With Baker set to file budget, Massachusetts finances seen as tight

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BOSTON >> The annual months-long debate over how Massachusetts should spend billions in taxpayers' money begins anew on Beacon Hill in the coming days, with predictions of yet another tight year for state finances.

Republican Gov. Charlie Baker is scheduled to deliver his budget proposal for the fiscal year starting July 1 to the Democrat-controlled Legislature by Wednesday. Since taking office last January, Baker has repeatedly spoken of a "spending problem" in state government, resulting from expenditures increasing at a higher rate than tax revenues or, in other words, money going out faster than it's coming in.

Baker recently ordered $50 million in midyear cuts from the current $38 billion budget.

The governor has signaled that he plans to increase spending in some areas, including for local aid. He also hopes to sock away more money in the state's so-called "rainy day fund."

Some questions and answers about the state budget:

Q: The Massachusetts economy, by most accounts, is growing, and officials have projected a 4.3 percent increase in tax revenues in the next fiscal year. So why are state finances so tight?

A: It's true that the Baker administration and lawmakers agree on estimates of about $1.1 billion in additional tax revenue flowing into state coffers. But a recent analysis by the nonpartisan Massachusetts Taxpayers Foundation shows that much of that increase is already spoken for. By law, the state would be required to set aside $356 million in capital gains revenue for the rainy day fund; $197.2 million for the state's pension fund; $63.2 million for the Massachusetts School Building Authority; and $15.8 million for the MBTA.

Subtracting those mandates leaves $476.8 million, a sizeable sum by any measure but only a small chunk of a budget expected to approach $40 billion. There would be little room for new discretionary spending, a disappointment for those advocating hikes in critical areas like education, transportation or health care.

Q: What about new taxes?

A: Baker opposes any tax increases. More important, perhaps, so do top House Democrats, including Speaker Robert DeLeo and Ways and Means Committee Chairman Brian Dempsey. Since Democrats hold supermajorities in both chambers, a tax increase could conceivably withstand a gubernatorial veto — but not without strong leadership backing. And such a prospect becomes more unlikely in an election year with all 200 House and Senate seats up for grabs in November.

Q: Are there other potential approaches?

A: Governors and lawmakers have previously helped balance budgets by employing a variety of accounting methods and so-called "one-time revenues," such as tapping into temporarily available federal funds. Budget writers could also tinker with tax exemptions or tax credits as a way of squeezing out additional savings. For example, Baker is proposing adjustments in the film tax credit to save $43 million, though the House has previously shown no appetite for reducing the credit meant to lure movie producers to Massachusetts.

Q: What happens after the governor files his budget?

A: The House, and later the Senate, will debate and pass their own versions of the spending plan in the coming months. A conference committee — three House and three Senate members— will then meet behind closed doors to hash out a final version of the budget to send to Baker's desk.


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