State budget numbers are bad

The Patrick administration today lowered its revenue forecast for this fiscal year by a whopping $952 million and concluded there would be little or no budgetary improvement in the coming year.

The forecasts mean Patrick is facing a budget shortfall of $1.1 billion this fiscal year and will have to hold spending at the new reduced level next year. The budget picture is likely to dominate Beacon Hill for the foreseeable future and preclude any new spending initiatives.

The dismal numbers represent a stunning and rapid fall in state tax revenue, precipitated by the sharp economic downturn nationally and the state's heavy reliance on capital gains taxes.

Leslie A. Kirwan, Patrick's secretary of administration and finance, said she now believes the state will take in $19.45 billion in tax revenues this year, a dropoff of 9 percent from the estimate on which the original fiscal 2009 budget was based and 4 percent below a revised estimate released in mid-October. To close the gap by June 30, Kirwan will have to cut spending, raise new revenues, or raid the state's Rainy Day Fund. She previously had to close a $1.4 billion budget gap that emerged earlier this fiscal year.

Next year is unlikely to see much improvement. Kirwan and legislative leaders said they believe tax revenues will rise by only $80 million in fiscal 2010 to $19.53 billion. The officials say they plan to base their budgets for fiscal 2010 on that consensus revenue estimate.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

"It is likely the Commonwealth will continue to experience a downturn through FY10 and possibly longer," Kirwan and the legislative leaders said in a statement. "The dramatic loss of capital gains taxes, due in large part to the ongoing foreclosure crisis and weak home sales, is a key contributing factor to the drop in revenue."

The forecasts both for this fiscal year and next year are on the low end of what the state's Revenue Department was forecasting in mid-December, indicating the state's economic situation is continuing to deteriorate.