BOSTON, Mass. (WWLP) - The Patrick administration's budget chief says $300 million dollars could disappear from this year's state budget and another $1 billion could be cut from next year's state budget if Congress fails to compromise on across the board spending cuts and tax increases scheduled to kick in at the end of the year.
"There's going to be lots of money that used to be in the economy that isn't going to be in the economy anymore, and so the economy is going to contract," said Administration and Finance Secretary Jay Gonzalez. "We're going to get less tax revenues as a result. There's going to be less money in the economy, there's going to be less that people are spending to buy stuff and that means less sales tax."
This so-called fiscal cliff will have an immediate impact on programs that receive federal funding like special education, heating assistance for low-income families and other services across the state.
"We will see cuts to our grant programs to our police and fire, we will see cuts to our education," said Rep. Brad Hill (R-Ipswich).
The fiscal cliff could be averted if Congress reaches a compromise. President Obama has proposed a $1.6 trillion plan to raise taxes on corporations and the wealthiest 2 percent of Americans. He's also proposed $1 trillion in savings by ending the wars in Iraq and Afghanistan and slicing $340 billion from health care spending.
"The president has proposed a balanced approach to deficit reduction," said Gov. Deval Patrick. "The reason we haven't reached that solution so far is because of an obstructionist politics among the hard right in the Congress."
As a cloud of uncertainty looms over Washington, Secretary Gonzalez says investor confidence is going down, which is causing the market to tumble and tax revenue collections to come in lower than projected in Massachusetts.