CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

CLT UPDATE
Tuesday, December 7, 2004

On Bacon Hill it's called "income equity"


In accordance with Article CXVIII of the Articles of Amendment to the Massachusetts Constitution, every two years the Administration is required to ascertain the rate of increase in state median household income for the preceding two-year period for the purpose of adjusting base legislative pay.

The increase from 2003-2004 is 4.1 percent. Effective January 2005, legislative pay will be adjusted accordingly by State Treasurer Tim Cahill.

This action is being taken because in 1998 voters approved a change to the Massachusetts Constitution that tied legislative pay to changes in the state's median household income.

Statement from A&F Secretary Eric Kriss regarding Article CXVIII
December 6, 2004


Governor Mitt Romney notified state lawmakers yesterday that they are eligible for an automatic $2,188 annual pay hike, or about 4.1 percent over two years, despite a tight state budget and sluggish wage increases elsewhere in the state.

The pay increase is automatic under a constitutional amendment approved by voters in 1998, which ties the legislators' salary hikes to the median household income....

The 200 legislators' base salary will rise to about $55,500. In addition, all state senators and many House members can boost their salaries with stipends ranging from $7,500 to $15,000 for committee chairman and other leadership positions....

The US Census bureau reported in August that the two-year average of the state's median income was $50,976 in 2002-2003, down sharply from $52,649, the 2001-2002 average....

"There is nothing anyone can do about it ever," said Barbara Anderson, executive director of Citizens for Limited Taxation, an ardent foe of increasing legislative pay levels. "The voters are foolish enough to vote for something; then they should get what they vote for." She pointed out that the only way to repeal the amendment is to place another on the ballot, a process that requires legislative approval. "You need the cooperation of the legislators who are getting the only constitutionally guaranteed pay raise in the world," she said. "And it ain't going to happen, never."

The Boston Globe
Tuesday, December 7, 2004
Legislators eligible for 4.1 percent pay increase


"Two percent is modest," said Ann Dufresne, spokeswoman for Senate President Robert E.  Travaglini (D-E. Boston)....

Under a 1998 voter-approved change to the state constitution, Administration and Finance Secretary Eric Kriss used the rate of increase in state median household income for the preceding two-year period to adjust base legislative pay.

A state study has recommended that the governor and lieutenant governor - who do not accept a salary - as well as the attorney general, auditor, secretary of state and treasurer, also receive the same pay increase in January as lawmakers.

The Legislature would have to approve the increase.

The Boston Herald
Tuesday, December 7, 2004
Lawmakers who passed up last pay raise poised for 4.1 percent hike


Massachusetts residents may notice some small relief next year in the amount of income tax they pay....

It stems from legislative action in 2002. That's when lawmakers froze a voter approved income tax rollback in the face of a two billion dollar budget gap.

Associated Press
Monday, December 6, 2004
Small income tax cut set to kick in automatically in new year


State officials confirmed yesterday that rising revenues will trigger an expansion of personal income tax exemptions. The change, which will save individual taxpayers about $15 a year, is called for in a tax bill the Legislature approved in 2002.

The Boston Globe
Tuesday, December 7, 2004
Income growth means tax cut
Unexpected result narrows state gap


State tax collections will likely increase by 3.5 percent to 5 percent over the next 18 months, economists predicted Monday, but Massachusetts budget analysts say rising health care costs, deficit projections and potential budget-busting decisions from the courts and the federal government make it likely that state government's fiscal crisis will continue into a fifth year....

With health care costs consuming about one third of the budget and health care inflation in double digits annually, Beacon Hill leaders are in the midst of trying to both expand health insurance access while trying to rein in costs. Simultaneously, the federal government will let the state know by late January whether it will cut off $600 million in annual Medicaid reimbursements that it questions....

This year's budget dedicates 20 percent of sales tax revenue to school construction projects and that means 40 percent of the state's second largest tax revenue source is off limits - 20 percent more is steered to the MBTA. That doesn't include more than a billion dollars a year for public employee pensions that has been moved "off budget." ...

