Governor Baker Estimates $765 Million Budget Deficit for Fiscal Year 2015

Boston – Governor Charlie Baker today announced an estimated $765 million state budget deficit for Fiscal Year 2015. Along with Lt. Governor Karyn Polito and Administration and Finance Secretary Kristen Lepore, Governor Baker identified the current deficit as a spending problem, not a revenue problem, and reiterated his commitment to protect local aid and prevent tax increases as the Administration works to reduce the deficit.

Governor Charlie Baker
Press Briefing Room, State House Room 157
January 20, 2015

Governor Baker: Good morning everybody. Lieutenant Governor Polito, Secretary Lepore and I are here today to discuss one of the issues that we’ve been spending some time working on for the past ten days, which is the size and scale of the Fiscal 2015 budget deficit. After careful review, line item by line item of every piece of the state budget and discussions with agency heads, administration CFOs, and members of the Legislature, we’ve determined the size of the fiscal deficit in Fiscal 2015 is $765 million. Now that $765 million has a lot of moving parts in it, but tax revenue for the most part has come in pretty much on benchmark, about a 4.5 percent increase Fiscal ’14 to Fiscal ’15, about a $24 billion total overall. State spending on the other hand, after the Governor’s 9C cuts from the previous year, is going to go up by about 7.3 percent, far in excess of the growth of state tax revenue, and therein lies the $765 million problem. It’s made up of a number of elements, the biggest element of that is the ongoing issues associated with managing the state’s Health Connector. We believe at this point in time that this represents about a $230 million piece of the puzzle. The Group Insurance Commission, which represents health insurance coverage for state employees, retirees and municipal employees and retirees, is another $155 million. Departmental revenue, which is an interesting item, is also going to come in below the budget benchmark by somewhere in the vicinity of about $180 million. The long story short: the deficit is about $765 million, spending seems to be the primary issue here, tax revenue’s about where people thought it would be, and we will obviously make these decisions as we go forward with great sensitivity and careful judgment. But as we’ve said many times before we are not going to cut local aid to solve this problem. We are going to work collaboratively with the Legislature on solving for it because we must solve for it, and it’s an important part of setting the table for our Fiscal 2016 budget, which we have to file at the end of February.