CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

 

CLT UPDATE
Thursday, January 30, 2003

CLT News Advisory & Update


No matter what the amount of cuts, there will still be a state budget. It is not possible to cut $400 million, $650 million, or even $4 billion, and as a result be left with nothing to spend on essential services....

CLT NEWS ADVISORY
Jan. 29, 2003
Five Facts to Remember
During Gov. Romney's Address and the Democratic Response


On the eve of Governor Mitt Romney's release of his plans to balance the budget, Senate President Robert E. Travaglini said yesterday he believes taxes will have to be raised to cope with the budget crisis, and said he and his Senate colleagues will lead the charge for new revenues if they fear crucial state services are in danger....

Travaglini said he did not have specific plans for tax increases and did not say how large an increase would be needed for the state to maintain essential services. His remarks about taxes were directed toward the budget for fiscal 2004, which Romney will present next month and the House and Senate will take up later in the spring.

The Boston Globe
Jan. 29, 2003
Travaglini says tax hike is needed to ease crisis


Gov. Mitt Romney vowed yesterday to bridge an immediate $485 million deficit by slashing deeply into local aid, health care for the poor, human services, public workers' health insurance and state recreation facilities - but without any new broad-based tax hikes....

The governor said he would file a budget next month that avoids new taxes and protects the state's "core mission" by proposing to "fundamentally restructure" the way government operates....

With tax-hike talk percolating from the highest circles, Romney drew a sharp line in the sand - saying tax hikes would push working families into ruin and further harm the state's faltering economy.

"That's the last thing we need," Romney said.

The Boston Herald
Jan. 30, 2003
AX MAN: Romney hacks away at local aid, human services


But Barbara Anderson, executive director of the Citizens for Limited Taxation, found Romney's penny-on-the-dollar explanation of his cost reductions "brilliant," and evocative of legislators' recent rationalizations of tax increases.

The Boston Globe
Jan. 30, 2003
Some advocates uncertain about extent of Romney cuts


If there is anything good to be said of a major fiscal crisis, it's that priorities come sharply into focus....

Let us hope, also, that Team Romney sees fit to start right in on one of the state's most wasteful sacred cows: the School Building Assistance Program.

It began in 1948 as a three-year program to help build schools for the post-World War II baby boom. Today it's a behemoth subsidy machine - with an endlessly renewable waiting list - providing some communities up to 90 percent reimbursements for their education Taj Mahals....

Yet school construction appropriations, according to the state Department of Education, grew to $362 million for fiscal 2003 - up a stunning 80 percent from 1999.

Now comes hard evidence that much of that money is being squandered, thanks largely to yet another sacred cow: project labor agreements.

The Boston Herald
Jan. 29, 2003
Cut budget? Maybe PLA time is over
by Cosmo Macero Jr.


CLT NEWS ADVISORY
January 29, 2003

Five Facts to Remember
During Gov. Romney's Address
and the Democratic Response

1. No matter what the amount of cuts, there will still be a state budget. It is not possible to cut $400 million, $650 million, or even $4 billion, and as a result be left with nothing to spend on essential services.

1(a). When spending advocates say, once a day for five days, that they will be cut $10 million, that does not add up to a $50 million cut.

1(b). A cut in the rate of increase is not really a "cut." Also, a cut in a particular budget or program does not necessarily translate to a cut in a specific service to a specific person.

1(c). "Fixed costs" are not necessarily unalterably fixed, and "entitlements" are not necessarily something to which anyone is permanently entitled.

2. If the budget was downsized to $20 billion, the state would be spending the same amount as the state was spending a few years ago when civilization did not come to a halt.

2(a) "Taxes are what we pay for civilized society" was said by Justice Oliver Wendell Holmes Jr. in 1904, before there was an income tax.

3. According to the latest report from the Washington-based Tax Foundation, Massachusetts tax burden per capita is the 5th highest in the nation. Whatever caused the current fiscal crisis, it was not a lack of taxation here.

3(a). This 5th highest burden means that, given a "blended approach" to the fiscal crisis, we taxpayers have provided our share of the ingredients. Last year we were given the biggest tax increase in our history. Time for new ingredients.

4. It is not, under any circumstances, the job of the taxpayers to suggest budget cuts before they can resist being taxed more. We taxpayers provide the money that provides all state services; we've done our job. Someone say "thank you" instead of suggesting we leave our jobs and our families to become state budget analysts and auditors. That's what we pay our representatives, administration officials, and state auditor to do.

