Three Months Into Fiscal Year, Budget Already $1B Off

State lawmakers and budget watchers gathered on Beacon Hill on Thursday to dissect the ever-growing budget gap, with at least one expert warning that the state already faces a $900 billion shortfall just three months into the current fiscal year.

Michael Widmer, of the Massachusetts Taxpayers' Foundation, said state revenue officials had over-estimated revenue collections by about $600 million for FY2010. In addition, he said the state faces a Medicaid shortfall of between $200 and $300 million.

"The revenue shortfall is only part of the total shortfall for the fiscal 2010 budget," Widmer said. "So when you put those two together, we're talking $800 or $900 million, potentially. I don't see how one avoids local aid [cuts]."

The hearing comes as a separate study projects a $2.25 billion budget shortfall for next fiscal year, FY2011. The study by the Massachusetts Budget and Policy Center calculated the shortfall based partly on how much the state had to use temporary funding sources, such as federal stimulus money, for this year's budget.

Noah Berger, executive director of the Massachusetts Budget and Policy Center, said the state plugged this year's budget shortfall with $2 billion. Next year, that funding source will not be there. In addition, he said, the demand for services will continue to grow as costs increase .

"In good times, revenue grows enough to make up for growing costs. Unfortunately in recessions, we see exactly the opposite," Berger said. "In recessions, the need for services grows more rapidly than in ordinary times and revenue declines and that's part of what we're facing."

"So we begin with the gap from the reliance on one time money in 2010," Berger continued, "and add to that the fact that we have increasing costs and not strong revenue growth yet, and that gap grows larger."