• March 9 2010

State and Local Finances

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In a presentation to business and government leaders, MTF President Michael J. Widmer described the enormous fiscal problems that will face the state and municipalities at least through fiscal 2012 - even with an economic recovery. The state has depended heavily on federal stimulus dollars and "rainy day" reserves to balance the 2009, 2010 and 2011 budgets, but those monies will be largely depleted in fiscal 2012 when the state will confront a $2.5 billion shortfall. To complicate matters, two referenda on the November ballot, if passed, would result in revenue losses of $1 billion in fiscal 2011 and $2.5 billion in 2012, doubling the 2012 shortfall to $5 billion with virtually no reserves to help close the gap.

With likely additional cuts in local aid in fiscal 2011 and 2012, it is critical that the Legislature address the unaffordable costs of health care and pension benefits for local employees and retirees. The top priority should be to give municipal officials the same powers over health plan design - outside of collective bargaining - that the Group Insurance Commission has for state employees and retirees. In addition, the Governor has put forward a comprehensive pension reform bill that would make critical improvements in the pension system for state and local retirees.