Fiscal cliff could impact local communities

LENOX – The debate over the so-called “fiscal cliff” in Washington may have a real impact on local communities in The Berkshires.

That was the message 4th Berkshire District Rep. William “Smitty” Pignatelli had for his constituents at the Lenox Board of Selectmen’s most recent meeting.

“If the fiscal cliff in Washington is real, we’re going to have to face our own fiscal cliff,” said Rep. Pignatelli.

Fiscal cliff is a term being used for the automatic spending cuts and tax increases set to take effect at the beginning of 2013. These measures were set in place as a compromise between President Barack Obama and the Republican-controlled House of Representatives in exchange for the house voting to raise the ceiling on the national debt in 2011.

These across-the-board cuts, slated to kick in at the exact same time the Bush-era tax cuts are set to expire, were supposed to force members of both parties to compromise on a serious debt reduction plan. So far, however, no compromise has managed to gain traction, despite negotiations between Republican House Majority Leader John Boehner and Pres. Obama.

Some state government officials, including those in Massachusetts, have expressed worry about the fiscal cliff because of cuts in federal programs that aid states that would take effect if the federal government were to go over it. They’ve also worried going over the cliff will negatively impact the economy.

Both of these outcomes could also affect local governments, as cuts to state aid from the federal government may result in a reduction in local aid, as would decreased state revenues from a bad economy.

“A lot of those federal programs would trickle on down to the states,” said Rep. Pignatelli.

Compounding this for Massachusetts is the fact the state missed its revenue-collecting targets this fall and thus is looking at a budget shortfall, whether or not the fiscal cliff is gone over.

“With or without [going over the fiscal cliff], Massachusetts missed its benchmarks,” said Rep. Pignatelli when asked about the states financial situation by the selectmen.

Still, Rep. Pignatelli was optimistic, if the federal government did not go over the cliff, cuts to local aid might not take place, especially if the state collected a large amount of revenue this holiday season. He also said 2013 was looking to be a good economic year for Massachusetts and the state had one of the highest rainy day funds in the country.

“If revenues increase….we may be able to close that gap a little bit,” he said.

Even if the fiscal cliff is gone over, however, Rep. Pignatelli doesn’t believe the cuts to local aid will be draconian, pointing out Governor Deval Patrick is currently proposing a one-percent cut to local aid as part of his proposal to plug the state’s budget gap.

“In Lenox’s case, it’s 4,500 bucks,” Rep. Pignatelli said in comments to The Beacon.

These cuts would be more significant to some other communities in western Massachusetts. For instance, in Springfield, these cuts would amount to $320,000. Gov. Patrick is also asking for the authority to reduce local aid more this fiscal year if the budget gap doesn’t improve.

As for what towns can do with this information, Rep. Pignatelli suggested to the Lenox selectmen they proceed conservatively with their budgeting, something he noted Lenox has a history of doing.

“I would encourage you to proceed cautiously,” said Rep. Pignatelli. “At this point I think it’s premature to say whether you’ll be level-funded on local aid or there’ll be a five-percent cut.”

“I think everything’s on the table,” said Rep. Pignatelli, when asked by Selectman Channing Gibson about the status of community preservation funding. “The governor, to his credit, has not whacked one line item.”

Both the budget gap and the fiscal cliff have also influenced the discussion on taxes in the Massachusetts Legislature.

There is a push this year to reform the tax code in Massachusetts. Some of the primary proposals being floated are to cut tax expenditures (tax credits), particularly those for businesses, raising the income tax in a way that predominately effects the wealthy and raising the gasoline tax.

“If we do have it [the fiscal cliff], I hope it accelerates the discussion,” said Rep. Pignatelli when asked by The Beacon how these factors would influence the prospect of tax reform, something he is a supporter of.

While not giving the specifics of any particular proposals he might support, Rep. Pignatelli said he believes the dialogue will start taking place.

“I think we’re gonna be really hitting the ground running [on tax reform], with or without the fiscal cliff in January and February,” he said.

Posted by Bera B. Dunau on December 27, 2012. Filed under Breaking News,Community News,News,State News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry