PATRICK BUDGET SEEKS 3 PERCENT BOOST IN SPENDING

By Jim O’Sullivan
STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, JAN. 27, 2010…...Gov. Deval Patrick's $28.2 billion fiscal 2011 budget
includes close to $800 million in spending reductions, imposes new taxes on non-alcoholic drinks and
candy, and preserves state aid to cities and towns.

Patrick, battered in the polls and facing reelection in November, filed a spending plan Wednesday that
leans on $600 million in federal assistance still in need of congressional approval to close a roughly $2.7
billion structural deficit and boosts spending by 3 percent over this fiscal year’s expected outlay. Patrick
said human services programs would face a cut of half a percent including a $56 million cut in dental
services for MassHealth enrollees.

"Services will suffer and people and communities will feel it," he told reporters at a morning news
conference.

Patrick’s gubernatorial rivals were quick to amplify their already consistent criticism of his fiscal policies,
drawing a response from the governor when asked about their earlier criticism.

“If all you see, when you look at this budget, is numbers and line items, you make one set and type of
decisions,” Patrick said. “If you see people, you make different kinds of decisions. We see people, so we
make decisions accordingly.”

To balance the budget, Patrick pulls $175 million from the state’s chief reserve account, which would
leave $450 million in the rainy day fund. Patrick relies on $1.4 billion in American Recovery and
Reinvestment Act assistance, which includes the unapproved $600 million. The budget also deploys $160
million owed by federal government that Patrick officials said they were confident they would have in hand
by the start of fiscal 2011

Tax credit programs would also be curbed, with Patrick looking to cap a $125 million incentive for
filmmakers at $50 million and save $5 million by reducing a tax credit for life sciences companies. The
Department of Transitional Assistance employment services account would receive a $9 million cut.

Patrick wants the Legislature to further reduce spending on the Quinn bill, a program that offers
incentives to law enforcement officers who obtain higher education degrees. His budget expands the
“bottle bill” by charging a new 5-cent deposit for bottled plain and flavored water, coffee-based drinks, and
sports drinks, expected to generate $20 million. The bill also strips exemptions from the sales tax for
cigars and smokeless tobacco – sometimes known as “dip” or “chew” – in an effort, Patrick said, to cut
down on unhealthy behaviors.

The governor is asking his Cabinet secretaries to seek 3 percent decreases in contracts with outside
vendors. Patrick also proposed banning state entities from hiring lobbyists to lobby other state entities,
and a centralized and bulk energy procurement plan.

Patrick’s blueprint is likely to undergo major renovations in the Legislature. Members are skittish about
additional taxes, after voting for roughly $1 billion in additional revenues last year and facing reelection
this fall.
The proposal, labeled “House 2,” would restructure $300 million in debt service. Anticipating a spike in
fiscal 2011 payments, the state is spreading the payments out over seven years, reducing the long-term
debt line item by $300 million, aides said.

Patrick’s reliance on $600 million in prospective federal aid and $175 million in state reserves imperils the
state’s budget over the current and next fiscal years, Republican gubernatorial candidate Charles Baker
said Wednesday.

Baker, a former state budget chief, said Patrick was wrong to boost taxes, calling perennial changes to
state tax policy a discouragement to business investment.

“I’m still looking for the reform,” Baker said, calling for consolidated agencies instead of consolidated line
items, a reduction in the state workforce, and steering clear of health and human services program cuts
until after reorganizing the secretariat.

“This isn’t going to get us out of this … it’s just going to put it off for another year,” Baker said. Relying on
the non-recurring revenues, Baker said, "puts this year and next year at risk."

Asked whether he agreed with Patrick's $28.2 billion total, Baker, who says he’ll oppose new taxes as
governor, said, "I think it’s less about the size of the bottom line, and more about how you build the
revenue and the spending side."

Treasurer Timothy Cahill, running unenrolled against Patrick, called the budget unaffordable and said it
does not address the need to create jobs. Cahill said he wanted to cut business taxes, and last year
opposed the 25-percent sales tax hike Beacon Hill approved. Cahill called the $28.2 billion plan “not a
good starting point for the governor,” and said he would not have promised local officials he would not cut
local aid, while stopping short of saying whether he would have preserved the accounts as Patrick did.

