Matt Viser of the Boston Globe has a story in today’s Globe that outlines some of the hard realities facing State budget writers as they prepare for the new fiscal year. From the Globe:
As the sputtering economy sends shocks from Wall Street to Main Street, the reverberations are being felt on Beacon Hill, where key officials acknowledged yesterday that the signs are bad and the future may be even worse.
Treasurer Cahill announced that he will have to borrow short term to pay State bills.
State Treasurer Timothy P. Cahill said yesterday that, yet again, he must borrow hundreds of millions in short-term notes to pay the state’s bills – like a consumer using a credit card to make a mortgage payment.
All of this is set against some really difficult transportation and infrastructure issues:
All of this is set against the fact that the state already has the high est per capita government debt in the country – and now will be forced to borrow even more to keep a deteriorating transit system and its aging college campuses from completely crumbling.
“Every taxpayer and tollpayer in Massachusetts is overburdened at the same time as our infrastructure is about to implode,” said Senator Mark C. Montigny, Senate chairman of the Joint Committee on Bonding, Capital Expenditures and State Assets and a New Bedford Democrat. “We are headed for a much more dangerous time than people realize. We’ve got all these nasty variables converging at the same time.”
It appears that the state will try to fund this budget with stopgap measures, primarily a use of the rainy day fund coupled with some targeted tax and fee increases.
Moving forward, while few are talking about serious program cuts, a big increase in the cigarette tax, tightening corporate tax loopholes, and digging into the state’s rainy day fund are apparently the most viable means of balancing the next budget.
The rainy day fund is sizeable enough to achieve the goal this year, but with a massive structural deficit the day of reckoning is coming.
“We’re just teetering on the precipice,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a nonprofit budget study group that is funded by businesses. “I haven’t heard any real ideas.”
Cahill said he will be forced to borrow $400 million by Monday to fulfill the state’s obligations, including local aid and pension payments. The state has occasionally had to borrow before to meet short-term cash shortages – including $600 million in 2006 and $1 billion in 2007 – but never this late in a fiscal year.
“This to me is a wake-up call,” Cahill said. “I’m hopeful that it’s going to be a message to everyone in the [State House] that we’ve got to get spending under control. It’s not just enough to look for new revenue sources.”
The comfort level that some have achieved by authorizing spending without worrying about how to pay for it has now pushed the Commonwealth to the fiscal cliff. If there is no will or political desire to raise taxes then spending must be reigned in. The political stalemate that has allowed programs to move forward without adequate funding sources must be broken. Either we a a state and nation recognize that some spending is essential and must be paid for, or spending must be cut. The luxury of spending without the ability to finance that spending is now gone. Some strong medicine is coming.
Bill Manzi.com 
Your Honor,
I’m proud of you. A true conservative concept.
Now let’s do this at the town level. We got to get off the dole.
Jules
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Your Honor,
Just read Margery Egan’s column in the Herald on the prop 2 1/2 overrides.
A quote from that article reads,”Here go the towns again, guilt-tripping homeowners into thinking they’re cheap and mean and cynical (your opinion of me) when the real problem is no political courage on Beacon Hill or in Town Hall”.
All these thought I have expressed in these entries before.
Jules
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Jules,
I never said you were mean! I read the Egan column as well. I have urged on this blog the very things that Egan has raised, i.e. that the 70 percent poison pill that exists in the GIC Bill be removed. I have taken it a step further, calling for Mayors to have the same rights the governor has (over the State health plan) administratively over local health plans. Methuen’s pension system has voluntarily joined the State system of pension management. I have lobbied my Senator and Rep to do just that.
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Mayor,
I have a question relative to your comment on Methuen voluntarily joining the state pension system. I’ll preface this first by saying that I recognize that Methuen has done better than many other cities/towns with their investments which are just marginally below the state’s expectations, but still considered underperforming.
However, I’m confused as to the uproar over liquidating assets before turning those monies over to the state system. Why would the town expect that the state would allow it to continue to invest in underperforming investments, by simply placing those underperformers under the state umbrella. I wouldn’t expect that the same investments would do any better under the auspices of the state, but perhaps I don’t have a clear picture as my information only comes from an earlier E-T article….for what that’s worth.
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The rub on the investments is that there may be some financial penalties for early divesting. And since there is a mix of investments some of the more solid performers would necessarily need to be divested as well. However the goal of the switch is to convert an overall underperforming group of assets over to the much better performing state plan. That requires liquidation. Methuen’s Retirement Board is independent of local government, although we fund them.
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Your Honor,
My parenthetical statement was associated with the term cynical and none of the others.
To clear up my definition of cynical as related to our discussion: I associate cynical as associated with predicting an outcome that has little chance of happening.
For instance; If I say you will raise taxes next year and you would say I’m cynical.
But, what if you do raise taxes. Am I a prophet?
By the way, I am not upset by your use of the term, but I will have fun with it.
Jules
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