BOSTON — Citing downsides for consumers, investors and state government and those it serves, House Speaker Robert DeLeo expressed grave concern about the impact of the approaching federal fiscal cliff and said he sees the odds of it being averted at about 50-50.
During a brief interview Wednesday, DeLeo said the state’s $540 million budget shortfall could rise to nearly $900 million unless Congress and President Obama can find common ground on an alternative to major spending reductions and tax increases on the verge of hitting across the country.
“This could turn out to be a whole lot worse than it is right now,” the Winthrop Democrat said.
During a recent encounter with Congressman Edward Markey, the dean of the state’s all-Democrat U.S. House delegation, DeLeo said he asked Markey whether he believed the spending cuts and tax hikes scheduled to take effect Jan. 1 would occur or whether negotiators would find a new deficit reduction course.
“His answer was he felt that there’s no way that that could be allowed to happen and they could resolve the issue,” DeLeo said. “Having said that, I think I’ve heard the sum of those statements from Washington before and I find the position we’re in now — watching what’s going on right now, it almost seems to be just a recurring theme — discussions at the beginning, things break down.”
Does DeLeo think a divided Congress — Republicans control the House and Democrats rule the Senate — and Obama will find a safer path and steer clear of the cliff?
“I’m not sure I want to say I’m hopeful,” DeLeo said. “Well, maybe hopeful is the right word. But I’m not sure if I’m optimistic that they’re going to be able to come up with a solution. But I really hope they do because that’s again going to be money directly to the state, not to mention what that could mean for the economy of the country and in each state in particular.”
He added, “I hope the puzzle all comes together and works in our favor but right now it’s probably 50-50 at best.”
In addition to the potential for a $540 million budget problem to grow by $350 million, cliff-triggered tax increases could hit Massachusetts hard given the state’s high per capita income and wealth compared to other states.
Noting he spoke last week to a group of investors and financial services sector officials, DeLeo said, “What I heard loudly and clearly was they’re watching very closely in terms of what’s going on in Washington, in terms of what their next move is going to be relative to investing funds, hiring, stocks and the like. So this could have some real, real damaging effect.”
Attendees told DeLeo tax increases would affect their business decisions and personal spending plans.
“That’s what I heard from some of these folks,” he said. “They’re talking about well if I’ve got X, Y, Z company and I’m going to get hit with this tax, then what is that going to mean? If I am going to be paying more taxes myself personally, then I’m not going to have the money to invest and you know so on and so forth.”
House members quickly expressed concern to DeLeo about Gov. Deval Patrick’s new request for the authority to trim a local aid account by 1 percent, DeLeo said. Patrick’s budget-balancing plans that require legislative approval, as well as his standing request for $30 million to address the fallout from a drug lab evidence tampering debacle, will likely see legislative consideration in January, DeLeo said.
Patrick administration officials say the 1 percent cut is manageable and will ensure that cities and towns share the pain of budget cuts being felt across state government.
But DeLeo is already hearing concerns. “Anytime you’re looking to touch local aid, it’s just a very, very difficult task and I’ve already heard from the membership,” he said.
DeLeo suggested that critics of the drug lab spending bill and Patrick’s budget-balancing proposal are poised to object to the advancement of those bills during informal sessions scheduled for the rest of December, which means efforts to advance those bills will have to wait until the new year.
Patrick’s $30 million drug lab-related spending request is “probably the right number right now at least to start,” DeLeo said, adding that the House could roll the drug lab spending and budget-balancing plans into one bill next year.