The state of Massachusetts will be cutting state services to balance the budget due to a dramatic reduction of almost $800 million in tax revenues. The state's midyear shortfall may be well over $2 billion, or almost 8% of the entire budget.
The outlook is grim. State officials are expected to meet privately to come up ways to plug the deficit. It will be difficult with unemployment and declining revenues from the state lottery to plummeting of capital gain taxes.
It appears that lawmakers are ready to panic. Massachusetts is in the same boat as many other states. Gov. Patterson of New York already has come up with creative and painful ways to cut into it's deficit. The governor is proposing an "obesity tax" on non-diet soda, reviving the state sales tax on clothing, lifting the limit on how much state tax can be charged for gasoline and eliminating legal exemptions in the income tax that he considers "loop holes". Expect Massachusetts to look closely at these too!
Right now the options that Mass Holes will have to live with include raising the state's gasoline tax, tapping the $1.7 billion in the reserve account, and making deep cuts in spending. It is said that state officials are hoping a stimulus package from the incoming Obama administration could help alleviate some of the revenue problems.
A bailout by the government is wishful thinking - and even if one is granted - it will not be a long term solution. Only a reversal of the recession of can save Massachusetts - and the other states.
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