Massachusetts Lawmakers Approve $27.4 Billion Budget

Massachusetts lawmakers Friday approved a $27.41 billion fiscal 2010 budget that includes new sales-tax revenue to help bailout two state transportation authorities and capital gains tax reform that would reserve excess revenue for future economic downturns.

The spending plan is slightly less than the $27.97 billion fiscal 2010 budget proposal that Gov. Deval Patrick released in late January and about $760 million smaller than the fiscal 2009 budget. Fiscal 2010 begins July 1.

The $27.41 billion plan for fiscal 2010 is a product of earlier House and Senate budget measures along with the governor's budget proposal and includes $2.4 billion of spending cuts, $1.2 billion of federal stimulus funds, and $1.3 billion of new revenue, according to a House Ways and Means Committee presentation.

"This budget is a fair and appropriate compromise that puts the people and the needs of the commonwealth first," said Rep. Robert DeLeo and Sen. Steven Panagiotakos, the legislature's chief budget negotiators, in a press release. "It strikes a balance between budgeting with fiscal caution while still providing for the services and programs the people of Massachusetts deserve."

DeLeo and Panagiotakos chair the House and Senate Committees on Ways and Means, respectively,

Last week, both chambers approved a long-awaited transportation reform measure that now heads to Patrick's desk just days after he enacted a pension reform bill. Lawmakers are also working on an ethics reform initiative. The governor has said that he would veto any revenue-enhancement measure without reform legislation on those three issues: transportation, pensions, and ethics.

"For the legislature to enact a 25% increase in the sales tax without first passing a strong ethics bill goes against the pledge that the legislative leaders and I made, and that the public expects us to keep, to deliver all three reforms before new revenue," Patrick said in a statement.

"We know what to do. The House passed a solid ethics bill. The Senate's bill contains a good new idea regarding campaign finance. Legislative leaders should quickly agree to final ethics legislation that includes the strongest provisions from the House, the Senate and my original bill - including a gift ban and campaign finance reform. Without that, I will veto the sales tax."

While Patrick included a 19% gas-tax increase in his fiscal 2010 budget plan to help offset sluggish revenue collections and boost transportation funding in the state, legislators rejected that tax hike and instead, placed a 1.25 percentage point increase to the state's 5% sales tax in the budget that would generate $900 million of additional revenue per year.

Of the new sales-tax revenue, $275 million would go towards transportation, with the Massachusetts Turnpike Authority gaining $100 million which could prevent a July 1 toll increase if the agency's board on June 25 repeals the planned toll increase. The Massachusetts Bay Transportation Authority, which oversees mass transit systems in the Boston area, would receive $160 million to fill a deficit in the agency's fiscal 2010 budget, which also begins July 1. Regional transit authorities would gain $15 million from the sales-tax boost.

In addition to increasing the sales tax to 6.25%, the fiscal 2010 spending plan would allow cities and towns to increase their meals tax by 0.75 percentage points, generating a potential $61 million, and boost their hotel tax by 2 percentage points, for a possible $34 million of new revenue. Those additional revenues would help offset cuts to local aid.

To help the commonwealth with future budgets, the bill requires the state to set aside 50% of all growth in capital gains tax collections in its rainy-day fund. That initiative will help Massachusetts reserve excess funds during strong economic periods, with those funds then available when state revenues drop in recessionary environments. Another 1% of capital gains revenue growth would help pay down the state's roughly $13 billion in other post employment benefit liabilities.

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