Bill Manzi.com

The Commonwealth of Massachusetts saw revenues come in for February $86 million dollars below the estimates, leading to a renewed warning that the FY2009 budget may be as much as one billion dollars out of balance. The alarm was sounded by the Senate Chair of Ways and Means, Steve Panagiotakos. From the Globe:

Senator Steven C. Panagiotakos, chairman of the Ways and Means Committee, said that tax revenues have fallen well below expectations for the first few months of the year and that the fall-off could be a harbinger of a major slump between now and June 30, the end of the state’s fiscal year

“We have a potential $700 million to $800 million deficit facing us,” said the Lowell Democrat. “It’s a real possibility. It has the potential to come close to $1 billion.”

His estimate is nearly twice as high as the current figure circulating around the State House. It also augurs for an almost unmanageable deficit in the next three years that can only be closed with a combination of painful spending reductions and new sources of revenue, primarily from broad-based taxes such as income and sales levies, said legislative leaders and budget specialists. The local aid account, which Patrick has already trimmed, could face even deeper cuts next year than proposed as part of his budget.

Panagiotakos also sees a major problem in FY2010, with the deficit possibly being as high as $4 billion. At that number the State will be in a position where they will be forced to cut all accounts below levels now contemplated, including local aid.

Panagiotakos and other legislative leaders are also predicting that the gap between expenses and revenues in the next fiscal year could exceed $4 billion, a level that can only be dealt with by finding new revenues sources and use of the state’s dwindling rainy day fund if Draconian cutbacks in state service are to be avoided. “The Legislature faces a huge dilemma,” Widmer said. “With no new taxes, they would have to decimate state programs. Even with a major tax increase, there will be major cuts.”

House Chair of Ways and Means Charlie Murphy was more guarded in remarks, indicating that he preferred to wait until March and April numbers came in before reaching the conclusions that Senator
Panagiotakos has reached. But Michael Widmer has been sounding this alarm for some time, with little reaction from Beacon Hill. Widmer called the Governor’s revenue estimates for FY2010 off by $1.2 billion dollars a month ago. That apparently has worsened.

The Legislature is between a rock and a hard place. Will it take the necessary steps to drum excess costs out of the system? Will it take a real look at revenue? The rubber is getting ready to meet the road.