Cahill said he would have “at least level-funded” the overall state budget.

Asked about Patrick’s argument for viewing the budget for its human impact, rather than a collection of
numbers, Cahill replied, “He may see people who are impacted by the budget. I see people who are
impacted by the job loss. He’s not speaking to those people.”

Cahill said he expected the Lottery to provide roughly $870 million in local aid this year, short of the $936
million mark on which the budget was formulated.

Lawmakers were combing through Patrick’s plan Wednesday.

“I would suggest that there’s a great deal of skepticism for any type of tax increase,” said House Ways
and Means chair Charles Murphy, a proponent of last year’s sales tax increase. Murphy said he was
uncertain whether Patrick’s “numbers are accurate or if they’re real.”

Asked about local aid reductions, Murphy said, “If it’s not feasible, if we have to make cuts, well so be it.”

“I think they did a good job with tough budget realities. But that being said, there’s going to be areas, I’m
sure, of difference,” said Senate budget chief Steven Panagiotakos, pointing to the Legislature’s previous
rejections of Patrick’s tax hikes on candy and soda, and expansion of the bottle deposit charge. Patrick’s
request for expanded budget-cutting authority, known as “9C” powers, were not “necessary,”
Panagiotakos said.

Panagiotakos also signaled reluctance to use the $600 million in hoped-for federal assistance unless
lawmakers are reassured it will eventually arrive.

“That money’s not there yet. We’re hoping that it will be,” the Lowell Democrat said. “Come May, if it’s not
there, our budget could look dramatically different unless it’s on the brink of being done.”

Asked whether Patrick had set up lawmakers to make the politically unpopular local aid cut, Panagiotakos
called local aid “the number one-priority of the membership.”

“The question comes: can you take $5 billion out of a $28 billion budget and preserve it in this climate? I
think that’s certainly a possibility, it’s one we’re going to strive for,” he said.

“Someone else has to make up the difference, and that seems to be in the public health areas and
environmental accounts, as well as some in MassHealth,” Panagiotakos said of Patrick’s budget.

Calling the bill “an interesting document,” House Ways and Means vice-chair Barbara L’Italien said the
state needed to “hunt down” the additional $600 million in federal aid.

Asked about a local aid cut, she said, “I think that we have to deal in the realm of what’s real.”

“I don’t think it’s the politically viable answer, but I think we need to be honest, and our numbers need to
add up, and we can’t be putting numbers in there that don’t exist,” L’Italien told the News Service.

Senate Minority Leader Richard Tisei, Baker’s running mate, said Patrick was perpetuating spending at
“unsustainable levels,” and called for changes to a state law that he said discourages privatization.

“The residents of Massachusetts are tired of being asked to bail out Beacon Hill when there is no
accountability from their elected officials, but the governor still refuses to implement something as simple
as a wage and hiring freeze to tame out-of-control government spending,” Tisei said in a statement.

House Minority Leader Bradley Jones said in a statement, “Governor Patrick’s talking point du jour is that
he and his administration have now delivered four budgets that are ‘balanced, responsible and on time.’
Though I have not had the opportunity to read his latest budget in its entirety, I have read enough to know
that while it may have been delivered on time, it is certainly not balanced or responsible. It’s amazing that
in a time of economic despair, Governor Patrick would think it is appropriate to actually increase the level
of spending. This budget is up more than 3% from last year’s budget and not surprisingly includes yet
another tax hike.”

Patrick budget chief Jay Gonzalez, unveiling his first budget since taking over from Leslie Kirwan last
year, said the state budget under Patrick has grown 0.6 percent annually, and said Republican governors
over the 16 years prior had averaged 4.6 percent increases.

Human service advocates ripped what they called Patrick’s decision to balance the budget by cutting vital
programs to disabled people, at-risk children and people looking for employment assistance.

