HOUSE BUDGET RAISES SPENDING 3.2 PERCENT, CUTS LOCAL AID $234 MILLION

The House Ways and Means Committee on Wednesday morning approved a $27.8 billion fiscal 2011 state budget bill that increases overall state spending by 3.2 percent while cutting local aid to cities and towns by $234 million.

Immediately after the committee vote, Massachusetts Taxpayers Foundation President Michael Widmer said he expected most of the local aid cut to come from education allocations under the Chapter 70 program and agreed with the assessment that the cut represents the biggest cut in state school aid of the recession cycle.

While targeting school aid that was insulated from cuts this fiscal year and in the last one, the House committee budget sustains existing state funding levels in other smaller local aid programs, including payments in lieu of taxes, regional school transportation, and funding for local public libraries.

The budget includes $1.4 billion in spending cuts and savings, including $300 million derived from a debt restructuring proposal endorsed separately by the committee. The panel also voted for a six-point bill aimed at easing pressure on municipal spending, in part by allowing local systems to defer rising pension system liabilities, authorizing a municipal early retirement incentive program, and promoting shared public safety resources.

With health care cost increases at the forefront of public debate, the committee budget allocated nearly $9 billion for Medicaid health insurance coverage to 1.2 million enrollees, a $601 million increase to fund a projected 3 percent increase in enrollment. Separately, the bill includes $838 million for Commonwealth Care, the subsidized insurance program that serves 170,000 individuals and was at the core of the state’s 2006 health care reform law.

Murphy said the bill includes $111 million in state savings under the MassHealth program – the bill reduces rates for providers and “restructures” health services, for instance - and reduces spending on an immigrant health insurance program by $15 million, to $60 million, while capping enrollment in that program. The budget spends $160 million in one-time federal funds in connection with a recent announcement regarding prescription drugs.

Murphy called the budget “reasonable and balanced.”

The bill reduces spending in certain line items by $750 million, Murphy said, and includes no draws from the state's dwindling rainy day fund and no tax increases - Gov. Deval Patrick had proposed increases in taxes on candy and soda as well as a reduction in tax breaks enjoyed by the film industry.

Murphy said the bill includes $1.5 billion in one-time federal stimulus funds that the state may not be able to rely on in fiscal 2012. The budget also does not eliminate any tax exemptions, or tax breaks and credits, Murphy said.

"From a fiscal point of view, this is an improvement over the governor's budget," said Widmer, focusing his praise on the committee's decision to stop spending state reserve funds that he said will be needed in fiscal 2012.

"The cuts are going to be difficult but they're absolutely essential," Widmer said. Asked about the local aid cut, Widmer said, "They need to share in the pain, given our fiscal realities. Human services has borne the brunt of cuts to date."

Widmer said the debt restructuring plan was a "legitimate" attempt to take advantage of lower interest rates but said he would have preferred that the savings be socked away in the rainy day fund rather than spent.

Rep. Viriato deMacedo (R-Plymouth), the committee's ranking Republican member, said the committee budget cuts spending by $400 million more than Patrick's budget. He said he was pleased that the committee budget didn't include tax increases or spending from reserves.
"How they spend the 27.8 billion dollars, that's something that we're going to take a look at," deMacedo said. "Frankly, this isn't going to be the worst year. Next year is going to be the worst year. We're still operating off of $1.5 billion dollars of stimulus dollars that aren't going to be there next year."

Republicans will look at ways to address the local aid cut. "We didn't write the budget," deMacedo said. "We'll take a look and see if we have any different ideas to help address the local aid cut issue." When the budget hits the House floor for debate the last week in April, deMacedo said, observers will see "a lot of amendments." But he added, "There's not a lot of resources. You can only do what you can do."

The Plymouth Republican said he was more optimistic that Democrats will not add taxes to the committee budget, as they did last year, because, he said, people are hurting more this year than last year.

"Every day I run into a new person who tells me, 'Hey, I just got laid off.' . . . If they do go back to work, they're going back to work at far less money than they previously made."
Last year's major sales tax increase, he said, caused Massachusetts to lose business, and associated tax revenues, to New Hampshire retailers who are seeing more customers file in from Massachusetts.

"Everybody is watching every dime," he said. "The Dunkin’ Donuts, which used to be the place to go, is not seeing the business that it used to see because people are now making coffee at home."

After the committee vote on the budget, House members headed into a closed caucus to discuss the bill. Murphy plans a 1 p.m. press conference to discuss the spending plan.