Baker cuts $50 million to start filling budget gap

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BOSTON – Gov. Charlie Baker on Friday slashed nearly $50 million from the state budget to partially close what his administration identified as a $320 million gap between projected spending and revenues through end of the fiscal year.

The emergency budget cuts, which come at the half-way point in the fiscal year, hit a variety of agencies and departments, with one of the largest reductions being a $10 million cut at MassHealth for fee-for service payments. The MassHealth cut also means the state will forfeit about $5 million in federal reimbursements associated with those payments.

Other agencies and programs saw their budgets cut as the administration took advantage of “fuel savings” related to the falling price of oil and gas that has reduced transportation and heating expenses for state facilities and vehicles. The State Police had $3.6 million trimmed from its budget alone because of cheaper gas.

In order to close the remainder of the budget gap, Administration and Finance Secretary Kristen Lepore said the administration planned to rely on additional non-tax revenues and the projected strength of the tax revenue collections over the next six months. With tax revenues currently sitting at $114 million above benchmarks through December, Lepore said she planned to revise upward the fiscal 2016 revenue projection next week, though he did not indicate by how much.

Lepore identified roughly $56 million in new, non-tax revenues from other sources to help plug the budget hole, including $23 million from abandoned or unclaimed property as well as additional federal reimbursements.

“We are taking corrective action today to ensure we remain on target for a balanced budget in FY 2016. Today’s corrections do not raise taxes or fees and will not affect the state’s ability to deliver core services,” Lepore said.

The budget gap, according to Lepore, can be attributed in part to a $205 million in budgeted non-tax revenue through items like fees and fines that have not materialized. In a letter to Baker, the governor’s budget chief wrote that “another substantial portion” reflects non-discretionary spending obligations that were not budgeted for, including private counsel compensation, human services caseloads and settlement and judgement costs.

The cuts, announced late Friday afternoon as most state workers were preparing to head out of their offices for the weekend, marked the second year in a row Baker, a Republican from Swampscott, has had to make a course correction mid-way through the budget cycle, though this year’s cut are far less drastic than the budget fixes he had to implement shortly after taking office.

Over $16 million in spending being trimmed by Baker this round can be linked back to the early retirement program the governor instituted last year to find savings to help balance the fiscal 2016 budget. The administration cut $16.3 million from the budget associated with the “timing of backfill hires” and the fringe benefits that would have followed those employees had they already been added to the payroll.

The governor also cut $2 million from the domestic marketing budget of the Office of Travel and Tourism, and $200,000 for a state climatologist, a position whose funding was similarly eliminated through two waves of 9C cuts in late 2014 and early 2015 by outgoing Gov. Deval Patrick and then the incoming Baker administration. The Legislature had to override another gubernatorial veto of funding for the climatologist in the fiscal 2016 budget last summer.

Other items of government spending zeroed-out by the midyear spending cuts were $1.5 million to the Big Data Innovation and Workforce Fund, $250,000 for grants for evidence-based approaches for improving recidivism outcomes, and a $1.1 million reserve to provide loan guarantees to small businesses.

The Massachusetts Taxpayers Foundation noted the spending reductions announced Friday were the first emergency budget cuts since 2001 triggered by downgrade in non-tax revenues as tax revenues were actually being upgraded.

“While today’s plan addresses $104.9 million of the administration’s estimated FY 2016 budget gap, fiscal challenges remain. Outstanding spending obligations in areas such as the Committee for Public Counsel Services, Emergency Assistance and MassHealth coupled with savings shortfalls from Retirement Program are among the exposures that present ongoing budget challenges,” the group wrote in its analysis of the spending cuts.

Written by Matt Murphy