it to us straight..........................are you?

    ReplyDelete

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