The Massachusetts Senate unveiled a $27.8 billion spending plan Wednesday that rejects new taxes and leaves untouched the state's rainy day savings account.
Senate Ways and Means Chairman Steven Panagiotakos said the proposed budget for the 2011 fiscal year relies on deep cuts including a $159 million reduction in aid to cities and towns. The Massachusetts House has already endorsed the cut.
He said that despite the rollback in local aid, every community will receive enough education aid to meet the requirements of the state's 1993 Education Reform law designed to make sure all school districts have an adequate amount of money.
He said the Senate budget maintains level funding in 154 line items and reduces spending in another 312 compared to the current year's spending.
Lawmakers have little choice but to tighten state spending given the slow recovery from the recession. The state relies on income and sales taxes for more than 70 percent of its revenues and until more people can get back to work, those revenues will remain meager, he said.
"We will have to live with the actual ebb and flow of our existing revenues," said Panagiotakos, D-Lowell. "We as a Legislature can't create jobs in the private sector, but we can create the fertile field."
To encourage job growth, the budget increases spending on career centers, work force training grants and jobs programs for teenagers by $7.7 million.
The budget also targets extra funds to help ease the plight of the state's homeless.
That includes $2 million to renovate 2,000 units in public housing developments across the state that are currently uninhabitable.
Panagiotakos said it's far less expensive to revamp the units than to pay to put up homeless families in hotel rooms. The number of homeless families in hotel rooms has jumped as the economy collapsed.
The budget would also create a new agency to allow state agencies to save money by pooling utility bills and purchasing power in bulk.
The Senate budget is similar to the House's but differs from Gov. Deval Patrick's $28.2 billion spending plan. Patrick's proposal maintains education and local aid for cities and towns, increasing taxes on candy and soda and draws up to $200 million from the rainy day fund.
Patrick's Secretary of Administration and Finance Jay Gonzalez called the budget "thoughtful and fiscally responsible," but said the administration was concerned about the proposal to reduce funding for local aid and education.
"This is yet another step in the budget process and we look forward to continuing to work with the House and the Senate," Gonzalez said.
Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said the Senate plan is the best that can be expected given the state's bleak revenue outlook, even though it relies heavily on one-time federal stimulus dollars.
"The major concern is that it still uses $2 billion in one time money that won't be available in 2012," Widmer said. "We're virtually assured of a fourth year of budget cuts."
Panagiotakos, who isn't running for re-election, agreed the budget situation isn't likely to get easier anytime soon.
He said the expected loss of federal stimulus funds could make next year's budget debate even grimmer. He said the state already faces up to a $3 billion budget gap for the 2012 fiscal year.
Adding to the uncertainty are two proposed ballot questions.
One would roll back the state income tax rate from 6.25 percent to 3 percent. The second would exempt alcohol sold in stores from the state sales tax.
If both pass, the state would see an additional loss of revenue of more than $2 billion.
Panagiotakos said the Senate budget would funnel all the revenue from the alcohol sales tax into substance abuse programs.
The Senate is set to begin debate on the massive spending plan on Wednesday. The House has already approved their version of the budget.