On Feb. 3, Gov. Charlie Baker announced his proposals to close the budget gap, which according to his recent estimate is now at $768 million. Included on the proposal list was reduced spending in the Executive Branch, Medicaid, and programs that have yet to be implemented. Excess capital gains tax revenue would be used to offset the deficit instead of saved for the rainy day fund.
In total, the plan incorporates about $514 million in spending reductions and $254 million in revenue.
“We’re here today to talk about a state government that lives within its means,” said Baker from the podium at the conference.
Shortly after entering office, Baker froze hiring and has since followed up with a series of contractual freezes. He estimates this will save $22 million. He hopes to save approximately $150 million dollars in 9C cuts, which are spending changes the executive branch can make within its own operations.
“The plan which we will be filing later today with the legislature lives up to our promise that we will not raise taxes, cut local aid, or drive down on the existing stabilization fund,” said Baker.
The budgets of local aid, services for the homeless, and the Department of Children and Families will go untouched.
Programs that have yet to be implemented, like an economic development bill and a clean water planning and technical assistance program, will have their funding slashed a total of $73 million.
The remaining cuts, $168 million of which are from Medicaid, will have to be approved by the legislature, the same as the tax amnesty proposal.
“[One budgetary solution with respect to MassHealth] is to again begin the process of doing eligibility redeterminations.”
“We are going to hold on spending state money on services that [the Center for Medicare and Medicaid Services] is not actually authorized [to do] at this point in time.”
Tax amnesty is an opportunity given to individuals, allowing them pay a specified amount of money in trade for previous tax penalties. This proposal, along with incoming excess taxes, is the sources of revenue in Baker’s plan.
Although Baker says he won’t pull from the state’s “rainy day fund,” the accumulated excess taxes that are saved for economic and budget emergencies, he does want to divert these incoming capital gains taxes from FY 2015 into the budget. He calls this a “one-time fix.”
Despite the cuts laid out in the plan, spending for FY 2015 is still a 7.7% increase over FY 2014.
“[This state spending] is simply not sustainable over time, even in a great economy.”
The budget imbalance was raised from the $765 million estimate in Baker’s inaugural speech to $768 million due to new tax data and factors such as the snowstorm in late January, the first in a series that Massachusetts has been hit with.