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Budget, Reform & Municipal Relief Update

May 8, 2009

As a member of the Senate Ways & Means Committee, I attended the emergency revenue hearing on Tuesday, May 5.  With the Commonwealth losing $1 billion in revenue between April 2008 and April 2009, Fiscal Year 2009 is shaping up to be one of the worst in Massachusetts history.  As such, I am writing to bring you up to date on the widening gap to close out our current budget ending June 30, 2009, as well as the worsening news regarding the Fiscal Year 2010 budget.  I also want to keep you informed of the status of important reform measures.

Here you will find two documents: a joint statement from Senate Ways & Means, House Ways & Means and the Administration on tax revenues for Fiscal Year 2010; and the municipal relief report released today.  For your reference, I am including below some discussion of some of the Commonwealth’s most pressing budgetary and reform issues below.  Please contact me at Karen.E.Spilka (at) to let me know your thoughts on these issues.  Your feedback will be invaluable as the Senate debates its budget in two weeks.

Reform Before Revenue
Senate President Murray has been steadfast in calling for reform before revenue.  I feel very strongly that ethics, pension and transportation reforms must be acted upon quickly.  Pension and transportation reform have been voted through the Senate and we will be taking up ethics reform expeditiously.  It is critical that we act now on reforms and realize all cost savings in the face of unprecedented budgetary challenges.

Mounting Current Deficit
As a result of the global economic crisis, the state is continuing to deal with deep revenue shortfalls for the current fiscal year ending June 30th.  Despite a combination of substantial cuts in jobs and services, utilization of rainy day funds, and allocation of federal stimulus money, we will struggle to fill this gap and to make our remaining local aid payments due in June.  Using stimulus and rainy day funds to make up this deficit will only make our fiscal challenges in FY 10 and FY11 even more daunting.

Responsive Reductions
During this past year, almost 2,000 jobs have been cut in state government.  The Governor has made over $860 million in mid-year cuts to this year’s budget.  The Senate has already cut its budget 12% and each State Senator has also agreed to take a pay reduction this fiscal year to give back income to the state.  I expect even more sacrifice next year.

FY 10 Budget
As the Senate prepares to release its budget for the next fiscal year beginning July 1st, agreed-upon revenues are over $1.5 billion below January figures used by the Governor in crafting his budget.  We need to brace for a difficult FY 10 budget that reflects our constitutional obligation to formulate this fiscal blueprint based on actual revenues.  Make no mistake that the full force of the international fiscal crisis will be felt this year.

Unprecedented Human Services and Local Aid Cuts
Unfortunately, it appears we all may be faced with cuts to core government services necessitated by this fiscal crisis.  My priorities will be maintaining the social safety net for those most vulnerable and providing for those areas most critical to my municipalities and constituents, including local aid.  The federal stimulus money and the Legislature’s prioritization of education and health care have helped make those areas less vulnerable than others.  I am proud that both the state and federal commitment to education will keep Chapter 70 and public higher education as close to level funding as possible.

Municipal Relief
It is also essential that local governments feeling the impact of these extraordinary challenges realize some measure of relief through healthcare savings and new revenues.  A Municipal Relief Commission report was released today, the details of which you can find in the attachment.

Senate Budget Challenges
Right now there appears to be a disconnect between the magnitude of cuts that are coming and discussion of new revenue sources.  Unfortunately, the House of Representatives did not have the latest revenue projections available when it finalized a budget.  It also used over $200 million in stimulus money, which is not sustainable in the long-term, to reduce cuts to local aid from a 33% across-the-board reduction from last year’s numbers to a 17% cut.  The House additionally relied on a sales tax increase to raise $900 million, a measure that the Governor has expressed opposition to and that the Senate has yet to consider.

The coming months will continue to present enormous challenges in government and for our most vulnerable residents that rely on the core services we provide.  I look forward to working in partnership with you to come up with responsible and creative solutions to this budget crisis.


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