BOSTON — Already facing the “strong likelihood” of midyear budget cuts due to slow economic growth, Gov. Deval Patrick’s budget chief has told the state’s municipal leaders that a failure by Congress to avert the so-called “fiscal cliff” in the coming weeks would cost the state up to $300 million this fiscal year and $1 billion over the next full fiscal year.
Secretary of Administration and Finance Jay Gonzalez provided the projection to town and city officials Wednesday at a meeting of the Local Government Advisory Commission, advising them that hundreds of millions of dollars in grants that flow through the state to municipalities could be at risk, as well as almost $1.5 billion in defense and health spending.
“The consequences of this are pretty dire. I think we’ve seen some positive statements coming out of Washington about a commitment to try to address this in a responsible way before January,” Gonzalez said.
Following a dismal month for tax collections in October that saw the state fall to $256 million below revenue projections for the year, Gonzalez said no final decisions have been made but reported a “strong likelihood” that the administration would revise downward its revenue projections and announce mid-year budget cuts soon.
“I’m sorry to not have better news,” Gonzalez said. While the economic growth rate of 1.9 percent in the third quarter was slower than anticipated due, in part, to uncertainty over federal deficit negotiations and economic turmoil in Europe, Gonzalez said the failure to address the fiscal cliff could have a further chilling effect on growth.
Come January a number of federal tax breaks are due to expire and $1.2 trillion in budget cuts spread over nine years will go into effect unless the lame-duck Congress can find common ground on an alternative approach to deficit reduction.