David G. Tuerck, director of the Beacon Hill Institute for Public Policy Research, offered the most optimistic estimate of likely state tax collections. Tuerck also pointed out that economists last year at this time predicted a total tax take that fell short to the tune of $727 million. "Everybody last year was overly pessimistic," said Tuerck, who described himself as "moderately bullish" at present.

State House News Service
Monday, December 6, 2004
Economists predict growth in revenues
but focus is on state spending


BHI forecasts "strong" growth in state tax revenues

MTF forcast: Rising revenues in 2005 and 2006; insufficient to close budgetary imbalance

Battling news releases
Monday, December 6, 2004


At the December 8, 2003 hearing of this committee, the Beacon Hill Institute (BHI) estimated that tax revenues for fiscal year 2004 would be $15.532 billion. This turned out to be the most optimistic of the estimates provided at that hearing or subsequently in the January 2004 consensus estimate. It also proved to be well below the mark, as actual 2004 tax revenues surged to $15.953 billion. While BHI was quite accurate in forecasting sales and use taxes, alcoholic beverage taxes, income tax withholding and motor fuels taxes, it missed estimated tax payments, income tax refunds and income tax returns and bills by a wide margin. BHI nevertheless offered the most accurate of the most widely-quoted forecasts.

Beacon Hill Institute at Suffolk University
December 6, 2004
Massachusetts Tax Revenue Forecasts for FY2005 and FY2006


Chip Ford's CLT Commentary

Isn't it strange how Beacon Hill pols listen so attentively to voters when they vote for constitutionally-mandated automatic pay raises for the pols, but give those same voters the middle-finger Beacon Hill salute when they vote to keep the pols' broken promise and finally roll back the income tax?

What a coincidence that on the same day a pay hike for legislators is announced, they also announced a tax cut for the rest of us. The pols will each stuff another $2,188 a year into their taxpayer-fattened wallets while taxpayers are granted a measly $15 annual "pay raise." Apparently this doesn't strike anyone as inequitable in the thin air high upon Bacon Hill.

Of course now that they're getting theirs, the next move is for the Legislature to increase the pay of constitutional officeholders as well. When the dust settles, only Governor Romney and Lt. Governor Healey won't be getting a pay raise: they haven't accepted pay for their public service since they were elected.

And look at the state employees' union gearing up for their usual strategy:

"Everywhere I know of, the administration is putting zeroes on the table for pay hikes," said David Holway, president of the National Association of Government Employees, SEIU Local 5000. He said his union nonetheless supports the pay hike for lawmakers.

Of course the union does. Once lawmakers get theirs, the unions will be storming the State House demanding mere income equity -- and how do you suppose The Best Legislature Money Can Buy will respond to their campaign benefactors? Hey, it's not their money.

Remember Question 1 on the 1998 ballot, the one which had a summary that stated: "This proposed constitutional amendment would prohibit the state Legislature from changing the base compensation received by members of the Legislature as of January 1, 1996"? That was right after they'd grabbed a 55 percent pay raise for themselves you will recall. "A 'Yes' vote would change the state constitution to prohibit legislators from voting to increase their own base salaries," the argument in favor of the amendment stated.

CLT was the only visible opponent of this constitutional amendment, the only one that saw and called it what it was. We campaigned against it with news releases and even a radio ad buy. This would make our legislators the only people in world history to have a constitutionally-mandated automatic pay raise, we warned over and over again.

But not enough voters were listening. I expect that they voted for it because they thought it would end the Legislature's feeding frenzy pay-grabs once and for all. They didn't realize that constitutional amendments only make it onto the ballot if they benefit the pols, regardless of how enticing they sound or what they seem to promise.

When trying to understand how things got so bad in Massachusetts, who's to blame for this mess,  the lesson most citizens have yet to learn is that they only need to look in the mirror. They're getting the government they voted for, that they deserve. It's painful that we also get the government they deserve.

So we'll each get fifteen bucks more next year,  the pols will get an additional $2,188 each, the so-called Massachusetts Taxpayers Foundation will continue asserting its traditional if not intentional inaccuracy that the state can't afford any further tax cuts while the state adds another billion taxpayer-dollars of spending to the next budget, e.g.,  expanding entitlements such as healthcare that the state can't afford even now. The Big Dig will continue to be "on time and on budget" as usual, voters will have another two years to perhaps wake up and realize it's time to look in the mirror and confront the real problem, and CLT will continue holding all their feet to the fire.

