September State Tax Revenues Plummet Below Benchmark

By Tom Philbin

Note from Sam: The whole country is in some tough economic times, and Cambridge is not immune. It's incumbent on us as City Councilors to spend the people's money wisely. We can still make a difference in people's lives, but every dollar has to go farther.

Gov. Prepares Mid-Year Cuts, Says Local Aid "On the Table"
Revenues $243M Below Sept. Benchmark, Off $212M for Year
Call Your Legislators Today to Rally for Municipal Relief Items

As feared, September state tax revenues fell far below the monthly benchmark needed to keep the state budget in balance, throwing Massachusetts state government sharply into the red at the end of the first quarter of fiscal 2010 and setting the stage for mid-year budget cuts just a few months into the fiscal year.

Monthly tax collections for September were $243 million below the benchmark. Most of the loss was due to lower corporate and business tax collections ($144 million below the benchmark), sagging income tax revenue ($58 million below the benchmark), and lower than expected sales tax collections ($37 million below the benchmark). For fiscal 2010 so far, tax collections are falling $212 million short of the benchmark.

The House and Senate Ways and Means Committee Chairs have both publicly stated that the September revenue figures were worse than their worst-case scenario projections. Both said that the revenue shortfall is an alarming signal that the fiscal crisis has not ended.

Under state law, the Governor has until October 15 to revise the fiscal 2010 revenue projections and then develop a plan to close the shortfall, which looks to be at least $500 million or more, since the first quarter losses amount to $212 million.

The Governor announced that he would consult with economic advisors over the next two weeks to revise the fiscal 2010 tax forecast based on the revenue numbers through the end of September and the most recent economic data. He said he would announce his plan to close the budget shortfall shortly after the new forecast is adopted.

Once the revenue estimate is officially lowered, the Governor will be forced to use his so-called Section 9C budget-cutting authority to reduce executive branch agency spending, triggering more state layoffs and program reductions.

In response to questions from reporters, the governor said, “Local aid is on the table because it is unavoidable.” The Governor cannot reduce the major general municipal aid account (the combined Lottery and Additional Assistance amount) and Chapter 70 education aid unless the Legislature grants him expanded 9C powers, as was done last year. However, the Administration has the ability to reduce many other local aid programs, including reimbursement accounts and grants. If the Governor renews his call for expanded 9C powers, the Legislature will likely once again provide him with that authority, as such a request has never been denied.