"We know the economy is bad and Governor Patrick is dealing with a $3 billion budget gap," said Michael
Weekes, president of the Providers' Council, which represents community-based human service
organizations. "He has called for a 'shared sacrifice' when making these difficult decisions, but he has
placed the huge burden of balancing this budget on the human services community and avoided cuts to
other sectors. That does not, in our judgment, speak to a shared sacrifice."

Health Care for All, a non-profit advocacy group, praised the governor, saying in a statement, “We
understand the need for shared sacrifices, and we will continue to urge for full restoration of benefits and
services to our state's most vulnerable residents - including legal immigrants - as soon as the economy
improves. We applaud the Governor for maximizing anticipated federal resources and seeking a repeal
on the sales tax exemption for candy and soft drinks and extending the cigarette excise rate to cigars and
tobacco. This is an opportunity to protect critical health and human services programs and improve public
health.”

Along with the $28.2 billion budget for fiscal 2011 that he filed Wednesday, Gov. Deval Patrick has also
crafted a $228 million supplemental spending plan for the current fiscal year, the vast majority of it to
cover Medicaid spending, Patrick budget aides said.

About $200 million funds MassHealth needs, $9 million goes to restructured collective bargaining
contracts, and $8 million pays for deficiencies in the Department of Corrections for which Patrick had
previously sought legislative authorization, aides said.

The governor is also seeking $7.2 million to reimburse cities and towns for added costs incurred by the
special U.S. Senate elections. Case settlements with the comptroller’s office would receive $2.5 million,
another $2.1 million would pay for veterans’ services, and $200,000 would fund payments to firefighters
killed in the line of duty.

The midyear budget bill also contains language calling for the debt refinancing and limited film industry
tax credit programs Patrick included in his fiscal 2011 plan, because the administration hopes to have
those plans in place by the July 1 start of the fiscal year.

The film industry said lowering the cap on its tax credit “may do more harm than good in helping our state
to recover.”

The move is “likely to negatively affect the scores of new Massachusetts businesses and the thousands
of new jobs in the Commonwealth that have been created as a result of the film tax credit,” said Mary
Fifield, a spokeswoman for Mass. Production Coalition, adding, “We appreciate the difficulty of the budget
environment and want to contribute to a balanced budget along with everyone else.”

Rep. John Keenan, House chair of the Committee on Tourism, Arts and Cultural Development, defended
the tax credit program, saying, “Tinkering with it in any way could effectively kill a remarkably effective
economic engine. It would be short-sighted to do so when we are in the midst of the worst recession
since the Great Depression and jobs in other sectors have virtually disappeared.”

Patrick said he did not think the changes to the tax credit would cost jobs.

In the fiscal 2011 budget, Patrick cuts his own office by 7.5 percent from this year’s original budget.

The plan contains an outside section calling for a commission to study the state’s school funding formula
under Chapter 70, the main account for assistance to cities and towns, and another to examine local aid
formulas generally. The $4.048 billion Chapter 70 account sits at its highest-ever level.

Energy and Environmental Affairs Secretary Ian Bowles said state parks will open later in the season and
close earlier under cuts proposed in the budget. The Department of Conservation and Recreation has
seen roughly 25 percent less funding and lost about 200 employees over the last two years, Bowles said.

Municipalities are already receiving less technical assistance, and under the governor's budget some
campgrounds would remain open but go unstaffed, he said.

"There's no doubt that the public will see it and feel it," Bowles told the News Service after Patrick's press
conference.

The state’s zoos, which flared last year as an issue after officials there said budget cuts could result in
animal euthanizations, receive the same funding they did last year, Gonzalez said.

Patrick and top lawmakers have agreed to base their fiscal 2011 budgets on assumed 3.2 percent growth
in tax revenues. State revenues have topped an annual estimate, which was lowered in October, for three
straight months, bringing year-to-date receipts $230 million above the new mark through December. Mid-
month data released last week showed the state taking in $881 million, $20 million more than the same
mid-January period of a year ago. While beating revised estimates, tax collections through mid-January,
just past the halfway mark for the fiscal year, have declined $327 million from fiscal 2009, during which
state tax receipts reflected the economic recession.

Republican gubernatorial candidate Christy Mihos did not return a phone call seeking comment.

-END-
1/27/2010

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