Governor Deval L. Patrick
FY13 Budget Adjustments Press Conference
Tuesday, December 4, 2012
As you know, economic growth all across the country has slowed. While on many measures Massachusetts is outperforming the nation as a whole, we have not been spared the impact of the slowdown. State revenues were below expectations through October by some $256 million. November results are in now, and I am pleased to report that collections for the month are above benchmark; but not enough to cover the previous months' shortfall or to convince me that there is no risk of additional revenue shortfall this fiscal year.
So today, after consulting with Secretary Gonzalez and our outside economists, we are revising the FY13 revenue estimate downward by $540 million.
We have faced challenges like this before and have each time taken a balanced, fiscally responsible approach to dealing with them. One such policy is to solve these gaps with no more than half the solution coming from one-time, non-recurring resources. This policy has served us well, and is one of the reasons the credit rating agencies have given us such positive, consistent reviews. We will take the same approach now.
So, using my so-called 9C authority, I am today cutting Executive Branch spending by $225 million or about 1%. What that means is that a number of new investments for FY13 projects and programs will be reduced or eliminated, across a range of government services. Secretary Gonzalez will go over these specifics with you in as much detail as you want. Members of the public can check on specific programs at www.mass.gov/anf.
But let me say now that there will be no reduction in Chapter 70 funding for the public schools.
About 700 planned and funded positions will be eliminated. This accounts for about $20 million of the savings. Implementation actually began with hiring controls we imposed in October. With these additional staffing cuts, the total state workforce will be down more than 6,000 positions from pre-recession levels.
I am also filing legislation today for the authority to make a similar 1% reduction in the budgets of the Judiciary, the Legislature, other Constitutional Officers and non-Executive departments, for an additional savings of approximately $25 million, and a 1% across the board reduction to unrestricted local aid, for a further savings of $9 million. I should say in the latter case, if lottery profits exceed the amount currently budgeted in this fiscal year, and they are on trend to do so, we are proposing that all excess proceeds be committed to restoring unrestricted local aid.
In addition to spending cuts, we propose to use $200 million from the Rainy Day Fund. That is also consistent with prior policy and still leaves a projected year-end balance of $1.2 billion, one of the highest in the country.
Thanks to our high credit ratings, borrowing costs are below original estimates. Additionally, the Health Connector Authority was even more successful than anticipated in cutting costs. The savings in these accounts amount to $113 million. We propose to apply $20 million of that to address the revenue shortfall, and the remainder to meet known but unforeseen costs for such things as Hurricane Sandy and a caseload increase in homelessness programs.
This plan is a sensible and prudent way to deal with the impact on state revenues caused by the recent slowdown in economic growth. And back upstairs, as I said, Secretary Gonzalez will go into as much detail as you like about both November collections and the plan we’re laying out to bring us in balance for this fiscal year.
But first, I want to add my voice to those calling for a comprehensive solution, by the end of this calendar year, to the fiscal cliff. Because by all accounts, that uncertainty, and the resulting slowdown in economic growth, is the direct cause of our budget challenges.
Economists agree that the fiscal cliff is keeping a tremendous amount of private capital on the sidelines. Business leaders I meet confirm that fact. The private sector will be unwilling to make the kind of investments that create jobs, grow state and federal tax revenue collections and contribute to a lasting economic recovery until Congress and the President come to terms on a solution. That solution should be balanced, with a combination of tax increases on the most fortunate and cuts to federal spending. Many of those cuts can be achieved by sensible reforms, including to programs like Medicaid and Medicare.
The cost of inaction is immense. If Congress fails to address the fiscal cliff, and the sequester goes into effect, state budget resources could slip in Massachusetts by another $300 million this year, and by up to $1 billion next fiscal year. That result can and should be avoided, for the sake not just of state and local governments but for all Americans.
Until then, we must act. Just as we have throughout the course of this administration, we face our challenges together and we make choices. That's why Massachusetts has weathered the global economic recession better than most other states, why our long-term fiscal footing is strong, and why we have achieved the highest credit ratings in the state’s history. Even with today’s adjustments, virtually all affected programs and services are receiving no less funding than they did last year. And most important of all, we are still making record investments in education, innovation and infrastructure – a proven strategy to grow jobs, attract private sector investment and, above all, make Massachusetts better for this generation and the one to come.
Like the ones before, the days ahead will be full of challenge and opportunity. Cutting budges is no abstract exercise for me; I know and I see the people these decisions affect. Still, I am confident that we’re up to the challenges and also ready to seize the opportunities. I look forward to working with the Legislature to get prompt action on these measures and thank the people throughout state government for sticking to their mission and sticking by the people we all serve.
Now, I am happy to take your questions.