For fiscal '85, a 'sunny skies' state budget without 'rainy day' funds

Like almost everything else, the cost of running Massachusetts continues to climb and climb and climb. It has been a quarter of a century since a Bay State governor has submitted an annual budget that was leaner than the one submitted the previous year. And the $8,141,444,000 fiscal 1985 budget proposed last week by Gov. Michael S. Dukakis is no exception.

The record spending plan, which may be even bigger by the time state lawmakers finish with it several months hence, is 10.5 percent bigger than appropriations so far for the current 12-month cycle that ends June 30.

Fiscal conservatives (and probably fiscal moderates) are undoubtedly concerned: For the first time in five years the proposed increase in appropriations exceeds the rate of inflation.

The Dukakis proposal - dubbed a ''good times'' budget by Richard Manley, president of the Massachusetts Taxpayers' Foundation (MTF) - appears to offer something for everyone, including some of the commonwealth's most vocal special interests.

The commonwealth's economic growth during the past year probably made it easier to shape this spending package. Built into the gubernatorial proposal is an assumption that this trend will continue well into fiscal 1985.

But if the economy slows down, the governor's proposal could prove to be a financial millstone. Thus, the MTF warns that the Dukakis budget ''proposes to spend too much and seems to reflect a policy to spend to the last dollar whether needed or not.''

The surplus for the general fund - projected at $9.7 million for fiscal 1985 - is particularly thin. This figure compares with $22 million expected to be left over this year and a surplus of $64.4 million when fiscal 1983 ended last June.

The pending budget would be on more solid footing if Massachusetts had a modest reserve fund to tap should revenues fall short of appropriations. Such ''rainy day'' accounts are part of the budgets in more than a dozen states, including some of the larger industrial states which, like Massachusetts, are fiscally sensitive to economic gains and setbacks.

These funds are invested, to yield interest, and are dipped into only under unfavorable fiscal conditions. Without such a nest egg, the commonwealth may sometimes find itself with the unattractive choice of cutting state services or raising taxes.

If all goes as Mr. Dukakis and his budget architects expect, Massachusetts should last at least until July 1, 1985, without a major tax boost. Much depends not only on continued growth in the yield from existing levies but also on legislative approval of two budget-related Dukakis measures.

The first of the two would boost the tax paid on real-estate transactions from $2.28 to $5 per thousand of sales price. The $20 million annual yield is earmarked to pay for state takeover of county courthouses.

The second would tie various state user fees, such as those charged for various business and professional licenses, to the cost of living. Whenever the latter rises, the fees automatically would increase by the same amount.

Whatever its shortcomings, the Dukakis spending blueprint is compassionate. Key provisions include:

* A 5 percent benefit boost for Aid to Families with Dependent Children (AFDC) and General Relief (GR).

* Restoration of state-funded medical care for GR recipients. These people, unlike the elderly poor and AFDC families, lost that coverage in a fiscal pinch during the first Dukakis administration.

* Spending increases of $129 million for education.

* Commitment of an additional $156.7 million to local aid, bringing the 1985 total to $2.4 billion.

Most of these appropriations seem likely to pass the legislature. Less certain are other gubernatorial proposals, which are somehow linked to the fiscal 1985 budget.

One is a $1 million appropriation Dukakis hopes to use to start a development bank. Massbank, as he calls it, would have the borrowing capacity to help fund replacement of sewer systems, water lines, local bridges, and other facilities.

Legislation for a second, somewhat controversial proposal - involving the breakup of the Metropolitan District Commission - is bound to encounter stiff opposition. It would transfer water and sewer operations in the Boston region to a new autonomous state authority, which would set its own rates to charge cities and towns.

The Dukakis budget assumes the proposed change will take place by early next year. Thus, funding for these two MDC divisions is provided only for the first half of fiscal 1985. But if legislation to create the water and sewer authority fails, the state may have a serious budget-balancing problem in the final months of fiscal '85.

In his less-than-enthusiastic assessment of the budget plan, Mr. Manley said: ''We are fearful that it (the budget) contains initiatives which reduce spending by assuming enactment of bills not yet before the legislature.''

The MFT and others are also concerned about the proposed state spending increase. Traditionally, extra funding in one year ''becomes next year's fixed costs,'' Manley said.

Dukakis's 1985 budget is $726 million more than the amount appropriated so far for fiscal 1984, now in its final five months. Lawmakers might bear in mind that overall state spending has nearly doubled since fiscal 1978.

During the past 20 years, annual budgets have increased nearly 1,400 percent. By contrast, the cost of living in the state rose by a more modest 219.9 percent for the same period, says the US Bureau of Labor Statistics.

Continued escalation of state budgets may mean a lot more dollars - but not all that much sense.

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