5. Medicaid is the elephant in the living room of all state budgeting. With its demographically-increased costs, there is no longer room for "business as usual" in Massachusetts. It's time to get spending under control.

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The Boston Globe
Wednesday, January 29, 2003

Travaglini says tax hike is needed
to ease crisis

By Rick Klein
Globe Staff

On the eve of Governor Mitt Romney's release of his plans to balance the budget, Senate President Robert E. Travaglini said yesterday he believes taxes will have to be raised to cope with the budget crisis, and said he and his Senate colleagues will lead the charge for new revenues if they fear crucial state services are in danger.

"We have a core mission here, and once we go below that level, I'm going to kick in," Travaglini said in an interview with the Globe. "There's no appetite in this building or in this business to raise taxes, but there's also no willingness to abandon the core mission of government. You reach a point where you say, 'You can't go there.' The system implodes, and you have to provide."

Travaglini's remarks point toward an almost inevitable collision between the new Senate leader and the governor, since Romney has vowed to veto any tax hike that reaches his desk. And Travaglini would face a stiff challenge winning approval for a tax hike in the Legislature because House Speaker Thomas M. Finneran has been cool to tax hikes, and many lawmakers say voters have made clear that they don't want to pay higher taxes.

Still, Travaglini said he plans to fight to maintain a state government that helps "people in crises" and provides quality education to all of its citizens, even if that requires raising taxes.

"We can't keep cutting, because you reach a point where if you keep cutting you're going to be eliminating totally the responsibility of government," he said. "We can't just cut the Department of Mental Retardation because it doesn't turn a profit. We can't close nutrition sites because we don't want to fund them. We can't totally remove and eliminate after-school programs."

Travaglini said he wants to give Romney all the tools he asks for to help address the budget shortfall, and supported the governor's request for expanded power to unilaterally cut the budget. He said he hopes Romney can fulfill his campaign promise to balance the budget without raising taxes or affecting core services, and said he is open to any ideas to root out inefficiencies.

But with Romney set tonight to unveil hundreds of millions of dollars in budget cuts, slicing away money that pays for schools, public safety, and health care for the poor, Travaglini said state leaders must be realistic about the need to discuss tax increases. In addition to a shortfall that has been estimated at $500 million for the fiscal year that ends June 30, the state is facing a budget gap of as much as $3 billion next fiscal year.

"These cuts, in the immediacy, are going to be so painful," Travaglini said. "And people are going to have to understand, if you think it's cold now, wait a couple of months. You're going to be living life in an igloo."

Travaglini said he did not have specific plans for tax increases and did not say how large an increase would be needed for the state to maintain essential services. His remarks about taxes were directed toward the budget for fiscal 2004, which Romney will present next month and the House and Senate will take up later in the spring.

Travaglini acknowledged that getting two-thirds of House and Senate members behind a tax hike to override a gubernatorial veto would be tough; the Legislature raised taxes by $1.2 billion last year, and many lawmakers have cited the close vote last fall on a ballot initiative to eliminate the income tax as evidence the public does not support new taxes.

But he believes the budget cuts Romney announces this week will have wide impact on some of the state's most well-organized and influential groups, including teachers, firefighters, police officers, and families that depend on aspects of the social safety net. When they feel the pinch, he said, they will lobby state lawmakers to take action, and those lawmakers may see the situation differently. House Ways and Means Chairman John H. Rogers made a similar prediction last week.

"The dynamic that I see coming into play is going to be powerful politically," Travaglini said. "The whole terrain is going to shift. The whole debate is going to heighten."

Romney plans to propose a restructuring of government's functions for the next fiscal year, saying inefficiencies need to be eliminated. Travaglini stressed yesterday that he is open to such measures. However, he is skeptical that they can save enough money to haul the state out of its fiscal mess.

The Senate president said he would explore short-term borrowing to prop up government spending next fiscal year until an economic turnaround materializes. Romney has called such an approach foolhardy, since it would hurt the state's standing with bond-rating agencies, and Finneran has dismissed the possibility as fiscally unwise.

Travaglini said he cherishes the cooperative relationship being fostered by top leaders on Beacon Hill, but warned that deference to Romney will only go so far, calling the governor "only one-third of this equation." Still, he said, his televised response to Romney's address tonight will highlight his eagerness to work with the governor and the House speaker in fashioning solutions to the fiscal mess.

