Patrick administration seeks cuts in local aid, other accounts to close budget shortfall

Gov. Deval Patrick's administration ordered nearly $200 million in immediate spending cuts Wednesday while asking lawmakers to approve reductions in local aid and other accounts to help close a state budget shortfall.

The gap, currently estimated at $330 million, has been triggered by a number of factors including an automatic change in the Massachusetts income tax scheduled to take effect Jan. 1, Secretary of Administration and Finance Glen Shor said. The tax cut, from the current 5.2 percent to 5.15 percent, is expected to cost the state about $70 million over the final six months of the fiscal year.

Patrick exercised his authority to make $198 million in unilateral spending cuts in the executive branch of state government, Shor said.

"We have done our very best to protect investments that are critical to the commonwealth's future and avoid negative impacts on the most vulnerable of our residents," he said.

While much of the spending cuts will come in the area of health and human services, sensitive agencies such as the Department of Children and Families would not be affected, Shor said. State aid to public school districts known as Chapter 70, pre-kindergarten education and public higher education were among other unscathed programs.

The state's total budget is $36.5 billion.

In a letter to state lawmakers on Wednesday, Patrick said he was filing legislation proposing a $25.5 million reduction in unrestricted state aid for cities and towns, along with cuts of 1.5 percent for most state agencies that are not part of the executive branch and therefore cannot have their budgets reduced without legislative approval.

The House and Senate are not scheduled to resume formal sessions until January, when a new governor, Republican Charlie Baker, also takes office.

Shor said the proposed cuts were not discussed with representatives of the incoming administration.

Andrew Bagley, director of research and public affairs for the Massachusetts Taxpayers Foundation, an independent budget watchdog, said he was surprised by the proposed local aid reduction.

"I think the (local aid) cuts are something that are going to impact the cities and towns, and they are obviously not going to be happy halfway through the fiscal year trying to figure out how to manage that," Bagley said.

He also noted lawmakers historically have been reluctant to make cuts that would affect communities in their districts.

But Shor said there was a need for "shared sacrifice" to address the shortfall.

"We are asking cities and towns to help us in solving the state budget gap," he said.

Several independent state agencies have agreed to forego additional appropriations that were promised to them in an economic development bill passed earlier this year, Shor said.

In addition to the automatic income tax cut, the administration has said the shortfall also was being driven by lower-than-expected returns on state fees and other non-tax revenues.

The foundation has projected an even larger budget gap of $500 million to $600 million, Bagley said, partly due to increased state employee insurance and retirement costs.