State cuts to spare schools, local aid
Officials also say no layoffs are planned
Governor Maura Healey officially announced Monday that due to lower-than-expected tax revenue collections, the administration is cutting $375 million in spending, slashing hundreds of millions from programs that provide outreach for seniors, behavioral health supports, homeless shelters, prostate cancer research, and more than 60 others.
In a letter to lawmakers, Healey said cuts to the state’s $56 billion spending plan for fiscal 2024 won’t impact school funding or local aid, nor are state officials planning to lay off any government employees. Budget officials plan to start cutting over the next few days, and don’t anticipate further cuts this fiscal year, which ends June 30.
Healey officials also confirmed, as previously reported by the Globe, that the administration will slice in half funding set aside for dozens of local earmarks as part of the spending cuts and downgrade the amount of tax revenue expected this budget year by $1 billion.
The cuts announced Monday were prompted by a shortfall of tax revenue, which is running $769 million, or about 4 percent, behind projections midway through the current fiscal year. December marked the sixth successive month that saw tax revenue fall below what state officials expected.
Matthew Gorzkowicz, the secretary of the Executive Office for Administration and Finance, said despite the dreary news, taxpayers should see the news as “a belt tightening.”
“We don’t see this as a recessionary environment,” the state’s top budget official said. “This is about fiscal responsibility and making sure our budget remains in balance. We can’t spend what we don’t have.”
The spending cuts mark a reversal for the governor, who just weeks ago waved off the possibility of midyear cuts. Healey told the State House News Service last month — before the latest revenue figures came in — that she was not considering them.
The December revenue figures “really changed things for us,” Gorzkowicz said.
Gorzkowicz underscored that the cause for cuts is solely based on overpromised revenue projections, not spending on the emergency shelter system or changes made as part of a tax cut bill last year.
He also added the administration is making cuts instead of dipping into the state’s surplus funds, because that pot of money is “for extraordinary circumstances” in which revenues decline year over year.
Ultimately, Massachusetts is still in “a revenue growth environment,” albeit a slow one, he said. “Revenues aren’t meeting our expectations, but they are still growing.”
State officials also said Monday they have reached a consensus revenue forecast for next fiscal year, which falls $208 million below the revenue figure it based this year’s budget on.
The consensus figure provides a basis for expected tax revenue that both the administration and Legislature use to craft their upcoming budgets for fiscal year 2025.
The figure estimates there will be enough money from the so-called “millionaire’s tax” to support $1.3 billion in spending on education and transportation — a $300 million increase over last year’s budget.
“Our consensus revenue number is essentially flat in terms of new growth,” Gorzkowicz said Monday, noting that while the economy is growing, it is growing slowly.
Some people affected by the cuts hope there aren’t longerterm repercussions.
The administration plans to slice $1.3 million from the state’s $9 million tourism budget. Martha Sheridan, chief executive of the Meet Boston tourism bureau, said she hopes that’s the only hit to that line item. She noted state hotel tax revenues rose about 9 percent in the first five months of the fiscal year compared with a year ago, underscoring the fiscal benefits to supporting the tourism sector.
“Obviously tourism is helping the bottom line for the Commonwealth,” Sheridan said. “But we certainly understand, in circumstances like this, these things need to happen.”
The 66 programs to face cuts include a $294 million reduction in MassHealth’s fee-for-service payments. An administration official said there are no eligibility changes for the state’s public insurance, but that the ongoing redetermination effort has eliminated more people from MassHealth enrollment than expected.
Another $55 million will be cut from the Department of Development Services. The majority, $35.4 million, will come from money allotted to residential care, one of the largest single cuts detailed Monday.
Leo Sarkissian, executive director of The Arc of Massachusetts, an advocacy organization for people with intellectual and developmental disabilities, said the impact of the cuts should be minimal, as much of the money would have been reverted back to the state anyway.
But regardless, he is concerned about them happening in a system that he sees as too slow connecting to people who are eligible for services but aren’t receiving them.
“This news can reduce hope on those still waiting to be assisted,” he said.
Lawmakers were also wary about the long-term impacts of the spending cuts, and what the cuts mean for the state’s fiscal landscape.
State Senator John Velis, a Westfield Democrat, said even though the state used a separate spending bill to pump more money into family shelters, Monday’s cuts are a “warning shot” about the financial pressures wrought by the influx of migrants into Massachusetts and the demands it has put on shelters.
”A dollar is a dollar. And state money is state money,” said Velis, who was among the National Guard members deployed to buttress the state’s shelter system during the fall. “I don’t know how I can continue to support more funding for [the shelter system] without some type of notion of: where does it end or how are we limiting it?”
The cuts didn’t come as a surprise to those who have been watching state revenue numbers closely.
The Massachusetts Chambers Policy Network had issued a warning in November to state budget writers to be more disciplined as they prepare their budget for the next fiscal year. The concern among the chambers of commerce: State general fund spending had risen by 27 percent between the 2018 and 2022 fiscal years, or nearly double the rate of inflation.
“To deal with a budget crisis, you either cut programs or you increase taxes. Neither one of them are good choices,” said Jim Rooney, chief executive of the Greater Boston Chamber of Commerce, and a member of the chamber network. “If you’re more disciplined about the rate of growth in the first place, you won’t run into these issues.”
Doug Howgate, president of the business-backed Massachusetts Taxpayers Foundation, said the Healey administration seems to be making the right choice by cutting local earmarks.
“It’s not to say these aren’t really good programs in many cases,” Howgate said. “But . . . when times are challenging and you need to make reductions, it makes sense to go after things that are not core government services.”
However, in the long run, these cuts might not be enough, with six more months of tax revenues to come in the fiscal year.
“We’re watching closely. This puts us in balance. But it’s not to say we can clap our hands and say we’re done with this year now,” Howgate said.