Yesterday's interview, Travaglini's first extended public comments about the job he assumed Jan. 1, revealed a Senate president who is relishing the opportunity to champion the cause of the disadvantaged. He said he hopes to avoid being tagged as a "liberal" leader or "the compassionate health-and-services guy," but said he will not abandon his core beliefs.

Though he has been initially overshadowed by Romney and Finneran, Travaglini said ignoring him and the role of the Senate is a mistake. Many observers have remarked on the fiscal conservativism that appears to unite Romney and Finneran. The Senate has traditionally leaned in a more liberal direction.

"People who are trying to marginalize the significance of the participation of the Senate in this whole scenario are making a major miscalculation," he said.

He called the Senate presidency the "pinnacle of my personal and professional career," and vowed not to run for any other office, even ruling out the mayoralty of Boston, which he has been rumored to covet. He described his lack of further political ambitions as "liberating," since he will be able to take politically controversial stands.

Travaglini said he is humbled by the high post he occupies. In his sprawling State House office, Travaglini's eyes welled up when discussing his improbable rise from working-class East Boston to an office lined with portraits of Horace Mann and Calvin Coolidge. Travaglini is the state's first Italian-American Senate president.

"This is a victory for the little guy," Travaglini said. "I didn't go to Harvard, and I'm not an attorney, so I don't belong here. But it's about time a guy like me is here, so now let's see what I do."

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The Boston Herald
Thursday, January 30, 2003

AX MAN:
Romney hacks away at local aid, human services

by Elisabeth J. Beardsley and Elizabeth W. Crowley

Gov. Mitt Romney vowed yesterday to bridge an immediate $485 million deficit by slashing deeply into local aid, health care for the poor, human services, public workers' health insurance and state recreation facilities - but without any new broad-based tax hikes.

Speaking live on TV from the Corner Office, Romney pledged "the most far-reaching restructuring of government in decades" next year - but said there's no time for anything but cuts in the remaining five months of this fiscal year.

Some of Romney's cuts are symbolic - like axing the notoriously patronage-laden Metropolitan District Commission and its controversial chief David Balfour - but mayors and advocates warned that most of the cuts would create real pain.

"I am asking everyone to share the burden," Romney said. "I've tried to make the reductions as fair as I can, and they do not compromise the core missions of state government."

While the "good news" is the free-falling economy seems to have hit bottom, Romney said the state must still "face up to the reality" - a shortfall that could hit $650 million by the end of the year.

The state will be forced to dip into its dwindling reserves if an expected $165 million implosion in capital gains revenues materializes late in the fiscal year, he said.

While the details of the cuts will not be released until today, Romney plans to unilaterally slash $343 million from programs and ask lawmakers to approve another $143 million in cuts - a total of $488 million in immediate savings, including $2 million in fee hikes.

The most controversial cut will fall on local aid, with Romney shaving $114 million out of the roughly $2 billion still due to cities and towns - a 5 percent cut over the last five months of the year.

Boston Mayor Thomas M. Menino said his city would suffer far more than a 5 percent cuts, since Romney plans to take most of the money from big cities like Boston that get so-called "additional assistance."

Menino predicted Boston's local aid during the next five months will be slashed by between $24 million and $27 million. "It's not fair," Menino said. "We're looking at an 11 percent cut in local aid. The devil is the details and he didn't talk about them."

Lt. Gov. Kerry Healey is slated today to roll out a "relief" package of proposals to free cities and towns from costly mandates.

The single-biggest cut will fall on human service programs, with Romney cutting a $133 million swath - or 3 percent over the rest of the year - through programs that have already been hard hit.

And the governor hinted at potentially explosive changes to the $6 billion, budget-busting Medicaid program, which provides health care to nearly 1 million of the state's poorest residents.

"I'll ask citizens who receive free medical care to contribute a share of its cost," Romney said.

And in a move that has traditionally pitted GOP governors against lawmakers, Romney said he would ask the Legislature to increase state workers' health insurance contributions from 15 percent to 25 percent.

Public employee unions threatened warfare over Romney's insurance plan, which they said would balance the budget on the backs of workers who have already absorbed $30 million in higher health care costs.

"State workers have already done their part to solve the deficit," said John J. Templeton, president of the Service Employees International Union, which represents 9,000 human service workers.

Romney also warned of a "slightly shorter season" at state recreational facilities and higher fees for "boaters and golfers."

While much of Romney's speech focused on the cash shortfall in the current fiscal year, he raised a warning flag over the "real bear" - next year's expected deficit of $3 billion.

The governor said he would file a budget next month that avoids new taxes and protects the state's "core mission" by proposing to "fundamentally restructure" the way government operates.

Brandishing the banner of "streamlining and economizing," Romney noted the state employs at least 800 lawyers - "way too many."

In addition to abolishing the MDC, Romney said he would meld agencies that fall under the rubrics of health and human services, transportation, the environment, and work force training.

Legislative leaders offered a televised Democratic response to Romney's speech - promising cooperation, but also issuing stark warnings.

House Speaker Thomas M. Finneran said Romney's popular election "is not to be trivialized" - but he immediately threw down the gauntlet on three areas which Romney, moments earlier, had threatened.

Finneran said he would seek to protect education and literacy programs, local police and fire services, and health care providers.

"How the governor defines 'essential services' will likely receive much scrutiny in the weeks and months ahead," Finneran said.

But Romney said he would pursue drastic changes to the complex formula that dictates shares of school aid - saying the distribution should be "more fair, efficient and effective."

While Romney pledged not to cut direct school aid, his local aid cuts will squeeze municipalities that use general state aid to support both schools and public safety services.

And Romney pointedly noted that health services would be "pared back" and that he would ask hospitals, nursing homes and other health care providers to "share" in the "emergency reductions."

Both Finneran and Senate President Robert E. Travaglini insisted the Legislature behaved responsibly by building reserves, hiking taxes and cutting spending - a reaction to Romney blaming them for mismanagement.

Travaglini raised the specter of tax hikes as a "last option" for solving the state's budget woes next year, when the deficit balloons to five times the size of the current shortfall.

With tax-hike talk percolating from the highest circles, Romney drew a sharp line in the sand - saying tax hikes would push working families into ruin and further harm the state's faltering economy.

"That's the last thing we need," Romney said.

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The Boston Globe
Thursday, January 30, 2003

Some advocates uncertain
about extent of Romney cuts

By Stephanie Ebbert
Globe Staff

Governor Mitt Romney predicted that in the next few weeks, special interests would react to his budget cuts as if their world was coming to an end. But with few details offered on his $650 million budget-balancing plan last night, many advocates were still uncertain about what the day of reckoning would bring.

"He really didn't go into too much detail except he really seemed to single out state employees," said John Templeton, president of SEIU Local 509, which represents more than 10,000 state and University of Massachusetts workers who face layoffs and higher health care premiums.

Mayor Thomas M. Menino, chewing on a piece of pizza as he watched the speech in the City Hall's Eagle Room with several top aides, shook his head when Romney said his cuts would not compromise "the core missions of government" and when the governor suggested that people now getting free medical care will need to pay for it. Even the governor's elimination of the Metropolitan District Commission could place an added financial burden on Boston, he said.

"Who's going to maintain the parks? Who's going to police the parks?" Menino said. "You still have a park system out there and somebody's going to have to work it."

Others, taking their lead from the Democratic legislative leaders who sounded a theme of cooperation in their televised responses to the governor, pledged to work together.

"The tone was right tonight," said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association. "We hope that ... in the next several weeks and months we can all come together to minimize the damage."

Much concern focused on Health and Human Services, slated to lose 1 percent of funding as Romney asks Medicaid recipients to pay copayments for services and pare back services.

"It's balancing the budget crisis on the backs of those least able to afford it," said Steve Collins, executive director of the Massachusetts Human Services Coalition.

"We see this in the context of the series of cuts that have already occurred that really have hurt people," said Rob Restuccia, executive director of Health Care for All. He noted that MassHealth recipients already lost dental coverage, access to eye glasses, artificial limbs, dentures, and that 50,000 people will lose all coverage in April. "He talked about this in terms of a few pennies, but pennies add up quickly, particularly for the most vulnerable residents."

But Barbara Anderson, executive director of the Citizens for Limited Taxation, found Romney's penny-on-the-dollar explanation of his cost reductions "brilliant," and evocative of legislators' recent rationalizations of tax increases.

