Doomsday coming in 2012?

Forget the Mayan prophecy of doom for December 2012. The far more likely catastrophe, according to a recent report from the Massachusetts Taxpayers Foundation, is a financial one that will hit with the state budget some months earlier, when the fiscal 2012 budget is put together. MTF warns that by constructing a fiscal 2011 budget that relies heavily on one-time federal funds, Gov. Deval Patrick is setting the state up for serious and widespread budget cuts a year later.

The report notes that Mr. Patrick’s 2011 budget of $31.7 billion is 4.2 percent ahead of 2010, and very close to the pre-recession figures outlined for the original 2009 budget. The difference, of course, is that it is built on forecasted tax revenues of just over $19 billion, a whopping $2.35 billion below the original 2009 forecast.

Such budgeting makes little sense to us. Sure, through the use of one-time federal stimulus funds, drawing down the stabilization fund, and making modest cuts to many agencies, as well as local aid, the governor should be able to present a budget that works, at least in the short term. But long-term sustainability is doubtful.

MTF warns that withdrawing $175 million from the stabilization fund will leave the balance below $500 million, which could lead to a downgrade of the state’s credit rating. Moreover, it notes that while federal stimulus aid must be spent in the 2011 fiscal year, “…it is not responsible to use other one-time funds to support spending that cannot be sustained in 2012.”

Of course, Mr. Patrick is not the only one shaping the fiscal 2011 budget. The House Ways and Means Committee on Wednesday approved a $27.8 billion budget that includes deeper spending cuts than Mr. Patrick’s plan, and preserves the existing tax credits and exemptions the governor would eliminate. But even the House plan includes painful cuts to local aid.

It is likely that the bottom line on the 2011 state budget will lie somewhere between Mr. Patrick’s numbers and the House figures, and that it will please no one. But the reality is that state government has spent beyond its means for far too long. Tax revenues have repeatedly fallen short of the administration’s expectations in recent months, even as costs for everything — including the state’s universal health coverage law — continue to rise. Yet Mr. Patrick’s current budget assumes 5 percent annual growth that may not occur even if a recovery takes hold.

In short, the administration needed to serve up even more bitter fiscal medicine in order to close anticipated gaps next year. It’s not too late for them to move in the direction of the House version, which represents a more realistic approach. Papering over a financial crisis might help win an election this fall, but it will prove a hollow victory indeed if it leads to a fiscal calamity in the governor’s next term.

Source: www.telegram.com