Baker pegs deficit at $765m

Governor says spending is too high

GOV. CHARLIE BAKER said the state is facing a $765 million deficit this fiscal year, a shortfall more than twice as large as his predecessor estimated and attempted to address two months ago.

With just over 5 ½ months left in the fiscal year, Baker’s options for closing the deficit are limited. He said he would lay out his plan for eliminating the shortfall later this week, but indicated he will seek legislative approval to tap some $200 million in capital gains tax revenue that normally would be directed into the state’s rainy day fund.

Baker, a Republican, blamed much of this year’s shortfall on excessive spending without mentioning that the spending was authorized by a Democratic Legislature and governor. Even after nearly $200 million in spending cuts ordered by then-Gov. Deval Patrick at the end of last year, Baker said spending in fiscal 2015 is up 7.3 percent over the previous year, well in excess of the increase in tax revenues.  “That simply isn’t sustainable this year or next,” he said.

Senate President Stanley Rosenberg issued a statement suggesting he agrees with Baker on the size of the deficit but perhaps not on the solution. “The governor’s estimates are in the range of what we believe the deficit to be,” Rosenberg said. “As we’ve said from the beginning, we believe this is both a spending and a revenue problem and we look forward to the governor’s proposals for closing this gap.”

House Speaker Robert DeLeo issued a statement saying he would work with Baker to address the deficit.

Baker said his administration believes $230 million of the shortfall is related to the Massachusetts Connector, the online health insurance exchange set up after passage of the federal Affordable Care Act to steer uninsured residents into health plans. When the exchange failed to work in 2013, Baker said about 300,000 people were affected.  The Patrick administration responded by temporarily enrolling many residents in Medicaid, the state and federally subsidized health insurance plan for the poor and elderly, without knowing whether they belonged there or not. Baker said he can’t ask those who received subsidized health insurance improperly to now return the money because they were put in that situation through no fault of their own.

A spreadsheet handed out by Baker aides indicated the temporary enrollment in subsidized health plans isn’t the only cause of the Medicaid deficit. The sheet also attributed the deficit to Sovaldi, a drug that cures hepatitis C but costs $1,000-a-pill; costs related to implementation of the Affordable Care Act; and higher reimbursements for health insurers that cater to Medicaid clients. The health insurers, whose losses have been mounting, say the increase approved by the Patrick administration was woefully inadequate.

Baker said his administration needs to get a handle on the Medicaid spending issue because it is affecting this year’s budget and will affect the budget for next year that he files in February.  “It’s going to drive a lot of decision-making,” he said.

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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.

The governor said another $155 million of the deficit can be traced to the Group Insurance Commission, which provides health insurance to state workers. Kristen Lepore, the administration and finance secretary, said utilization of health care by state workers appears to have far exceeded forecasts.

Baker also said fees and fines collected by state agencies are running $179 million below forecasts, Revenue Department settlements with taxpayers are running $100 million behind estimates, and additional state spending this year contributed $108 million to the deficit. A number of state agencies and programs are also running deficits, including the Department of Children and Families ($41 million), public defenders ($35 million), and emergency assistance funding for family shelter beds ($45 million).