Such is life in the Peoples Republic of Taxachusetts as we approach 2005. Will that be the year we finally reach critical mass and collectively demand real reform, assert change ? Stay tuned.

Chip Ford


The Boston Globe
Tuesday, December 7, 2004

Legislators eligible for 4.1 percent pay increase
By Frank Phillips and Elise Castelli
Globe Staff and Globe Correspondent


Governor Mitt Romney notified state lawmakers yesterday that they are eligible for an automatic $2,188 annual pay hike, or about 4.1 percent over two years, despite a tight state budget and sluggish wage increases elsewhere in the state.

The pay increase is automatic under a constitutional amendment approved by voters in 1998, which ties the legislators' salary hikes to the median household income. Romney's chief fiscal aide, Eric Kriss, said the 4.1 percent increase is a "guesstimate" based on an expected economic recovery.

The 200 legislators' base salary will rise to about $55,500. In addition, all state senators and many House members can boost their salaries with stipends ranging from $7,500 to $15,000 for committee chairman and other leadership positions.

Lawmakers contacted yesterday appeared ready to accept the pay raise. Two years ago, all but one of the 40 state senators rejected the 3.25 percent automatic raises that Romney offered because of the state's fiscal crisis.

"I will be accepting my pay raise," Senate President Robert E. Travaglini said. "I encouraged the senators two years ago not to take the raises, in view of the severity of the situation. I will be encouraging them this time around to take it."

In 2003, the state faced a $2 billion deficit, while this year the projected budget gap is $600 million. The Romney administration is taking a tough stance in many of its collective bargaining negotiations with state workers. A top administration official said yesterday that it is ready to grant up to 2 percent raises.

"Everywhere I know of, the administration is putting zeroes on the table for pay hikes," said David Holway, president of the National Association of Government Employees, SEIU Local 5000. He said his union nonetheless supports the pay hike for lawmakers.

The lawmakers can avoid a vote on the pay hikes because the raises are automatically triggered by the amendment, which requires a biennial adjustment calculated by the governor and based on the change in median household income during the previous two years.

The US Census bureau reported in August that the two-year average of the state's median income was $50,976 in 2002-2003, down sharply from $52,649, the 2001-2002 average. More recent figures are not available.

Kriss said he thinks the pay increase figure -- which averages 2 percent a year -- is actually "conservative" in light of what he says is an expected economic recovery. He said it is less than the rate of inflation and added that the governor has no choice but to come up with the best "guesstimate" in order to meet the constitutional amendment's mandate.

"I don't believe this is an issue of who is supporting it and who is not," Kriss said. "It is in the constitution, and we follow the law. And we have followed the constitutional amendment, and we're pleased to be able to do that. It's not really relevant whether we support it or not."

Kriss also brushed aside the symbolism of the raises coming at a time of fiscal problems, even though the pay hikes will not have a significant impact on the state budget deficit.

"The state has a budget challenge but the budget challenge we measure in the hundreds of millions of dollars and a 2 percent a year increase for the Legislature is a relatively modest amount," Kriss said.

Travaglini said the pay hikes reflect the work the Legislature has done in the past two years to deal with a difficult fiscal problems.

"I think we've done a satisfactory job, so this is obviously news that is received in a positive way," Travaglini said.

For years, lawmakers often faced the wrath of voters when they voted themselves pay raises, at times sparking initiative petitions to roll back the pay hikes. Critics cried foul when Speaker Thomas M. Finneran ushered onto the ballot the amendment proposal, which appeared, based on the wording of its first sentence, to bar legislators from voting themselves pay hikes. The amendment won with 60 percent of the vote.

"There is nothing anyone can do about it ever," said Barbara Anderson, executive director of Citizens for Limited Taxation, an ardent foe of increasing legislative pay levels. "The voters are foolish enough to vote for something; then they should get what they vote for." She pointed out that the only way to repeal the amendment is to place another on the ballot, a process that requires legislative approval. "You need the cooperation of the legislators who are getting the only constitutionally guaranteed pay raise in the world," she said. "And it ain't going to happen, never."

Some lawmakers reached yesterday indicated they would accept the increase.

"I didn't accept my pay increase two years ago because of the fiscal crisis, but I don't know why at this point I wouldn't [accept] if it's a cost of living increase," said Senator Richard R. Tisei, a Wakefield Republican.

Return to top


The Boston Herald
Tuesday, December 7, 2004

Lawmakers who passed up last pay raise poised for 4.1 percent hike
By Ann E. Donlan


Lawmakers will receive a 4.1 percent holiday pay hike next month, and unlike two years ago when many turned down a pay hike, their pockets are eager for the extra cash.

"Two percent is modest," said Ann Dufresne, spokeswoman for Senate President Robert E. Travaglini (D-E. Boston). "We were facing a $3 billion deficit the first year that the Senate president took office. He did encourage the Senate members to forgo the pay raise. This year, he will encourage the members to accept it."

Dufresne said the pay increase breaks down to a 2 percent increase this year, followed by another 2 percent increase next year.

Under a 1998 voter-approved change to the state constitution, Administration and Finance Secretary Eric Kriss used the rate of increase in state median household income for the preceding two-year period to adjust base legislative pay.

A state study has recommended that the governor and lieutenant governor - who do not accept a salary - as well as the attorney general, auditor, secretary of state and treasurer, also receive the same pay increase in January as lawmakers.

The Legislature would have to approve the increase.

Return to top


Associated Press
Monday, December 6, 2004

Small income tax cut set to kick in automatically in new year


Massachusetts residents may notice some small relief next year in the amount of income tax they pay.

The cut will come in the form of a slight increase in the personal exemption for individuals and couples. It will cost the state about 60 million dollars annually.

It stems from legislative action in 2002. That's when lawmakers froze a voter approved income tax rollback in the face of a two billion dollar budget gap.

When they froze the rate, lawmakers agreed to automatic "triggers" that would restart the cut when the economy improved.

After nearly two years of slow but steady improvement, the first of the triggers is set to kick in.

But don't get too excited. The cut will only translate into 15 dollars a year for single filers and 29 dollars a year for couples.

Return to top


The Boston Globe
Tuesday, December 7, 2004

Income growth means tax cut
Unexpected result narrows state gap
By Scott S. Greenberger, Globe Staff


Couples will save $30 on their state income taxes, and Beacon Hill budget writers will have an extra $300 million to spend in the coming fiscal year, as the recovering economy continues to pump money into state coffers at a faster rate than expected.

State officials confirmed yesterday that rising revenues will trigger an expansion of personal income tax exemptions. The change, which will save individual taxpayers about $15 a year, is called for in a tax bill the Legislature approved in 2002. Now couples will be able to deduct $7,150 from their taxable income, up from $6,600, and individuals can deduct $3,575, up from $3,300.

The announcement was made during a State House hearing in which administration officials and outside economists said the state is likely to collect at least $16.5 billion during the current fiscal year, $300 million more than the prediction Beacon Hill budget writers had settled on in October. That means the budget gap for fiscal year 2006 will be about $600 million, instead of the $900 million hole that was feared as recently as last month.

Return to top


State House News Service
Monday, December 6, 2004

Economists predict growth in revenues
but focus is on state spending
By Michael P. Norton


State tax collections will likely increase by 3.5 percent to 5 percent over the next 18 months, economists predicted Monday, but Massachusetts budget analysts say rising health care costs, deficit projections and potential budget-busting decisions from the courts and the federal government make it likely that state government's fiscal crisis will continue into a fifth year.

Economists testifying at the state's annual tax revenue forecasting hearing said the recovery is slowly gaining strength, but Massachusetts continues to lag the nation and many other states in bringing back jobs. The Massachusetts recovery began in March 2003, after a 27-month recession that took 200,000 jobs while being notable more for its length than its depth. The state has added 23,000 jobs since March.

"It's recovering at a slow, measured pace," UMass economist Alan-Clayton Matthews told House and Senate Ways and Means Committee members and Eric Kriss, the Administration and Finance Secretary in Gov. Mitt Romney's administration.

