Massachusetts has weathered fiscal storm better than most, but more pain ahead
There’s good news and bad news for residents fed up with ringing in another New Year with a state budget crisis.
On the bright side, Massachusetts is far from alone. In fact, 49 states plus Puerto Rico have experienced budget gaps in fiscal 2010, according to a budget expert with the National Conference on State Legislatures.
But the downside is that budget gaps and the funding cuts necessary to solve them will be part of the routine for at least another two years, even as the economy recovers.
Right now, the state is looking at a projected $3 billion deficit in fiscal 2011, which starts July 1, and is still working to shore up this year’s budget, which will probably require a combination of making mid-year budget cuts and using one-time monies, like stimulus funding and the state’s ‘‘rainy day’’ reserves.
Budget analysts who have studied the situation across the country say the problem and the solutions in Massachusetts are not unlike those seen in the majority of states, with the Bay State faring far better in many cases.
Across the country, states faced a cumulative budget shortfall of $145.9 billion when working on their current budgets, according to a recent report from the National Conference of State Legislatures. And the total budget gap for all states is predicted to be even greater in fiscal 2012 than 2011, according to the report.
In Massachusetts, the solutions have included increasing the state sales tax and relying heavily on stimulus funding.
In the past year, seven other states and the District of Columbia also passed sales tax hikes. Increases are pending approval in four other states.
But the more controversial piece has been the stimulus money. Gov. Deval Patrick put $1.657 million of it toward the current budget this summer, and he’s now proposing another $62 million to help close a mid-year gap.
He’s not the only governor to use stimulus money that way, and a large portion of it was intended to do just that: provide a crutch for state finances.
Of the $8.8 billion available to states in the flexible “fiscal stabilization” portion of the stimulus act, the second-largest chunk (21.5 percent) is expected to address shortfalls, behind maintaining public safety budgets, according to a breakdown by the Council of State Governments.
But stimulus money is only available for two years. After that time, experts warn that money is gone, it might leave an even bigger problem for states.
“Stimulus funds have been incredibly useful to states but they need to plan now for the absence of them,” said Todd Haggerty, a fiscal policy associate with the National Conference of State Legislatures.
Many watchdog groups have been critical of the state’s handling of stimulus money.
Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, has been a vocal critic of choosing what he calls short-term fixes over long-term plans.
“You take advantage of the opportunity in a fiscal crisis to make changes that will help over the long term,” he said.
Haggerty said he’s seen many states take advantage of the recession to consolidate agencies and establish commissions to study the effectiveness of government. He said Massachusetts stands out for passing its transportation reform act this year, which consolidated the MBTA, MassPort, MassHighway and the Turnpike Authority into one super agency.
Widmer pointed out that he believed the state responded to its problems quicker than others.
“The fiscal 2010 budget got to the governor on time, a sharp contrast to other states where’s it’s been going on for months and months and months,” he said.
Some more good news came from a recent report by a Boston-based think tank, the Beacon Hill Institute, that ranked Massachusetts first in competitiveness.
The study has its naysayers, including Widmer and State Treasurer Timothy Cahill.
“People may look at our study and say, how can this be?” said Frank Conte, project manager for the report. “But we’re looking at a different measure, at how well Massachusetts generates income and manages to grow gross state product year in and year out.”
It looked at over 40 factors to rank all the states, including infrastructure, environmental policy, technology and fiscal policy.
“I’m not discounting any problems here, but if we are careful and attentive to our strengths, we are well-positioned to come out of the recession and not lag behind the national economy,” Conte said.
Patriot Ledger writer Nancy Reardon may be reached email@example.com