Senate budget slashes spending; tax debate looms

Senate leaders are proposing to spend $1.3 billion less next fiscal year than the House authorized in its budget passed earlier this month, Senate officials said Tuesday.

The draft budget cuts $439 million from Beacon Hill’s aid to cities and towns and wrestles with a fiscal crisis marked by a prolonged plunge in state revenues by making deep spending reductions and leaving the door open to heavy tax hikes.

Faced with revenue projections that have declined by more than $1.5 billion since Gov. Deval Patrick and the House published their budgets, the Senate Ways and Means Committee planned to release a $26.7 billion spending blueprint Wednesday, or roughly $1.5 billion less Q the state is currently due to spend in the current fiscal year.

Due for floor debate next week, the Senate Ways and Means draft of the fiscal 2010 budget leans on $1.1 billion in federal stimulus aid and $299 million from the state’s dwindling stabilization fund.

“The bottom line is the budget really reflects the financial reality that we are currently working under,” said committee chair Sen. Steven Panagiotakos. “There were no good decisions in this budget, and there will be a lot of concern after people start looking at it, in a lot of different areas.”

The vast discrepancy in spending, predicted by House leaders as they prepared to ratify their budget, could set up a conference committee starting out with a nearly 5 percent differential in spending authorization, unless senators pack the revenue side with new taxes.

The Senate Ways and Means plan calls for $79 million less in funding than the House set aside for municipalities’ chief source of education aid from the state.

“It was very difficult for us to hold the House number in such a big account, so we had to cut Chapter 70,” said Panagiotakos (D-Lowell).

Using $180 million in funds from the federal economic recovery package, the committee bill brings each school district to “foundation,” the funding level the state has estimated as the minimum amount needed to provide an adequate educational program.

But, Panagiotakos said, the Senate calculated foundation levels differently than Gov. Deval Patrick and House leaders, who used a 4.5 percent inflation rate. The Senate, he said, chose the 3.04 percent rate from the fourth quarter of 2008.

The $356 million reduction in non-education local aid would pull that account down to roughly $830 million, roughly 30 percent below the level cities and towns are due to receive this year, after Patrick sliced $128 million during a midyear budget-cutting exercise brought on by the revenue collapse. The House budget panel initially proposed cutting non-school local aid to $889 million, but the full body restored over $200 million through its approval of a 25-percent sales tax hike initially projected to produce $900 million, a forecast that has since been called into question.

The Senate’s plan contains no new revenues. Senate leaders are open to members adding new taxes to the budget during floor debate.

In a television interview Sunday, Panagiotakos called a sales tax increase “more palatable” than other levies on the table.

Both the governor and House used a $19.53 billion revenue estimate. After steady drops in state tax collections punctuated by a precipitous fall in April receipts, state leaders agreed to a $17.9 billion revenue projection for next fiscal year.

After adding over $600 million in spending to a committee budget leaders had described as austere, the House called for spending slightly higher than Patrick’s, despite general acceptance that the state’s fiscal outlook had dimmed considerably.

The Senate budget is starkly less generous than the earlier two proposals.

“I don’t think we could point to a single line item where there was an increase,” said Sen. Michael Morrissey (D-Quincy). “If there are, I haven’t found them.”