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Mass. Budget Chief: No New Taxes, But Challenging Year Ahead

Heavily into planning for next year’s state budget, Administration Finance Secretary Jay Gonzalez on Tuesday said the Patrick administration plans no new broad-based tax increases in fiscal 2013, and will have to find ways to cover surging demand for social services that is expected to outpace revenue growth.

“Even though tax revenues are growing modestly, and we may have more resources next year, the demands in our safety net programs and health care costs generally, the rate of growth in those areas exceeds the growth in resources,” Gonzalez told the News Service during a 20-minute sit-down interview in his office.

Through mid-November, tax collections of just over $7 billion since the start of the new fiscal year in are up 5.8 percent over the same period in fiscal 2011 indicating that the Massachusetts economy continues to rebound from the recession that began in 2008 and forced rounds of budget cuts.

“Tax revenues have been growing and we expect them based on economic forecasts to continue to grow so I think next year’s budget will be bigger than this year’s budget, but probably only modestly,” Gonzalez said.

Gov. Deval Patrick’s budget chief, however, cautioned that next year is going to be “another challenging budget year,” that will likely require a “modest” use of the stabilization fund, and changes to health and human service programs. He noted that revenues next year are only projected to climb slightly higher than their pre-recession levels from fiscal 2009.

“In developing budget options for the governor, I’m assuming no broad based revenue increases,” Gonzalez said.

Gonzalez said lingering effects from the recession continue to create high demand for safety net programs, which consumed 52 percent of the state’s fiscal 2011 budget and have been one of the only areas in state government to see significant spending growth since 2007.

“That is going to put us in a position where in order to continue to help all the people that need to be helped during these tough times, lots of those additional resources we have are going to need to go to continue to preserve as many of those programs and services as we can,” Gonzalez said. “We may not even be able to preserve those programs and services in the same way that we’ve had them before in order to make sure we’re living within the resources we have.”

He said preserving safety net programs at their current service level could require an additional $1.4 billion next fiscal year.

The Patrick administration will meet next month with legislative leaders to form a consensus estimate on revenue for fiscal 2013 that will inform spending decisions in the budget Patrick must present before Jan. 25. In preparation for writing the budget, cabinet secretaries will begin this week holding public hearings across the state, starting with the Executive Office of Health and Human Services on Friday in Northampton.

In announcing the hearing date, Health and Human Services Secretary JudyAnn Bigby last Wednesday wrote in a letter to the human services provider community that they should expect a challenging budget cycle.

“Because of several one-time revenue sources and the continued demand for services, FY13 will be challenging and require cuts and reductions and the need for the Administration to make difficult decisions. To overcome this budget challenge, we will need to work together to reexamine all public services and their delivery and find innovative solutions so that we can continue our mission with minimal disruption,” Bigby wrote.

The letter from Bigby prompted an angry response from Gary Blumenthal, the president of the Association of Developmental Disabilities Providers, who said the threat of cuts conflicted with Patrick’s message that Massachusetts was rebounding faster than other states.

“It is just shocking and disturbing that the Administration chooses to announce budget cuts on the eve of Thanksgiving when they know many will miss this bad news. We will work hard to stop any cuts and hold the Administration to its promise to protect and invest in human services as revenues and the Massachusetts economy has rebounded,” Blumenthal wrote in a response e-mail to providers.

Blumenthal went on to point out that the state recently restored a $65 million cut in local aid to towns and cities, and approved 3 percent salary increases for management employees.

Gonzalez said the other big question mark facing state budget-writers will be trying to anticipate how the stalemate over deficit cutting in Congress will play out over the next several months.

“If they were to cut Medicaid, that would be an issue for us,” Gonzalez said. Another $2.6 billion in discretionary spending received each year from the federal government to support programs run by the state is also “up in the air,” he said.

While Gonzalez said he expects negotiations over a federal Medicaid waiver to be settled before a final budget is drafted, he said there was no way to prepare for the uncertain impacts of Washington spending decisions.

Federal cuts to scientific and defense research could also take a significant bite out of the Massachusetts economy if they come to pass, affecting jobs and corporate tax collections.

“We’re just going to need to be nimble and flexible and proactive about monitoring the situation, which I think we’ve shown in the past we’ve been able to do,” Gonzalez said.

This program aired on November 29, 2011. The audio for this program is not available.

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