Responding to a softening local economy, Governor Deval Patrick announced he will cut spending and implement a series of cost-savings reforms, as part of a five-point Fiscal Action Plan, to address fiscal challenges confronting the Commonwealth.
The announcement comes as the Department of Revenue reports September revenues fell below benchmark, resulting in a $223 million revenue shortfall for the first quarter of the state’s fiscal year, excluding one-time receipts. Given the likelihood revenues will continue to slow because of continuing economic deterioration, Governor Patrick has directed Administration and Finance Secretary Leslie Kirwan to revise the state’s revenue estimate, which supports the budget, and to prepare for emergency spending cuts.
«We have prepared for these circumstances and are ready to implement our plans to assure a balanced and responsible budget,» said Governor Patrick. «Now, we have to implement sensitive to both short-term challenges and the long-term interests of the Commonwealth.»
Highlights of Governor Patrick’s five-point Fiscal Action Plan include:
1. Revenue Adjustment and Spending Cuts
Secretary Kirwan will lower the consensus revenue number by October 15th. Lowering the revenue figure automatically triggers the Governor’s authority to make mid-year, so-called «9C» spending reductions within the Executive Branch.
Over the next two weeks, the Secretary will work with the Department of Revenue, and continue to consult with outside economic experts to determine what the new FY09 tax revenue estimate will be. The Governor will then make cuts throughout the Executive Branch consistent with the revised revenue estimate.
2. Spending Cuts Outside of 9C Authority
The Governor has asked the Legislative Leaders, the Chief Justice, and the other Constitutional Officers to reduce their spending voluntarily. As a benchmark, the Governor will reduce the budget in the Executive Office of the Governor by 7%.
3. Reforms and Restructuring
While cuts will be necessary to address the budget shortfall today, the Governor will seek additional reforms to improve the state’s long-term fiscal health, specifically:
Dismantling the Turnpike Authority: The Governor has directed the Secretary of Transportation to prepare legislation to dismantle the Turnpike Authority, merge the remaining transportation agencies, and restructure the Big Dig debt.
Consolidating Agencies: Governor Patrick has directed Lieutenant Governor Murray to oversee an administration-wide effort to consolidate departments and agencies and their offices, and to develop means of delivering state services with the quasi-public agencies in a more efficient and coordinated fashion.
4. Pension Reform
The Governor has asked the Treasurer to work with the administration and the Pension Reform Commission to develop a legislative proposal to reform the state pension system and the Massachusetts Bay Transportation Authority (MBTA) pension system.
5. Containing Health Care Costs
The administration will accelerate plans to contain and ultimately reduce the costs of health care in the Commonwealth.
Anticipating potential budget challenges several months ago, the Patrick-Murray Administration has already implemented cost savings measures across agencies through spending and hiring controls, the suspension of merit pay raises and a shared responsibility health care solutions package.
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