When my boss came back to the office from a briefing this morning, he told me about the December revenue numbers and my comment was something to the effect of you know they’ll spend it ASAP. Apparently, I was right. While I am overjoyed that MA revenues have exceeded projections, especially in December, I don’t think that now is the time to restore some of the 9c cuts. Between the Governor’s commitment to restore regional school transportation and the $14 million restoration of TAFDC, the money is already spent.
Now, it should come as no surprise that I favor spending on social safety net programs and believe that we (in MA and nationally) spend far too little money on these programs. So then why do I think that restoring some cuts is bad policy? Well (and hopefully I am not speaking out of school) close to half of the increase in the December revenue numbers is due to tax settlements. This is not actual revenue growth, but merely one time events. And, one or two months of okay revenue numbers does not make a healthy fiscal year. There are no guarantees that January through June will meet, let alone exceed, the October projection (new revenue projection for FY10 is due out about the 15th and it will be interesting to see how DOR/ANF view the world).
The danger here, in case it is not yet obvious, is that the state’s fiscal picture could worsen between now and the close of the fiscal year. Then what? Do we go back and make further 9c cuts? Do we take back the money we restored in January?
What the administration ought to do is put the higher revenue into the stabilization fund. I do not advocate that as a means of replenishing, but rather as a safe place to store cash in the event that it becomes necessary between now and July 1. Of course, as we get closer to the end of the FY, if revenue numbers continue to improve then we ought to consider restoring some of the painful cuts that have been made. But only insofar that those funds are not going to be needed simply to provide level services in FY11.
Alas, this just is not politically feasible. First, everyone on Beacon Hill likes to spend money. Especially given the drastic cuts that have been made this year. Plus, it’s an election year and putting money into the stabilization fund, though prudent fiscal policy, is not sexy politics. It’s really just that simple.