Patrick Outlines 'Growth Budget' Built Upon Tax Increases
Hawley Shea / Governor's Office
Gov. Deval Patrick files his Fiscal Year 14 budget proposal at the State House on Wednesday.
Gov. Deval Patrick rolled out an aggressive $34.8 billion spending plan for fiscal 2014 Wednesday, calling it a "growth budget" that relies heavily on $1.2 billion in new revenue generated from higher taxes to support investments in education and transportation.
"This is a plan to grow jobs," Patrick said at an early afternoon press conference, proposing a 6.9-percent spending increase and lifting the curtain on a spending plan he has rolled out in bits and pieces over several days.
Patrick is seeking $1.9 billion a year in new revenue driven by a major reform the of the tax code to increase the income tax to 6.25 percent and reduce the sales tax to 4.5 percent. Patrick's budget proposes to repeal the exemption of candy and soda from the sales tax and increase the cigarette excise tax by $1 to $3.51 per pack, provisions not previously highlighted by the administration as it unveiled its plans for new revenue.
The governor's budget also includes $34 million to begin implementing last summer's health care cost containment bill that administration and legislative leaders believe will save $200 billion over 15 years, and directs $30 million for rate increases to hospitals to help them shift away from the traditional fee for service and toward accountable care models.
MassHealth, the state Medicaid program, would receive a 13-percent budget increase under the plan, allowing for 325,000 new members to enroll through the increased eligibility standards under the federal Affordable Care Act (ACA), which includes federal reimbursement.
The administration also hopes to take advantage of new federal supports through the ACA, also called ObamaCare, to restore full adult dental coverage to income-eligible MassHealth enrollees, a benefit that was cut during the recession.
Because the tax code changes Patrick is seeking would not take effect until next January, the administration is balancing its budget for fiscal 2014 on $1.2 billion in new tax revenue, an $838 million increase in existing revenue streams, and $555 million in one-time resources, including $400 million from the "rainy day" fund.
Money from the tax increases would be channeled back into transportation and education, including $550 million in new resources for early education, longer school days, college tuition grants and funding for community colleges and the University of Massachusetts.
The budget also includes a $269 million increase for transportation to close the MBTA's budget gap, expanded evening and weekend operating hours in service regions that have been cut, moving employees off the capital budget and boosting Chapter 90 funding for local road and bridge projects by $100 million to $300 million.
"This budget begins paying for the 21st century transportation system that the people and business of Massachusetts need and deserve," Patrick said.
After steady rounds of budget cuts fueled by the recession and weak recovery, neither the governor, nor his budget team could point to a specific program that was cut in the budget proposal. Patrick said not every program has been fully restored to pre-recession levels, nor did every program and agency receive the full funding they requested to maintain services at the current levels.
Patrick said he didn't "submit this proposal lightly," knowing that while the recession may be over families have still not recovered. But, he said his tax reform would create a more fair and simple system that would be less burdensome for low-income families by reducing the emphasis on the sales tax and doubling the personal tax exemption to $8,800.
The governor also rejected the notion that his plan would stymie economic growth and cost the state's economy jobs, calling investments in infrastructure and innovation a historically proven strategy for growth.
"I reject the notion of this self-defeating strategy of not shaping our future … If we want growth then we're going to have to have to invest in it," Patrick said.
Patrick said he could not envision supporting an income tax increase to 6.25 percent without the accompanying decrease in the sales tax, suggesting they are a package deal that will only work when coupled together with the other reforms.
Sen. Stephen Brewer, last session's chairman of Senate Ways and Means, said he anticipates taking "a hard look" at the use of $400 million in stabilization account funding.
"I think the Senate will have a few adjustments and that's how we always do things," said Brewer, who added that the fate of the governor's plan could depend on the feedback senators receive from citizens during the seven public hearings they are planning on the budget.
"Clearly it's an ambitious revenue leap at $1.9 billion, but we're mindful the governor has a vision and two years from now on this very day he'll be a private citizen, so we have to take into account the priorities of the members," Brewer said.
But House Minority Leader Brad Jones, a North Reading Republican, accused Patrick of "prioritizing his legacy over the needs of the commonwealth's residents."
"The Administration's method of reckless taxation as a means towards revenue, while tapping into the 'Rainy Day' fund, is both shortsighted and extremely irresponsible. I encourage Gov. Patrick himself to engage the commonwealth's residents in the factual debate that he so desperately wants to conduct," Jones said.
The governor's budget includes $75.5 million in additional funding for innovation and job creation, including a $10 million increase to $25 million for the Massachusetts Life Sciences Center, and $18.75 million from gaming license revenue to jumpstart the Advanced Manufacturing Futures Program created in 2012 that the administration projects will create or retain 1,856 jobs in the next five years.
The budget also recommends capping the popular, but also controversial, film tax credit program at $40 million a year, a response Patrick said was in part due to concerns that the money was being used to fund the excessive salaries of movie stars.
As he outlined two weeks ago in a series of announcements, Patrick is also proposing to freeze the unemployment insurance rate, reform the municipal unemployment benefit system, consolidate the more than 240 local housing authorities into six regional authorities and enhance oversight of sterile compounding pharmacies in the wake of the nationwide fungal meningitis outbreak.
The budget also relies on $83 million in gaming revenue the governor expects to collect in 2014 after the first licenses are issued, only a portion of which is being counted on for recurring operating budget costs, officials said.
The governor is estimating the state will also collect $26.2 million next year from its agreement with Amazon to begin collecting sales taxes on purchases made in Massachusetts, and proposes to collect an additional $24 million by expanding the bottle redemption law to bottled water and sports drinks. Like his candy, soda and tobacco tax proposals, Patrick's bid to expand the bottle law failed to make it through the Legislature last session.
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