BOSTON >> A day after the Baker administration disclosed the potential for revenues next year to fall $750 million short of projections, House Speaker Robert DeLeo suggested that legislative negotiators may need to "take a pause" to develop a plan to address the significant markdown in expected revenues.
With just over two weeks left until the new fiscal year, a panel of House and Senate lawmakers is trying to negotiate a final state budget for fiscal 2017. Both branches this spring approved budgets totaling roughly $39.5 billion based on projections for next year that the administration now says now could be overstated by $450 million to $750 million.
The conference committee - led by Rep. Brian Dempsey and Sen. Karen Spilka - met for the first time Friday, before the revenue problems were publicly disclosed by Gov. Charlie Baker's budget team.
"The conference committee, I'm not going to say has been put on hold, but I guess it's very difficult to make decisions when you're not sure about how much money you have to spend," DeLeo said in an interview on Boston Herald radio.
Just what that means procedurally and how it will impact the Legislature's ability to deliver to the governor an on-time budget for July 1 remains to be seen.
"It's going to be my suggestion...that we take a pause and we're probably going to have to make some cuts to the revenues that we were expecting in the budget," DeLeo said.
DeLeo said he would "prefer" not to use reserve funds or turn to new taxes to close the gap, and he also said he would "not be disposed" to cutting funding for early education, opioid abuse prevention and treatment or local aid.
Beyond that, the speaker said he planned to discuss the options with Ways and Means Chairman Dempsey later Wednesday afternoon.
"Anything and everything is going to be on the table and we'll see what happens," DeLeo said.
Spilka on Tuesday said she expected Baker to file a "corrective budget" to address the new revenue picture for fiscal 2017, but the administration has not yet commented on whether that is part of its plan.
"As the budget process wraps up, it is important for the administration and our partners in the legislature to remain proactive and make adjustments in spending in line with expected revenues," Administration and Finance Secretary Kristen Lepore said in a statement on Tuesday.
Despite low unemployment, a growing economy and solid sales and withholding tax collections, Massachusetts taxpayers appear to be in for an even more austere budget than the spending plans crafted in April and May.
Beacon Hill leaders appear to have been caught offer guard as stock market volatility cut into investment gains last year, resulting in lower than expected capital gains tax collections over the second half of fiscal 2016 and the trend is expected to continue.
With the downturn reportedly impacting other states as well, Baker's budget office is also now estimating that the current fiscal year, which ends on July 1, will finish $320 million to $370 million below revenue estimates. In January, the administration had increased its official expectation of tax revenues for fiscal 2016 by $140 million.
Lepore said the administration plans to address that shortfall without using reserves or resorting to layoffs or emergency budget cuts - administration officials have not offered specifics about how they are balancing the budget and where revenues and savings are being realized.
Baker, Dempsey and Spilka all said they planned to work together to craft a solution.
"This isn't like we're coming back and dealing with it in December or January when we only have six or seven months left in the fiscal year to make decisions and I think we're just going to have to work with them to make sure the budget they send to us and the budget we sign is balanced based on that reality," Baker said Tuesday.
House Democrats plan to caucus Wendesday afternoon before a formal session to take up municipal governance legislation. The budget woes are likely to come up in caucus.
"I have to say, I hold in high regard and admire the chairman of Ways and Means and I know his continuing effort of conversation, compromise, consensus and collaboration with the administration, with A and F, with our Senate counterparts -- I'm confident they'll be able to work through this and come out with a balanced budget through that collective effort," said Rep. Paul McMurtry, a Dedham Democrat.
McMurtry said, "We've weathered storms in the past, similar, and we'll be able to do it. The speaker and the chair of Ways and Means are two individuals that have applied their skill and leadership and have weathered storms like this in the past, and I'm confident we'll be able to get through this as well."