Taxes and Budget Issues

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STATE HOUSE NEWS SERVICE

WITH HIS ANNUAL SPENDING PLAN for the fiscal year that begins in July due to the Legislature in just over three weeks, Gov. Charlie Baker on Monday said emergency cuts to the current budget are “likely” for the second year in a row, but like last year local aid is expected to be left untouched.

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Baker and his budget team have been tracking underperforming non-tax revenues and as much as $250 million in spending exposures in the fiscal 2016 budget as his administration weighs possible mid-year corrections to keep the state budget in balance.

While tax revenue collections year-to-date beat projections by about $73 million, the governor has indicated that higher-than-anticipated spending on other programs and services could require a paring down of agency budgets with six months remaining in the fiscal year, a trimming exercise that gets more difficult the later he waits to act.

“I think it’s likely we’ll do some 9Cs as part of this process,” Baker said on Monday. “We’re doing everything we can to make sure we don’t hit services people depend on and we’re certainly not going to…we’re going to stay away from cities and towns.”

Though he declined to characterize the size of the problem budget monitors in his administration are tracking, the governor said he has already shared a lot of information with legislative leaders and both sides are waiting to see December revenue totals before making any final decisions.

“I would expect that shortly we’ll be making some decisions with respect to that,” Baker said, when asked about the size and nature of the budget fixes he intends to initiate.

In November, revenue collections fell $55 million short of targets, but officials explained that $20 million to $30 million of withholding collections were deferred to December due to the timing of a new tax collection system roll-out. A spokeswoman for the Department of Revenue said December tax collection figures are due to be reported on Wednesday.

As for the fiscal 2017 budget proposal that Baker intends to file on Jan. 27, the governor said he agrees with House Speaker Robert DeLeo that there should be no new taxes or fees included in next year’s budget.

“The budget that we’re working on… is not going to include any new fees or taxes in it,” Baker said.

DeLeo reiterated a position taken by both himself and his budget chief Rep. Brian Dempsey that there would be no new taxes in the House’s fiscal 2017 budget proposal. The speaker said Monday that the middle class continues to struggle with the high cost of living in Massachusetts.

“I feel that, especially folks in the middle class, I think that when I’m around the area and I’m talking to folks they’re still having trouble just paying their expenses right now, whether it be their mortgage, whether it be their health insurance, school or whatever it may be. And quite frankly I think to try to ask them to bear a further financial burden through taxes or fees would just be a little bit too much for them,” DeLeo said.

Meet the Author Matt Murphy State House News Service

The governor also said he’s hoping to “ween” the state off its reliance of “excess capital gains” revenues to balance spending. Since taking office, Baker has twice partnered with the Legislature to suspend the practice of depositing all capital gains taxes in excess of $1 billion into the state’s savings account to avoid more drastic mid-year cuts or difficult budget choices.One major bond rating agency has flagged that practice as worrisome given the state’s need to rebuild its “rainy day” fund.

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