Massachusetts got a sampling of trickle-down economics this week, and it’s leaving a bitter taste all around.
Gov. Deval Patrick announced that he is planning mid-fiscal year spending cuts as a way to reduce a budget deficit that is projected to reach $540 million by the end of June 2013.
How does this amount to trickle down? The governor and others say they are see the state’s economic picture being directly influenced by what’s happening at the federal level ... particularly uncertainty about whether Congress will act to avoid the “fiscal cliff.”
“By all accounts, that uncertainty and the resulting slowdown in economic growth is the direct cause of our budget challenges,” Patrick said in an Associated Press story. “Economists agree that the fiscal cliff is keeping a tremendous amount of private capital on the sideline. Business leaders I meet with confirm that fact.”
Like it or not, the governor is right in trying to take a proactive approach in heading off what could be a much bigger problem.
That said, one of the places that the governor has called for cuts aims directly at the cities and towns across the commonwealth ... and that’s a mistake. This comes from a “1 percent across the board reduction to unrestricted local aid” that is seen as netting the state $9 million in the effort to close the gap.
While $9 million out of $540 doesn’t seem like a large amount, just how crucial local aid is can’t be underplayed.
“Every community will be impacted,” Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, told reporters. “The 1 percent sounds small, but it will destabilize current budgets that are in place and communities will have to take action.”
Beckwith has a point, especially when he reminds everyone that the state’s cities and towns have, since 2009, had to swallow a whopping 32 percent cut in state assistance.
Greenfield in particular should also be worried about another aspect of the governor’s plan, whereby $20 million will be saved with a “reduction in the amount of sales tax revenues that will automatically be transferred to the Massachusetts School Building Authority to support local school building costs.”
The town will need a quick answer from the state as to likely impact, if any, on the high school construction project ... which is in a crucial stage.
It’s not a great situation, though if there is something that communities can be thankful for, it’s the decision by the Patrick administration to spare Chapter 70 education funding from cuts.
In the coming months we’re sure the picture will brighten.
But how quickly things turn around isn’t just based upon steps taken here in Massachusetts.
Congress must act and avoid the cliff, providing some basis for confidence in the future.