Gov. Charlie Baker with Administration and Finance Secretary Kristen Lepore.

THE BAKER ADMINISTRATION said on Wednesday that it is steadily reducing the state’s reliance on one-time revenue solutions, but nevertheless wants to balance the fiscal 2017 budget using $150 million that was slated to go into the state’s rainy day fund.

Under state law, the state is supposed to transfer any capital gains tax revenues above a threshold of $1.484 billion into the rainy day fund. Under current projections, capital gains tax revenues are expected to exceed the threshold in fiscal 2017 by $356 million. The Baker administration plans to funnel $206 million into the rainy day fund and use the remaining $150 million to balance the budget.

Standard & Poor’s late last year changed its financial outlook for the state from stable to negative because of concerns about the use of rainy day funds to pay for spending at a time when the economy is growing.

In theory, rainy day funds should be built up in good economic times so they can be tapped when the economy contracts and state revenues shrink. That approach has not been followed the last few years in Massachusetts, suggesting the state is living beyond its means financially.

CommonWealth reported in September that the amount of money in the state’s rainy day fund had fallen by 28 percent over the last four years even as state tax revenues grew 17 percent. The Massachusetts Taxpayers Foundation issued a report in November warning that the rainy day fund had a balance equal to 3 percent of state spending, which was comparable to low points following the 2002 and 2008 recessions.

At a State House press conference, Baker said he had no concerns the state’s bond rating would be downgraded. The governor said his administration was making progress in eliminating a structural deficit that came about because state government was spending more money than it was taking in.

Gov. Charlie Baker with Administration and Finance Secretary Kristen Lepore.
Gov. Charlie Baker with Administration and Finance Secretary Kristen Lepore.

Kristen Lepore, his secretary of administration and finance, said she had known all along it would take several years to eliminate the state’s structural deficit and bring spending in line with revenues. She said the state relied on $1.2 billion in one-time solutions to balance the fiscal 2015 budget. The cost of one-time solutions fell to $600 million in the current fiscal year and would fall to $253 million in the governor’s budget plan for fiscal 2017, which begins July 1.

Bruce Mohl oversees the production of content and edits reports, along with carrying out his own reporting with a particular focus on transportation, energy, and climate issues. He previously worked...

One reply on “Baker diverts $150m from rainy day fund”

  1. That approach has not been followed the last few years in Massachusetts, suggesting the state is living beyond its means financially
    Actually the biggest cause of this the falling tax rate voted by the voters after the legislature promised to reduce it (when they feel it should happen). Even the DOR has certified it as the cause of it when the rate fell from 5.20% to 5.15% at the start of the 2015 (FY2014).
    Another problem is the estimate of other revenues that has not materialized when the revenue estimates was agreed to by both the House, Senate & the Governor last July (FY2015).
    I knew all along that the state will continue to have this problem for the next few years despite underinvesting in many areas for years.

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