Baker plans to pluck $1.4 billion from rainy day fund to balance Massachusetts budget


Massachusetts Gov. Charlie Baker’s adjusted $45.5 billion fiscal 2021 budget would draw $1.35 billion from the commonwealth’s rainy-day fund to cover a COVID-19-induced revenue gap.

“This updated plan reflects the new realities,” Baker told reporters Wednesday in Boston.

Baker’s budget office projected a $3.6 billion drop in state revenue from original projections.

The proposal sets off a mad scramble at the State House, where lawmakers will try to produce their own versions by Thanksgiving. The fiscal year began July 1.

“This updated plan reflects the new realities,” Massachusetts Gov. Charlie Baker said.

Baker had signed a three-month, $16.5 billion temporary budget on Aug. 4, which kept funding for most state services level over the three months. Massachusetts had previously operated on a one-month spending plan since the fiscal year began.

“It was pretty obvious early on that the drop in revenues and other factors would significantly impact the budget picture, which is one of the reasons why we and the legislature decided to issue a series of [temporary] budgets until some of the smoke cleared with respect to what fiscal 2021 would actually look like,” Baker said.

The rainy-day withdrawal, if enacted, would still leave roughly $2.2 billion remaining. The balanced proposal does not rely on new taxes and “protects substantial financial reserves for the future,” he said.

The budget, which excludes transfers to the Medical Assistance Trust Fund, represents a fractional increase over Baker’s original $44.6 billion proposal in January, primarily as the result of rising caseload costs at MassHealth, the state’s Medicaid program, related to the coronavirus.

The rainy-day withdrawal represents less than 3% of the budget. The remainder, said Baker, would provide “a significant buffer” for fiscal 2022 and beyond.

Only Massachusetts, Pennsylvania, Rhode Island and South Carolina have yet to approve full-year budgets.

The adjusted budget, according to Baker, is built on the revised FY21 tax revenue forecast of $27.6 billion.

Many states adopted stopgap spending plans to cope with the pandemic downturn. Rhode Island’s legislature expects to reconvene after the November election to better gauge what extent of further federal aid, if any, it will receive.

“The COVID-19 pandemic is likely to significantly impact state budgets for a number of years as states face reduced tax collections from all major revenue sources, as well as increased spending demands resulting from both the public health emergency and declines in the national economy,” the National Association of State Budget Officers said.

Baker’s budget assumes no federal aid.

His plan includes more than $100 million to support economic development and small businesses. Support for local schools includes a $108 million increase under Chapter 70, the major state-aid program for public elementary and secondary schools, and at least $442 million in federal support for K-12 schools.

The budget, said Baker, keeps to the pension schedule announced in January. It includes a $274 million increase over FY20 toward the commonwealth’s pension funding obligation, for a total allocation of $3.115 billion. Massachusetts will make its final amortization payment toward the pension funding obligation in FY 2036, four years earlier than the statutory requirement.

Support services in the commonwealth remain under-resourced, according to the left-leaning Massachusetts Budget and Policy Center.

“While the administration has expressed its commitment to preventing cuts for core services, its budget fails to make the swift and at-scale policy solutions needed to support the hundreds of thousands of families in our state that can’t afford to put food on their table or keep their families safe and housed,” the group said in a statement.

According to the business-backed Massachusetts Taxpayer Foundation, fiscal 2022 could be more challenging, given that many new revenues listed are one-shots.

“The state will have to hope for further federal assistance, an economic rebound and strong tax revenue growth because the $2.2 billion remaining in the stabilization or rainy-day fund is not sufficient to weather this storm,” the foundation said.

Moody’s Investors Service rates the commonwealth’s general obligation bonds Aa1. S&P Global Ratings and Fitch Ratings rate them AA and AA-plus, respectively.

Massachusetts health officials on Wednesday reported 518 new confirmed coronavirus cases and 16 additional deaths. As of Wednesday, confirmed cases statewide totaled 138,083, with 9,429 deaths.

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