Baker admin hopes to avoid layoffs in budget reckoning

Boston Statehouse

“Honestly, I can’t think of a less risky activity,” Gov. Charlie Baker said about riding the MBTA, after imitating a rider’s behavior during a Wednesday press conference. (Nancy Lane/Boston Herald/Pool)

BOSTON (SHNS) – Gov. Charlie Baker’s administration hopes to avoid government layoffs both this year and next year, the governor’s top budget official told lawmakers Wednesday, describing Baker’s new spending plan as a “stability” budget intended to protect services at a time of great need.

“We’re not looking, unless things deteriorate remarkably, to do anything but stay the course and bend the growth curve … ,” Administration and Finance Secretary Michael Heffernan said. “This is the time people need the government the most.”

The governor’s budget chief also identified a major wildcard in the months ahead – enrollment growth in the massive MassHealth program, which unless controlled can quickly consume revenues eyed by other state programs.

Heffernan and legislative leaders had one eye on the current fiscal year, which began on July 1, and the other on fiscal 2022 as the House and Senate Ways and Means Committees held a hearing on Gov. Charlie Baker’s revised $45.5 billion budget proposal for fiscal 2021. An annual state budget was due July 1 but state government has been operating on interim budgets since then as leaders waited to gauge the economy’s response to the pandemic and to see if Congress would deliver additional financial aid to states.

Baker has said he’d like to have the budget finished by Thanksgiving, and he filed a $5.4 billion interim budget Wednesday to cover spending beyond Oct. 31, but legislative Democrats have not given a timeline for taking up the governor’s latest plan, and House Ways and Means Chairman Aaron Michlewitz said the next steps are to continue talking with members.

“This was an important step today. Obviously him filing the budget was an important step as well. The interim budget is going to obviously be needed,” Michlewitz said after the hearing, telling the News Service he did not have a specific date or clear process outlined for when and how to take up the budget.

Baker’s updated budget proposes to spend about $900 million more than he recommended back in January due in large part to a 9.2 percent increase in costs at MassHealth, where enrollment has grown by 161,000 people since March to more than 1.9 million people for the first time since 2016. To balance the spending bill and account for a projected drop of $3.6 billion in tax revenue, compared to revenues forecast in January, Baker relied on $1.8 billion in federal relief funds and up to $1.35 billion in reserves.

Both Heffernan and Health and Human Services Secretary Marylou Sudders identified the challenge of maintaining MassHealth benefits through fiscal 2022 when enrollment is projected to eclipse 2 million people – or more than one of every four state residents – due to the pandemic.

“The fiscal cliff on MassHealth in FY22 is significant,” Sudders said.

Apologizing to Sen. Cindy Friedman, Sudders said next year’s budget may require difficult decisions about whether the state can afford some MassHealth benefits, including behavioral health. “I wish it was your fault,” replied Friedman. “Then we could do something about it.”

Transportation Secretary Stephanie Pollack also had her eye on fiscal 2022, telling the committees that next year “is the biggest challenge the T faces” because the transit agency will have spent its federal CARES Act money but is not expecting service to have rebounded to its pre-pandemic levels.

Pollack said the MBTA is taking a multi-pronged approach to getting through this year and building up reserves for a difficult 2022 fiscal year.

Along with reallocating some federal funds, seeking legislative approval to pay capital workers’ salaries with borrowed funds instead of from the operating budget, and pursuing other cost savings, the T is looking to cut “spending on currently underutilized services,” Pollack said. The MBTA is “providing more service than its revenues can support,” she said.

“But more importantly, it’s providing more service than its ridership justifies, and I don’t mean just current ridership,” Pollack said. “I mean the ridership that’s projected for a year from now and even two years from now, given the continuing pandemic and economic dislocation but also changes in travel patterns.”

The administration has also proposed to use $550 million from the Coronavirus Relief Fund, which would exhaust the state’s allocation from the federal CARES Act. Michlewitz, however, questioned why not all of the $1.1 billion in CARES Act funding authorized to be spent in July by the Legislature had been allocated.

“We really have a hard time moving forward and using coronavirus funds without some of these things being allocated,” Michlewitz said.

Heffernan promised to provide the Legislature by Friday a “road map” for when and to whom the remainder of the earmarked money will be dispersed. “We’ve had some difficulties in making sure people get their money,” he said.

Senate Ways and Means Chairman Michael Rodrigues questioned whether the state was in jeopardy of forfeiting any of the $502 million in Coronavirus Relief Fund money allocated for cities and towns if it is not used by Dec. 30.

Heffernan said the state was in the midst of a second round of dispersing municipal relief money after $100 million was claimed in the first round. “Any unspent money from that $502 million will not go back to the feds. We have plans to use all of that money so that we do not waste a dollar,” Heffernan said.

Administration officials said that in virtually all cases the proposed spending decreases from Baker’s original budget in January were due to reduced caseloads, including a $5.9 million decrease in funding for substance abuse prevention.

Housing and Economic Development Secretary Mike Kennealy outlined $92.7 million in proposed spending intended to support the state’s economic recovery, including a $7.7 million grant program to support technical assistance for minority- and women-owned businesses, particularly micro-businesses.

Kennealy said that money would be focused on helping smaller businesses do more online, something that emerged as a “critical need” during conversations with the business community this summer.

He said the administration is also looking to invest in the innovation economy, which will “ultimately be a source of growth and recovery for our economy moving forward.”

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