For Immediate Release - October 02, 2008

GOVERNOR PATRICK ANNOUNCES ACTION PLAN TO MANAGE STATE FISCAL CHALLENGES

Administration to lower FY09 tax revenue projections, cut spending and seeking lasting reforms

BOSTON - Thursday, October 2, 2008 - Responding to a softening local economy, Governor Deval Patrick announced he will cut spending and implement a series of cost-savings reforms, as part of a five-point Fiscal Action Plan, to address fiscal challenges confronting the Commonwealth.

The announcement comes as the Department of Revenue reports September revenues fell below benchmark, resulting in a $223 million revenue shortfall for the first quarter of the state's fiscal year, excluding one-time receipts. Given the likelihood revenues will continue to slow because of continuing economic deterioration, Governor Patrick has directed Administration and Finance Secretary Leslie Kirwan to revise the state's revenue estimate, which supports the budget, and to prepare for emergency spending cuts.

"We have prepared for these circumstances and are ready to implement our plans to assure a balanced and responsible budget," said Governor Patrick. "Now, we have to implement sensitive to both short-term challenges and the long-term interests of the Commonwealth."

Highlights of Governor Patrick's five-point Fiscal Action Plan include:

1. Revenue Adjustment and Spending Cuts

Secretary Kirwan will lower the consensus revenue number by October 15 th. Lowering the revenue figure automatically triggers the Governor's authority to make mid-year, so-called "9C" spending reductions within the Executive Branch.

Over the next two weeks, the Secretary will work with the Department of Revenue, and continue to consult with outside economic experts to determine what the new FY09 tax revenue estimate will be. The Governor will then make cuts throughout the Executive Branch consistent with the revised revenue estimate.

2. Spending Cuts Outside of 9C Authority

The Governor has asked the Legislative Leaders, the Chief Justice, and the other Constitutional Officers to reduce their spending voluntarily. As a benchmark, the Governor will reduce the budget in the Executive Office of the Governor by 7%.

3. Reforms and Restructuring

While cuts will be necessary to address the budget shortfall today, the Governor will seek additional reforms to improve the state's long-term fiscal health, specifically:

  • Dismantling the Turnpike Authority: The Governor has directed the Secretary of Transportation to prepare legislation to dismantle the Turnpike Authority, merge the remaining transportation agencies, and restructure the Big Dig debt.
  • Consolidating Agencies: Governor Patrick has directed Lieutenant Governor Murray to oversee an administration-wide effort to consolidate departments and agencies and their offices, and to develop means of delivering state services with the quasi-public agencies in a more efficient and coordinated fashion.

4. Pension Reform

The Governor has asked the Treasurer to work with the administration and the Pension Reform Commission to develop a legislative proposal to reform the state pension system and the Massachusetts Bay Transportation Authority (MBTA) pension system.

5. Containing Health Care Costs

The administration will accelerate plans to contain and ultimately reduce the costs of health care in the Commonwealth.

Anticipating potential budget challenges several months ago, the Patrick-Murray Administration has already implemented cost savings measures across agencies through spending and hiring controls, the suspension of merit pay raises and a shared responsibility health care solutions package.

"The downturn in the national economy will affect us all, squeezing the budgets of households, businesses and the Commonwealth alike. In demanding times like these, we share not only the burdens caused by national economic trends, but we also share the responsibility to address this challenge in a manner that is both fiscally responsible and that reflects our values as a Commonwealth," said Lieutenant Governor Timothy P. Murray. "I commend Governor Patrick for his quick and decisive actions and stand ready to work side by side with him in the days and weeks to come to deal with this ongoing fiscal challenge."

"When the Governor signed the FY09 budget, he laid out a management plan to prepare agencies for potential cuts," said Secretary Kirwan. "My team has worked closely with each secretariat on implementing that plan. None of these cuts will be painless, and we realize there will be significant impacts on residents, but like everyone else, we must find places in these challenging times to cut back."

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