Massachusetts Economy in Distress, Report Says
DISTRESS
Worcester Telegram & Gazette
Jason Millman
Boston University Washington News Service
March 5, 2008
WASHINGTON – Massachusetts, facing a billion-dollar budget deficit and increases in housing foreclosures and the number of people receiving food stamps, ranks eighth on a list of 15 states in the “most economic distress,” according to a report released this week.
The study, compiled by the Center on Budget and Policy Priorities, a nonpartisan research center, ranked states based on changes in employment, housing foreclosures, and food stamp participation.
Although employment in Massachusetts actually rose .8 percent in the last three months of 2007 compared with the same period in 2006, the commonwealth made the list because of a large jump in foreclosures and increase in food stamp participation, which the study said indicates an increase in poverty.
Foreclosures in Massachusetts increased .38 percent from the third quarter of 2006 to the third quarter of 2007, the seventh highest level in the country, according to the report. Early indications also show the housing market will continue to be problematic this year. There were more than 800 foreclosures in Massachusetts in January, the highest number since August 2007, according to the Warren Group, which provides New England real estate data.
The food stamp caseload in Massachusetts increased 6.9 percent from 448,000 to 479,000, the ninth-largest increase in the country, according to the report.
Among the 15 most distressed states were Rhode Island, which ranked third in the report, and New Hampshire, which ranked 14th. There were 12 other states that were ranked in “economic distress,” including Vermont, Connecticut and Maine. Nevada and Minnesota topped the list, and Florida and California ranked fourth and fifth, respectively.
The study also found that more than half the states in the nation are projecting a budget deficit for the coming fiscal year, which means they will have to cut services or raise taxes.
The Bay State should receive federal assistance to help balance the commonwealth’s budget to avoid being forced to raise taxes or make significant cuts to services, said report co-author Elizabeth McNichol, who said the problems facing states in economic distress can be attributed to national factors out of the states’ control.
“It’s nothing the states have done,” Ms. McNichol said. “States have to balance their budgets, and if they take actions like cutting expenditures to do so, they’re making the national and state economy worse.”
Ms. McNichol referred to a $20 billion grant Congress gave to the states in 2003 to help balance their budgets. Half of the $20 billion went toward Medicaid, and the other half funded service programs. The report recommends Congress take a similar action this year but only give funds to the 27 states in economic distress.
U.S. Sen. Susan M. Collins, R-Maine, who led the 2003 effort, has been in discussions with other senators to sponsor a second economic stimulus bill to provide direct budget assistance to the states, according to her press secretary.
Ms. McNichol said the three factors the report focused on are indicative of the states’ overall bleak economic picture.
“If people aren’t working, they’re not paying income tax, and they’re not consuming much either,” she said. “If there are increases in poverty, there are going to be pressure on health care programs and social service programs that affect lower-income people.”
Noah Berger, executive director of the Massachusetts Budget and Policy Center, an independent organization that reviews the state budget, said funding for essential programs like health care and education will be scrutinized greatly in the legislature as Massachusetts tries to remedy a projected $1.2 billion budget deficit.
“Massachusetts is in a very severe fiscal crisis, from both long-term and state-based issues, primarily that we cut taxes deeply during the ’90s, which means that in good times, we barely get by and haven’t been able to restore spending on education and local aid,” Mr. Berger said.
Mr. Berger said the federal government should help Massachusetts fill the budget gap because many of the problems affecting the state stem from national issues. The 2003 federal grants helped Massachusetts get through the last fiscal crisis, he said.
“The state still raised taxes and cut spending deeply, but it would have been that much worse without it,” Mr. Berger said. “A similar or perhaps somewhat larger level of support would both be good for Massachusetts and good for the national economy.”
The Center on Budget and Policy Priorities focuses on issues that affect low- and moderate-income people and conducts research on how proposed budget and tax policies will affect them.
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