The term to watch was "core services," which Romney had pledged during his campaign to protect - and which he assured last night would be saved. Observers said it depends on the definition of "core services."

"I believe that it is troubling that he's suggesting reductions to health care for the poor, elderly, and disabled citizens - and in fact, if he carries it out, it would be a reversal of his promise during the campaign," said Philip W. Johnston, chairman of the state Democratic Party.

Scott S. Greenberger of the Globe Staff contributed to this report.

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The Boston Herald
Wednesday, January 29, 2003

Cut budget? Maybe PLA time is over
by Cosmo Macero Jr.

If there is anything good to be said of a major fiscal crisis, it's that priorities come sharply into focus.

Such is the case today as Gov. Mitt Romney prepares to address the commonwealth - no doubt with a measured and pointed plan for closing an estimated $650 million budget gap.

But Romney won office not on any pledge to simply manage a short-term crisis.

He promised substantive measures to restructure state government to make it more efficient.

So we should hope that as Romney sets forth to trim large chunks of spending - with the least impact possible on those most at risk - somewhere deep in his budget office there are aides reinventing this tired and wobbly wheel.

Let us hope, also, that Team Romney sees fit to start right in on one of the state's most wasteful sacred cows: the School Building Assistance Program.

It began in 1948 as a three-year program to help build schools for the post-World War II baby boom. Today it's a behemoth subsidy machine - with an endlessly renewable waiting list - providing some communities up to 90 percent reimbursements for their education Taj Mahals.

Andrew Natsios, administration and finance secretary under former Gov. Paul Cellucci, decried the trend of cities and towns opting for new-school construction when renovations would suffice.

Yet school construction appropriations, according to the state Department of Education, grew to $362 million for fiscal 2003 - up a stunning 80 percent from 1999.

Now comes hard evidence that much of that money is being squandered, thanks largely to yet another sacred cow: project labor agreements.

In a study due for release today, the conservative Beacon Hill Institute found that PLAs contribute a whopping $31.74 per square foot to the average $184 per square foot cost of building a school.

The agreements, while not expressly forbidding nonunion contractors from bidding, require all bidders to hire labor out of union halls and the adoption of union rules on the job.

The net result: Open-shop contractors lose any competitive edge; many don't bother bidding at all; union rules invariably add more labor to the payroll; and taxpayers absorb the higher costs.

In three communities alone - Lynn, Malden and Wilmington - PLAs drove up the collective cost of building schools by $16 million.

"We were a bit surprised. The anecdotal evidence was that (PLAs) raised costs between 10 (percent) and 20 percent," said Jonathan Haughton, senior economist at the Beacon Hill Institute and one of the study's authors. "We found a 17 percent increase in costs when you have a PLA. It's near the upper end, and personally I expected it to be near the lower end."

Those percentages translate to real dollars that can be measured in the state's bottom line.

"There really are (savings) here," says Haughton. "They're not in the next six months. Or even in the next year. But they're (achievable) if you are looking over a period of two to three years."

Still, debate over PLAs prompts fierce reactions from labor leaders, and Bay State officials have been wary of taking the issue head-on.

Open-shop contractors lobbied hard, to no avail, to get former acting Gov. Jane Swift to ban PLAs on state-funded projects by executive order.

And just yesterday, the AFL-CIO blasted a Supreme Court ruling that upheld a Bush administration executive order restricting PLAs on federally funded projects.

"I am of course very disappointed that the court refused to examine whether the president acted within his authority," said Edward Sullivan, head of building and construction trade unions at the AFL-CIO. "We will be evaluating alternative strategies ... to reap the benefits of project labor agreements on major public works projects."

Can Gov. Romney effect change on this wasteful condition without a full-on battle with organized labor and their legislative toadies?

Maybe not.

But Haughton notes that, rather than pursuing an outright PLA ban, Romney could go around the unions and get the same result.

How? By changing the way cities and towns are reimbursed for school construction.

As it stands now, the state reimburses a straight percentage for all costs based on a complex and grossly political formula. A better way, Haughton suggests, is to set a fixed reimbursement per square foot - $120, for instance. Anything above that number, driven by PLAs or otherwise, would be the sole responsibility of the community.

It might stem the trend toward Taj Mahals, and make city and town officials think twice before jumping onto the waiting list.

That would be real reform - the kind Mitt Romney promised.

And it might just make the next crisis a little easier to swallow.

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