Baker administration hopes to avoid layoffs in budget reckoning

  • The Massachusetts State House in Boston FILE PHOTO

  • Massachusetts Gov. Charlie Baker AP FILE PHOTO/CHARLES KRUPA

State House News Service
Published: 10/21/2020 9:59:36 PM

BOSTON – Gov. Charlie Baker’s administration hopes to avoid government layoffs both this year and next year, the governor’s top budget official told lawmakers Wednesday, describing Baker’s new spending plan as a “stability” budget intended to protect services at a time of great need.

“We’re not looking, unless things deteriorate remarkably, to do anything but stay the course and bend the growth curve ... ,” Administration and Finance Secretary Michael Heffernan said. “This is the time people need the government the most.”

The governor’s budget chief also identified a major wildcard in the months ahead - enrollment growth in the massive MassHealth program, which unless controlled can quickly consume revenues eyed by other state programs.

Heffernan and legislative leaders had one eye on the current fiscal year, which began on July 1, and the other on fiscal 2022 as the House and Senate Ways and Means Committees held a hearing on Gov. Charlie Baker’s revised $45.5 billion budget proposal for fiscal 2021. An annual state budget was due July 1 but state government has been operating on interim budgets since then as leaders waited to gauge the economy’s response to the pandemic and to see if Congress would deliver additional financial aid to states.

Baker has said he’d like to have the budget finished by Thanksgiving, and he filed a $5.4 billion interim budget Wednesday to cover spending beyond Oct. 31, but legislative Democrats have not given a timeline for taking up the governor’s latest plan, and House Ways and Means Chairman Aaron Michlewitz said the next steps are to continue talking with members.

“This was an important step today. Obviously him filing the budget was an important step as well. The interim budget is going to obviously be needed,” Michlewitz said after the hearing, telling the News Service he did not have a specific date or clear process outlined for when and how to take up the budget.

Baker’s updated budget proposes to spend about $900 million more than he recommended back in January due in large part to a 9.2% increase in costs at MassHealth, where enrollment has grown by 161,000 people since March to more than 1.9 million people for the first time since 2016. To balance the spending bill and account for a projected drop of $3.6 billion in tax revenue, compared to revenues forecast in January, Baker relied on $1.8 billion in federal relief funds and up to $1.35 billion in reserves.

Both Heffernan and Health and Human Services Secretary Marylou Sudders identified the challenge of maintaining MassHealth benefits through fiscal 2022 when enrollment is projected to eclipse 2 million people - or more than one of every four state residents - due to the pandemic.

“The fiscal cliff on MassHealth in FY22 is significant,” Sudders said.

Apologizing to state Sen. Cindy Friedman, Sudders said next year’s budget may require difficult decisions about whether the state can afford some MassHealth benefits, including behavioral health. “I wish it was your fault,” replied Friedman. “Then we could do something about it.”

Transportation Secretary Stephanie Pollack also had her eye on fiscal 2022, telling the committees that next year “is the biggest challenge the T faces” because the transit agency will have spent its federal CARES Act money but is not expecting service to have rebounded to its pre-pandemic levels.

Pollack said the MBTA is taking a multi-pronged approach to getting through this year and building up reserves for a difficult 2022 fiscal year.

Along with reallocating some federal funds, seeking legislative approval to pay capital workers’ salaries with borrowed funds instead of from the operating budget, and pursuing other cost savings, the T is looking to cut “spending on currently underutilized services,” Pollack said. The MBTA is “providing more service than its revenues can support,” she said.

“But more importantly, it’s providing more service than its ridership justifies, and I don’t mean just current ridership,” Pollack said. “I mean the ridership that’s projected for a year from now and even two years from now, given the continuing pandemic and economic dislocation but also changes in travel patterns.”

State Rep. Denise Garlick, vice chair of House Ways and Means, described herself as “very unsettled” after hearing Pollack’s testimony, calling transportation “one of the greatest amenities we have for the people who live, work and play in our commonwealth.”

“This is the first presentation we’ve had a secretariat of the commonwealth who was talking about cutting services, and in general, the tone has been how we sustain our commonwealth so our services are available because there will be an end to this COVID-19 time that we’re in,” the Needham Democrat said.

Pollack responded that the MBTA’s goal is to hold “a core of essential services” harmless from changes.

Over the course of more than four hours of testimony, legislators questioned decisions made by Baker in the budget bill over everything from funding for food insecurity and the impact of a streamlined sales tax collection process to decreases in mental health spending.

“I think that while many folks are relieved the proposal level funds their appropriation, for the most part, from FY20 and there are no draconian cuts in the budget, we also realize the pandemic has caused real increased demand in some areas around housing instability, food insecurity, around some of our basic safety net programs,” Rodrigues said after the hearing.

Heffernan said the administration settled on tapping the “rainy day” fund for $1.35 billion after exhausting all other resources, and would look to shrink that withdrawal if additional federal funding or higher tax collections become available. The draw from reserves would use a little more than one-third of the $3.5 billion savings account, and leave more than $2.2 billion for future years.

“We think of it as the last resort,” Heffernan said.

Michlewitz probed the administration’s proposed use of one-time revenues, including $834 million in enhanced Medicaid reimbursement payments that were part of Congress’s COVID-19 relief to states.

Heffernan said that officials might learn after the election or early in 2021 whether the enhanced Medicaid reimbursements would be extended beyond March through the final quarter of the fiscal year, which would be worth about $250 million.

“That would be helpful,” Michlewitz said.




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