Patrick takes campaign hits over new budget gap

Gov. Deval Patrick’s campaign rivals pounced Thursday night on news that the administration could face nearly $300 million in red ink this fiscal year due to recession-driven increases in state programs, including health care, calling it evidence of poor budget stewardship.

Treasurer Timothy Cahill, running as an unenrolled candidate for governor, said the disclosure, reported by the News Service Thursday afternoon, represented “further evidence that we have a broken and mismanaged health care system in this state.” Cahill added, “I warned on Tuesday that health care spending in Massachusetts was blowing a hole in the state budget. I’m glad that the governor’s office is finally acknowledging that fact.”

Republican candidate for governor Charles Baker lumped Cahill in with Patrick, even though Cahill has no direct control over the state budget, in alleging their “total incompetence when it comes to the Commonwealth’s budget.”

Baker said, “In the face of the worst economic times since Governor Dukakis, their failure is intolerable. Our state’s budget should be the top priority for the Governor and the Treasurer yet time and time again unanticipated spending and rising costs catch both of them off guard. Their lack of leadership on the budgetary process is unacceptable and the taxpayers and business owners of Massachusetts deserve better.”

Unanticipated spending on MassHealth and other caseload-related programs have spurred the rising costs, which state budget officials estimated will range from $195 million to $295 million, said Administration and Finance Secretary Jay Gonzalez.

Both the House and Senate budget chiefs said the new chasm pointed toward a rejection of Patrick’s initial budget-balancing strategy of pulling $175 million from the stabilization account for fiscal 2011.

“How are we going to [use the] Rainy Day Fund next year if we care going to need it to get out of this year?” Sen. Steven Panagiotakos said in a telephone interview. “Knowing what we know now, it would be imprudent to use the Rainy Day money … any of it.”

House chair Rep. Charles Murphy said he was “on board” with opposition to fiscal 2011 stabilization fund draws baked into the budget.

According to Gonzalez, $130 million in prescription-related “clawback payments” from Washington will allow for $80 million preserved in the stabilization account this year, and $50 million next year. State finance officials eye the fund with care in part due to its importance to credit analysts who have called it one of the Commonwealth’s strengths, but warned against further depletion after the fund has been drained of hundreds of millions.

Both lawmakers said they wanted to learn more about the problem before reaching gap-filling strategies. Panagiotakos said he thought budget reductions in fiscal 2010 would be “difficult” since there are only about three months left in the fiscal year and most of the budget has already been spent.

“At this point, I think it’s kind of early [to say] how we’re doing to do it until we know what the issue is,” Murphy said.

The rising red ink will likely force the state to deploy some array of painful late-year budget cuts, new withdrawals from the already heavily depleted stabilization fund, and tightened spending management in the executive agencies.
"We've gotten information in recent days that suggests we have an additional $195 million to $295 million dollar exposure for this year," Gonzalez told the News Service.
Gonzalez said the administration discovered the problems during routine budget review, and planned to bring the information to bondholders in a supplementary information statement Friday.
"To the extent we have a deficiency, we'll act promptly to deal with it," Gonzalez said.

According to the information statement, the Patrick administration through the beginning of March was tracking $426 million “in additional funding that might be necessary to support state programs and services,” including costs associated with special elections and winter road-clearing. The statement referenced a mini-budget Patrick has filed to address some funding needs and said the administration expects to file another supplemental budget.

Asked if the recurring budget woes signaled mismanagement, Panagiotakos called it instead an instance of the recession sending unexpected numbers of people into state-proffered programs like MassHealth and transitional assistance.

Mid-month revenue figures released Thursday showed March tax revenues had fallen $125 million below the same period last year, a drop revenue officials attributed to heavy decreases in corporate and business taxes, particularly an excise tax on financial institutions. Withholding taxes, siphoned from paychecks, had climbed slightly.

Gonzalez said Thursday that increased use of tax credits, including the controversial sweetener for the film industry, accounted for much of the fall-off in corporate and business tax receipts.