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By Kyle Cheney, Michael Norton and Jim O'Sullivan
State House News Service

January 23, 2007 ... For Gov. Deval Patrick, year 2 is beginning to look a lot like year 1.

The Patrick administration, in its second annual budget proposal, again finds itself forced to close a projected $1 billion-plus budget gap, and is again daring a skeptical Legislature to produce $300 million in new revenues by adopting his proposal to increase corporate tax collections by closing several "loopholes" in the tax code.

The economy is again in flux, more so than at this time last year, with federal and state experts warning that if a recession hasn't already begun, it may be around the corner. And this year casinos are in the budget mix.

Also, like last year, the Patrick administration has rolled out several stepped-up spending proposals - a $368 million increase for education programs, a roughly $40 million increase for public safety programs and an 8 percent increase in the parks budget - while signaling steep cuts in other areas that haven't yet made headlines.

Patrick, whose 2006 campaign was rooted largely on promises of investments, on Wednesday offered lawmakers state budget that raises state spending by 3.5 percent and increases local aid to cities and towns by 5.1 percent. 

Referring to the elected officials he frequently calls his "partners" in the Legislature, Patrick, who will need the help of legislative leaders to pass his budget, said, "It takes three of us to do this tango."

To close a projected $1.3 billion budget gap, Patrick hopes to wring $300 million in savings out of the state's Medicaid program, boost state employee health insurance premiums by $51 million and provide no spending increases to 190 state budget line items, forcing state managers to find "creative ways" to deal with increasing costs and demands. 

Patrick also wants to save $40 million by eliminating 300 earmarks included in this year's state budget, a move that sets up another confrontation with the Legislature over who is best suited to decide how taxpayer monies are spent. The administration says the Executive Branch needs spending discretion; lawmakers say they best know what their constituents want.

On the revenue side, Patrick is calling for the generation of $197 million merely by improving enforcement of existing tax laws. Patrick wants to change the way the state collects existing taxes on tobacco sales to target collection and enforcement efforts. Attorney General Martha Coakley would also coordinate a statewide effort to prevent the misclassification of employees that results in "millions of dollars in lost tax revenue."

The governor suggests using $370 million more in one-time revenues to close the gap, which has persisted for years because the state spends more than it generates in tax revenues and consistently deploys one-time revenues to pay for spending. Patrick, noting this year's budget depends on $780 million in one-time revenues, says his latest spending plan calls for a "measured" use of state reserves "to protect against harmful cuts." The state has more than $2 billion in reserves.

Patrick, flanked by Lt. Gov. Timothy Murray and Cabinet secretaries, said his main disappointment was the recurring structural imbalance and said the state wouldn't close that gap until it produced "faster economic growth."

As previously reported, Patrick's budget uses his hoped-for casino licensing revenues to provide $88 million to cities and towns for transportation infrastructure improvements, insulate cities and towns from ma $124 million shortfall in Lottery revenues, and deliver $88 million in property tax relief worth an average of $200 to more than 420,000 households. This is controversial because the House is highly skeptical of casino plans and hasn't afforded the governor a public hearing on his plan.

Patrick's planned casino revenues are not needed to balance the budget, but the release of his casino-related spending plans, along with the budget document, appears intended to ratchet up the pressure on the House to decide the fate of casinos.

In response to a question about the uncertainty confronting local officials planning their own budgets while he has proposed $600 million in speculative revenues for next fiscal year, Patrick said, "They never know at this point what the number is going to be." He said he expected them to lobby the capitol for the revenues.

At a late-morning press conference, when a reporter asked whether it was "hasty" to adopt a corporate tax code panel's recommendations in his budget, while House Speaker Salvatore DiMasi has urged restraint, Patrick's eyes went wide. "Hasty? Hasty?" the governor bristled. "Sometime around here we are going to start to have to focus on the cost of inaction."

Full story available at State House News.

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