No Plan Yet, But State Leaders Huddle On Ballooning Budget Gap

Gov. Charlie Baker and Democratic leaders of the House and Senate huddled for nearly two hours on Monday as they tried to wrap their arms around a ballooning budget gap, but appeared in no rush after the meeting to scale back assumptions for tax collections next year.

Baker said Monday he'd like to get a better idea of what May will bring for tax collections before settling on a course of action to bring spending into balance with sluggish tax collections for fiscal 2017.

He also said he does not believe the revenue projections for fiscal 2018 need to be adjusted before the Senate begins its budget debate in 15 days.

The Department of Revenue last week released tax collection data for April that showed a widening gap between projected and actual tax collections for the year, with revenue now running $462 million behind estimates used for budgeting and growing at a 1.1 percent clip after 10 months of the fiscal year.

Revenue Commissioner Michael Heffernan warned that not only would tax collections fall short of benchmarks for the year, but he recommended revisiting the 3.9 percent growth forecast for fiscal 2018.

"We're basically looking at all the issues associated with where we are in spending and revenue at this point in time and we're working with our colleagues in the Legislature about all of those issues. I'd like to get a little more visibility into the month of May and deal primarily with fiscal '17 at this point before we start getting into a conversation about what to do bout '18," Baker said.

The governor met for about two hours Monday afternoon with House Speaker Robert DeLeo, Senate President Stanley Rosenberg and other legislative leaders where the budget was a focus of the conversation, according to one attendee.

"I think there was a good discussion of how serious the problem is and the fact that we do need a plan and that we continue to need to find a way to reconcile what we're seeing in the economy with what we're seeing in terms of state tax revenue, and there were no answers today other than, I think, a shared commitment to find the right way forward," Senate Minority Leader Bruce Tarr told the News Service.

Elected leaders on Beacon Hill have been struggling to understand why tax revenues are growing so slowly despite a relatively strong state economy and low unemployment. Baker has suggested that stagnant wage growth is partly to blame, and Tarr said there were many theories floated during the meeting, but no definitive answers.

The House two weeks ago debated and passed a $40.4 billion spending plan for fiscal 2018 based on a set of agreed upon revenue projections that the Senate has also used to build the budget plan expected to come out of the Senate Ways and Means Committee next week.

Baker said he did not see the need to adjust the revenue targets ahead of the Senate budget debate, but did not rule out the possibility that the House-Senate conference committee would have to take steps as they did last year to revise revenue and spending at a later date.

Last spring, the state experienced a similar downturn in revenues in the spring that prompted House and Senate leaders to adjust their spending targets during the conference committee process after both branches had already approved budgets for the following year.

"I could easily see us ending up in a similar place this year," Baker said.

Rosenberg agreed. Asked whether he was comfortable debating a budget in two weeks based on 3.9 percent revenue growth, Rosenberg said, "Yes, and we'll look forward to the conference process to iron out any difficulties."

Baker said he and Speaker DeLeo see eye-to-eye on the point that the fiscal 2017 revenue problem should be solved without tapping into the state's $1.2 billion "rainy day" fund. He said that as long as revenues are growing and the state is able to increase investments in local aid, child welfare services, addiction treatment and other priorities then the reserves should be left untouched.

"Our view at this point is we need to solve, as we did last year, our fiscal problem for this year without touching the rainy day fund," Baker said.

Tarr, a Gloucester Republican, said he was considering his options ahead of the Senate budget debate, but saw justification for lowering the revenue projections for fiscal 2018.

"It seems to me that it should (be lowered) unless someone can give us a reason it shouldn't. We're thinking about that right now, in terms of what we can do," Tarr said.

Tarr said the leaders who met Monday agreed to resume their conversation over the budget next week when they meet again.

"Hoping that things will get better is certainly an important sentiment, but not a good plan, and so I think we do need to determine how we're going to deal with that with the Senate budget debate coming up very quickly," Tarr said.



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