Mass. Gov. Offers Smaller Budget

Massachusetts Gov. Deval Patrick Wednesday released a $30.5 billion fiscal 2012 spending plan with $570 million less spending than the current fiscal year’s operating budget.

This is the first budget proposal of Patrick’s second term as governor. It uses $385 million of one-time revenues, including $200 million of rainy-day funds, a decrease from previous years. Massachusetts used $3.2 billion of one-time revenue in fiscal 2009 during the national recession with the help of federal stimulus funds. Massachusetts’ fiscal year begins July 1.

Patrick’s fiscal 2012 budget proposal does not include restructuring debt to push out maturities to future years. The state restructured $300 million of debt to ease debt-service costs in the current fiscal 2011 budget.

“I think this budget is a fiscally responsible budget,” Jay Gonzalez, secretary of the Executive Office for Administration and Finance, said in a telephone interview following the governor’s press conference on his budget plan.

“The $385 million is a sustainable use of one-time resources based on our tax-revenue trend,” he said. “So we’ve eliminated our structural deficit, which investors should be happy about.”

The state will pay about $2.22 billion in debt-service costs in fiscal 2012, about $255 million more than what it paid in fiscal 2011.

To help absorb a loss of $1.5 billion of federal stimulus funds and deal with rising health-care costs, the administration proposes a $65 million cut in local aid to municipalities, reductions in social-service programs, and the elimination of 900 positions on top of 5,900 reductions to the state’s payroll since October 2008.

“This is a proposal to invest in critical areas that will help us strengthen our economy and expand opportunities in the near term and position us for the strongest recovery possible in the medium term,” Patrick said during the press conference. “It challenges us to do differently some of those things government ought to do.”

The Patrick administration anticipates utilizing its entire $1.75 billion borrowing capacity for fiscal 2012, according to Gonzalez.

In addition, the state expects to issue $378 million of Commonwealth Transportation Fund bonds and $115 million of grant anticipation notes to help finance its accelerated bridge program, which aims to upgrade and replace deficient bridges throughout the state.

The CTF bonds are special obligation bonds secured by revenue from the state’s 21-cent gas tax and registrar of motor vehicle fees.

The state issued its first-ever CTF bond deal in December.

The anticipated borrowings, along with federal funds and remaining stimulus funds for infrastructure projects, will bring the state’s capital spending to $3.6 billion in fiscal 2012.

“We will adapt over $3.6 billion in capital projects, continuing a record level of investment in the kinds of long-neglected infrastructure projects that enable economic growth and improve quality of life,” Patrick said.

The governor is also proposing that one-time tax revenues and litigation settlements to the state that surpass $10 million go directly to Massachusetts’ stabilization fund so that it does not spend those funds or budget against it, Gonzalez said.

A withdrawal of $200 million from the stabilization fund in fiscal 2012 would leave the state with $569 million remaining in its rainy-day fund by the end of fiscal 2012.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, an independent fiscal think tank, questioned the administration’s goal of holding growth in Medicaid spending to $100 million next year when the state typically has faced annual increases of nearly $1 billion.

“That would be a Herculean achievement and probably beyond the capacity for any state to achieve,” Widmer said.

Massachusetts has more than $17 billion of outstanding debt. Fitch Ratings and Standard & Poor’s rate the state AA-plus and AA, respectively. Moody’s Investors Service assigns its Aa1 rating.

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