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By Senator Richard T. Moore

The Massachusetts Fiscal Year 2010 state budget that is now being finalized in a House-Senate Conference Committee reflects a stark reality: the national and world-wide recession has a real cost for all of us. The fact that we’re not alone among the states offers little consolation for those who will lose some state or local services or for those who may lose jobs, pay higher insurance, and make other sacrifices.

The current FY ’09 budget approved by the Legislature and signed by Governor Patrick a year ago, was balanced for about the first three months of the Fiscal Year. Then, as the stock market fell in early fall, and the recession took hold, revenues began to slump, and then crash like an avalanche of snow. To understand why Massachusetts has almost $4 billion less in receipts as the state enters the new budget year on July 1 than it has the previous year, we need to understand what happened in the economy.

According to some analysis by the Beacon Hill Institute, a conservative Boston think-tank, the story behind the lower revenue estimates is startling!

• Sales tax revenues have dropped by $220 million. What this really means is the $4.4 billion dollars less in goods and services have been purchased in Massachusetts.

• Capital gains revenues have dropped by $797 million. This means that over $15 billion in true capital gains have failed to be realized – largely caused by stock market and real estate collapse. This is truly an astounding figure - $15 billion will not be reinvested, not turned into new business or growth in current industries.

• Income tax revenue has declined by $1.6 billion, meaning that $31 billion less income was earned. Residents and small businesses taxed at the income tax rate have shrunk by $31 billion!

• Corporate tax revenues have dropped by $428 million which means that corporations have not realized $4.5 billion in profits. Profits just vanished! Profits that are supposed to be the economic engine, the lifeblood of our economy.

• Taken all together, the Massachusetts economy has lost an estimated $55.9 billion in economic activity!

Many individuals, organizations, and community leaders are contacting the Governor and legislators to restore cuts to last year’s level or, at least to the amounts allocated in the Governor’s or House budget. However, those budgets were based on the assumption that state revenues for next year would be $19.5 billion. By the time the Senate considered the budget, leading state economists told us that their most optimistic prediction was for state revenues to be $17.8 billion. Even this number, we were told, could erode further if the economy keeps slipping Many good, worthwhile state and local programs that help people who need that help will not be funded, or will not be funded at the level needed to help all who seek assistance.

Some have urged that taxes be increased; however, with the tax base in such rapid decline, any increase in rates will not produce much new revenue. Just as with people in their personal lives or businesses, state and local government is faced with dramatic cuts to services. We must all learn to do what needs to be done more efficiently and economically so that scarce public dollars can be stretched. People in Massachusetts are resourceful and caring. We will weather this fiscal storm if we all work together.

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