There's bad news, and there's bad news!

From the "nothing but bad budget news " department, here's an early look at just how bad the current fiscal years budget deficit  for Massachusetts might be. It also means that, given this is an election year, the information is being low-balled and does not reflect how the actual potential deficit will turn out to be in the end.

This is NOT good news for Fall River. Have a nice day Mayor Sylvanagan! How's that casino thingy workin' out for ya?!

BUDGET GAP ESTIMATES GROW

By Jim O’Sullivan
STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, AUG. 31, 2010…….The Senate’s top budget author has elevated high-end projections for the state’s budget deficit this fiscal year, pointing to executive agency estimates through early August that showed surging demands on already strained finances that could result in a gross $600 million deficit in Medicaid accounts.

Rising welfare and homeless shelter caseloads are further burdening the budget, even as the state has qualified for $250 million in kindergarten-through-high school federal aid and received $450 million, less than initially expected, in federal aid, said Senate Ways and Means chair Steven Panagiotakos.
House Ways and Means chair Charles Murphy agreed, saying, “Suffice it to say, there are deficiencies out there that were unanticipated.”

Lawmakers were reluctant to estimate an overall deficit in the current spending blueprint, less than two months old.

“It’s difficult to say what the total deficiency is,” Murphy said.

With federal reimbursements, the potentially $600 million hole in the roughly $10 billion Medicaid budget could net the state a loss of about $240 million, chewing up much of the $450 million in Federal Medical Assistance Percentages (FMAP) assistance authorized in Washington earlier this month, Panagiotakos said.

Additionally, the state is looking to balance its books for the fiscal year that ended June 30. Panagiotakos said he hoped to address both fiscal 2010 and fiscal 2011 shortfalls in one spending bill by Sept. 19.

“We’re trying to do both in one vehicle,” he said. Murphy agreed and said a second round of fiscal 2011 supplemental spending would likely emerge “in several months.”

New estimates show a $20 million gap in homeless shelter “emergency assistance” accounts and a $5 million shortfall for parks and beaches under the Department of Conservation and Recreation.
Without that funding, Panagiotakos said, the state would have to close “iconic parks” and delay opening of pools and beaches next summer.
DCR officials said it was “too early to speculate” whether next summer’s services would be affected by the budget.
“Next’s year’s schedule of openings hasn’t been set yet,” DCR spokeswoman Catherine Williams emailed. “We are in the process now of finalizing our spending plans for the year. DCR is reviewing its existing and projected resources while exploring ways to continue to provide critical programs and services in this challenging fiscal environment.”
With the $250 million in Race to the Top funds the Bay State is slated to receive spread over two years for kindergarten-through-high school, Panagiotakos said the state should transfer other federal aid into higher education spending. The state had earlier allocated $76 million from the federal stimulus into K-12.
“With them getting this extra $250 million and a significant cut in higher ed, I think it’s prudent that we take a good portion of that $76 million and put it back into higher education,” Panagiotakos said.

Wary of a steep drop in recession-era federal help in fiscal 2012, when a $2 billion structural gap looms, budget writers have been publicly hopeful that the influx of aid from Washington over the last month would allow some replenishment of the Rainy Day Fund, once robustly above $2 billion but scheduled to sink to $556 million by the end of fiscal 2011.

Panagiotakos said the escalating demands on the stream of federal money made it unclear how much money could be diverted to savings. Some of the newly authorized cash will backfill spending programs that were cut earlier this year when prospects for the FMAP money appeared dim. Even then, budget writers were banking on close to $700 million, instead of the $450 million ultimately approved.

That pool of cash already faces an array of demands from other corners in state government. For instance, when the additional FMAP hung in doubt, Patrick cancelled parts of a legislative spending blueprint that conditionally used the federal aid to support $56,250 for radiological emergency response, $170,517 for a prison industries and farm program, and $64,600 for a foster care and adopted fee waiver.
“On top of that, we have these other newly projected shortfalls,” Panagiotakos said.

July’s state tax revenues grew 3 percent from the year before, which Patrick administration revenue officials said reflected economic growth. Growth trends in tax receipts could dilute some of the red ink, but will likely not offset the problems incurred by a still-sluggish economy. August tax figures are due by the end of this week.
Analysts said the caseload hikes essentially handcuffed Beacon Hill into choosing whether to make targeted spending restorations or banking the remainder for future shortfalls.

“The spending’s only going to get worse, not better, in terms of the underfunding,” said Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation. “The caseloads, the pressure’s obviously only growing, not lessening.”

Patrick last week downplayed the problems posed by the mounting pressures on state coffers. He said, "Every year with the programs that depend on caseload - every year - there is uncertainty, and with the economy being what it is, there's been … even more pressure than usual on Medicaid and other services for people who are in need. But we have successfully managed those uncertainties for each of the last four years, and we will continue to do so."

Aides said the administration planned to file a supplemental budget soon
The fiscal 2011 budget is balanced $100 million in state Rainy Day Fund withdrawals, and $95 million in a suspended statutory carryover of General Fund cash. Prior to the authorization of the $450 million, the budget relied in $809 million in federal stimulus money.

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08/31/2010

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