And while there are parallels between this recovery and the one that followed the 1988-1991 recession, there are risks specific to the current times. Those risks, identified by the economists, include: growing federal budget and trade deficits, the costs and implications of the war on terrorism, weak job growth, rising health care and energy costs, concerns about whether consumers are maxed out, and a devalued dollar that is good for Bay State exporters but bad for foreign investment in the US and for interest rates.

"I still see considerable risks out there," said Yolanda Kodrzycki, assistant vice president and economist at the Federal Reserve Bank of Boston. "The most obvious risk that I see lies in the consumer sector."

Despite the warning signs, economists predicted state tax revenues will be on the rise next year.

Kriss said he was struck by the fact that three independently created forecasts of likely tax collections in fiscal 2006 fell within 1 percent of each other. Leaders of the Massachusetts Taxpayers Foundation, the State Department of Revenue and the Beacon Hill Institute at Suffolk University presented the forecasts.

Massachusetts Taxpayers Foundation President Michael Widmer said state government is in the midst of a prolonged fiscal crisis that was brought on by a collapse in tax receipts, but which is continuing largely because spending pressures are stronger than the now-recovering tax collections. The pressures are the most intense in high-cost areas like pensions, health care, debt service and school construction, he said.

"We are starting to get back on our feet," said Senate Ways and Means Committee Chairwoman Therese Murray (D-Plymouth). "But the crisis has not passed."

State budget writers are beginning to work more intensely on a spending plan for fiscal 2006, which begins July 1, 2005, with several big question marks in play, including:

With health care costs consuming about one third of the budget and health care inflation in double digits annually, Beacon Hill leaders are in the midst of trying to both expand health insurance access while trying to rein in costs. Simultaneously, the federal government will let the state know by late January whether it will cut off $600 million in annual Medicaid reimbursements that it questions.

The state Supreme Judicial Court (SJC) is due to rule in the coming weeks or months in a landmark case challenging the adequacy of public education in Massachusetts. The state's liability in this case has been estimated at as much as $2 billion. And Murray said plans for investments in early education call for new expenditures approaching $1 billion over the next 10 years.

Another SJC ruling due next year, according to state revenue officials, will settle the effective date of an invalidated capital gains tax hike enacted in mid-2002. Officials said that if an "amnesty" provision passed last year is left to stand, there will be no fiscal impact on the state. If the effective date of the tax hike is set at Jan. 1, 2002, the state would collect $160 million from taxpayers. If the date is set at Jan. 1, 2003, the state would immediately owe $250 million in taxpayer refunds.

This year's budget dedicates 20 percent of sales tax revenue to school construction projects and that means 40 percent of the state's second largest tax revenue source is off limits - 20 percent more is steered to the MBTA. That doesn't include more than a billion dollars a year for public employee pensions that has been moved "off budget." According to MTF, these large pools of dedicated funds leave less on the table for other areas, such as health and human services and education. House Ways and Means Committee Chairman John Rogers (D-Norwood) also expressed concern about the pace of actual sales tax collections, which could have implications for the MBTA and school construction.

State budget writers and MTF have pegged the gap between projected revenues and expenditures in fiscal 2006 at nearly $1 billion. Kriss today said the administration's budget, due in January, will address that gap, though he disagreed with the premise of forecasting a budget deficit. Kriss said it's premature to say whether the administration's budget will use one-time revenues.

David G. Tuerck, director of the Beacon Hill Institute for Public Policy Research, offered the most optimistic estimate of likely state tax collections. Tuerck also pointed out that economists last year at this time predicted a total tax take that fell short to the tune of $727 million. "Everybody last year was overly pessimistic," said Tuerck, who described himself as "moderately bullish" at present.

Also today, Department of Revenue Commissioner Alan LeBovidge served notice that the administration believes that tax collections for this fiscal year will beat the administration's recently revised estimate by between $281 million and $362 million. The estimate was revised on Oct. 15.

Return to top


NOTE: In accordance with Title 17 U.S.C. section 107, this material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml


Return to CLT Updates page

Return to CLT home page