MassHealth, schools, fire depts.: Losers in Mass. Gov. Healey’s $375M spending cut [masslive.com]

(*This story was updated at 1 p.m. on Tuesday, Jan. 9, 2023 to clarify the spending reductions surrounding MassHealth.)

Massachusetts’ state-run health insurance program, MassHealth, will bear the brunt of the $375 million that Democratic Gov. Maura Healey plans to slash from state spending in response to flagging tax revenues. But the suite of reductions the administration announced Monday leaves few sectors of government untouched.

Programs ranging from behavioral health supports ($5.2 million) and housing services and counseling ($5 million) to grants to local fire departments ($1.6 million), earmarks for parks ($772,500) and economic development projects ($11.3 million) all will fall under the budgetary knife as Healey’s office said it looked to rein in costs while avoiding cuts to core functions of state government.

Other areas targeted for reductions include grants for high school dual enrollments ($2.5 million); local public safety earmarks ($1.5 million); grants to local public health boards ($2.49 million), and grants to councils on aging ($950,000).

What’s not on table? Layoffs, a withdrawal from the state’s Rainy Day Fund, or any money that’s supposed to be used to address Massachusetts’ ongoing emergency shelter crisis, a senior administration official said.

The $1 billion tax cut package that lawmakers passed, and Healey signed into law last year, also will remain untouched.

“What the average taxpayer should know here is that we’re on top of the situation,” Healey’s budget czar, Matthew Gorzkowicz, said during a Monday briefing on the cuts, which do not require legislative approval, and are expected to go into effect within the next few days.

*Payments to MassHealth will be cut by $294 million, according to an analysis that Healey’s office released on Monday. The move was primarily prompted by “members using fewer services than we had originally budgeted. The remainder, a smaller part, is from modest, targeted adjustments to what is paid to managed care plans,” an agency spokesperson told MassLive.

Other social services accounts, such as the Commonwealth Care Trust Fund, another MassHealth offshoot, will see a $50 million funding cut, according to the analysis the administration released Monday, noting that there’s already enough money in the account to cover its anticipated expenses.

Healey let legislative leaders know about the administration’s plans in a Monday letter, where she laid out the state’s current fiscal picture, and alerted them that her office was reducing its 2024 revenue estimate by $1 billion, to $40.41 billion.

“In crafting spending reductions, we have done our very best to protect investments that are critical to Massachusetts’ future, limit impacts to programs and services, and to avoid negative impacts to the most vulnerable of our residents,” Healey wrote. “In addition we have refrained from any reductions to Local Aid and school funding.”

State Sen. Peter Durant, R-Worcester/Hampshire, told MassLive that he was nonetheless concerned about the cuts’ impact on local government, which “rely on these funds” to provide services to citizens.

Durant, who received word on the reductions on Sunday night, singled out reductions to fire and public safety spending as particular areas of concern.

“We’ve said revenue was coming up short and we needed to control spending,” Durant told MassLive. “Now this is coming to roost.”

At the same time, however, the reductions provide policymakers “with the opportunity to take a long, hard look” at how the state spends the public’s money, and from those deliberations, “decide what’s important to us,” Durant said.

The Democratic administration’s announcement comes just weeks after Healey, who has just started her second year in office, said she did not anticipate making such cuts, according to State House News Service.

Legislative leaders already were casting worried glances at the state’s financial health before the administration’s planned action. Revenue collection numbers released last week drove Monday’s announcement, officials said.

The commonwealth collected nearly $3.8 billion in taxes last month. That’s $82 million, or 2.1%, less than collections at the same time in 2022; and $138 million, or 3.5%, behind official benchmarks, MassLive previously reported.

Year-to-date collections totaled $17.86 billion, which was $60 million, or 0.3%, ahead of collections at the same time in 2023, but still $769 million, or 4.1%, behind projections, according to state Revenue Department data.

Speaking to reporters Monday, Gorzkowicz stressed that the state “can’t spend what we don’t have,” and said the administration was making the “necessary responsible budget reductions to ensure fiscal responsibility, [and] to make sure that we are not in a situation where we have to dip into our state’s rainy day fund — which [is] reserved for those really, you know, extraordinary circumstances where we do have a recession, and do have to make tough choices and preserve programs.”

In addition to the cuts, officials said they’d “identified certain revenue opportunities” that would increase the state’s non-tax revenues by $625 million. Pressed for specifics, Gorzkowicz said the windfall came from “interest earnings” on state investments, but did not provide much additional detail.

The administration also is leaving untouched the account that it plans to tap to cover the rising costs of the state’s emergency shelter system.

With the tab there expected to approach $1 billion a year for the next, two budget cycles, the administration has said it plans to drain a $700 million state escrow account to cover some of that expense, State House News Service previously reported.

In a statement on Monday, a spokesperson for the pro-business Massachusetts Fiscal Alliance called on the Democratic administration and the majority-Democrat Legislature to rein in spending and “to take bold action and move for broad-based tax relief to stem the outflow of Massachusetts residents and businesses.”

Monday’s announced cuts were the end result of “many poor economic decisions made by Beacon Hill leaders,” over the past year – starting with the state’s “millionaire’s tax,” the spokesperson, Paul D. Craney, said in an email.

“Our economy thrived for years under a flat tax structure, and we likely could have continued to thrive. Instead, Beacon Hill leaders pigheadedly allowed our competitive edge—the flat tax—to be eliminated and we’re paying the price now,” Craney said.

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