Publications: FY 2008

The state is facing a $500 million deficit in fiscal 2008 and the recently passed House budget for fiscal 2009 is at least $1 billion out of balance, creating a situation in which more than half of the state's reserves could be depleted in the next year without even accounting for a recession.

Tax revenues will grow somewhat better than expected in fiscal 2008 but increase only marginally in 2009, according to a forecast released today by the Massachusetts Taxpayers Foundation.

"How long will the luck hold?

For the past three fiscal years the Legislature has passed budgets which depended on reserves to achieve balance. In each case tax revenues came in better than forecast, largely because of capital gains, eliminating the need to actually deplete the reserves.

"The fiscal 2008 state budget debate turns to the Senate this week at a particularly delicate time for state finances.

Governor Patrick's fiscal 2008 state budget includes a proposed spending increase of 3.8 percent. Tables 1 and 2 summarize his recommendations by category and track spending from 2001 to 2008. After adjusting for inflation, proposed 2008 spending is less than 2001 for almost all categories except for Medicaid and employee benefits.

"The House Ways and Means fiscal 2008 budget, which will be debated by the full House beginning April 23, has a bottom line that is very similar to the Governor's budget proposal but rejects most of his specific initiatives.

Tax revenues will grow much more slowly in 2007 and 2008 than they did the past two years, according to a forecast released today by the Massachusetts Taxpayers Foundation.

In its annual review of state finances, the Foundation cautions that while the Commonwealth is in its third year of financial recovery, the state's leaders now face the challenge of choosing from a long list of competing funding priorities that far exceed the state's ongoing fiscal capacity.