Wednesday, January 28, 2009

Governor Patrick releases House 1 Budget Recommendations

Citing the current economic downturn and declining state revenues, Governor Deval Patrick this morning released his House 1 budget. The $28 billion budget raises registry fees and meals and hotel taxes, draws from the state's rainy day fund and expands the state's bottle bill. The governor also reaffirmed a recent plan to cut $128 million from this year's local aid and $220 million in the next fiscal year.

Flanked by members of this cabinet at the State House, Patrick outlined the "multi-pronged solution" including a fix to the current FY 2009 budget. One part of that effort includes the elimination of sales tax exemptions on certain foods and beverages such as candy and alcohol. This change is expected to generate $25 million this year and $121.5 million next year with funds to be earmarked for public health and wellness programs.

Throughout the press conference, Patrick stressed his efforts to strike a balance between competing interests, long-term goals and commitments and the sharp downturn in revenues.

"The national recession is inflicting serious pain across Massachusetts, from household budgets to the state's balance sheets, and like many residents throughout the Commonwealth, we have to make do with less," said Governor Patrick. "At the same time we also have opportunities. The Economic Recovery Plan leverages reforms and responsible budgeting that could help alleviate the mounting pressure on our communities now and in the future."

Patrick said the the budget may call for more layoffs of state employees. He noted that some programs faced severe reductions "to prevent deeper cuts" down the road.

A portion of the governor's proposed budget relies on federal aid dollars yet to be approved by Congress. The Governor said he was optimistic that the Obama administration would provide states with funds from the stimulus package.

Patrick also unveiled a second Municipal Partnership Act which calls for the an increase in the meals tax and an option for cities and towns to levy their own 1 percent sales tax. It also calls for the ability of local government to tax telecommunications property, a measure that will raise approximately $26 million according to budget documents. The act urges cities and towns to shift more of their retirees to Medicare, a move which won legislative approval last year.

Patrick also suggested that cities and towns could achieve efficiencies from regionalization particularly in the area of contract advertising.

"I anticipate there will be vigorous debate," the governor told reporters. "But endless debate is not acceptable. We need action."

During a question and answer session, Patrick said the state will move to direct all capital gains tax revenue to rainy day fund. In the past, capital gains tax revenue, because of their volatile nature, have made estimates used for planning budgets unpredictable and complex.

New revenue for the FY2010 budget include proposals for:
Meals and hotel taxes ($150 million from a 1-cent statewide increase dedicated to taking the sting out of local aid cuts and $200 million for a 1-cent local option)

Commonwealth Wellness Fund: Earmarking $121.5 million for public health initiatives by eliminating sales tax on alcohol, candy and sweetened beverages.

Expanding the state's bottle bill: Earmarking $20 million for recycling and water and and sewer rate relief by including once exempt beverages such as water, juice, sports and coffee-flavored drinks into the bottle bill program.

Registry fees: Earmarking for the state highway fund an expected $74.5 million from "updated and consolidated Registry of Motor Vehicle fees."
More on the governor's budget recommendations here, here and here.

Press coverage Globe/AP; Herald and Boston Business Journal

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