Beacon Hill's Budget Games

I’m a bit perplexed at the latest round of expectation-setting from Beacon Hill regarding the FY2013 budget.

First, it turns out we still have a structural deficit. But, didn’t the Governor tell us that the FY12 budget “eliminates the structural deficit I inherited from my predecessors”? And MTF President Mike Widmer came close to concurring, noting the near elimination of the structural deficit. Now, we find out there’s a $550 million structural gap. (Plus the cost of pushing out the pension fund, but that’s a bit harder to understand.)

Working from MassBudget’s curiously well-informed preview of the FY13 Governor’s Budget, I next learn that the Consensus Revenue Estimate says we’ll have an additional $840 million in available funds for the budget. Great, flush times, right?

Yet the same document projects an additional $1.4 billion in costs, attributed “primarily to inflation,” leaving us with a deficit of more than $1 billion before we start the budget process. That’s an increase of 4.6 percent based on last year’s budget of $30.6 billion. As a yardstick, inflation was 3 percent in the 2011 calendar year. Even in relevant sub-categories, like medical care, inflation was 3.5 percent. Compensation costs for government employees only grow by around 1.5 percent during this period.

So what’s going on here? Why is the cost of our state government outstripping all the relevant indexes? Let’s figure out why before we turn to … ahem … revenue enhancements.

Crossposted at Pioneer Institute’s blog.