Limited Taxation
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CLT Update
Wednesday, January 19, 2000


Mr. Widmer said the MTF almost certainly will oppose the auto excise initiative. He added that the group intends to update a version of its proposal to get the state income tax rate to 5 percent.

"Stock market profits called uncertain income
Warning sounded on state spending"
By Brian S. McNiff
Worcester Telegram & Gazette

Interesting ... the deceptively-named Massachusetts Taxpayers Foundation apparently has reconsidered its position on rolling back the income tax rate. With its track record, MTF's updated version probably will call for another rate increase.

Unless after yesterday's release, MTF heard loud and clear from its corporate "ideal sponsors" whose executives also are subject to the Massachusetts income tax.

Note how out-of-touch MTF really is: On the day it released it report and used the unfunded state pension liability "budget buster" as an excuse for keeping the income tax where it is, the pension fund announced a gigantic investment return last year of $5.5 billion.

MTF blew its "forecast" again.

There's some very good news today: Jerry Williams and Gene Burns are returning to Boston talk radio on Monday! That news is only two-thirds good -- also returning on the new WMEX-AM 1060 is Marjorie Clapprood.

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Chip Ford

The Boston Herald
Wednesday, January 19, 2000

New WMEX to heat up talk radio wars
by Dean Johnson

Boston's talk radio wars heat up Monday when the new WMEX-AM (1060) goes on the air at 7:15 a.m. with a lineup full of veteran talk radio personalities.

The daytime-only signal will have a classic talk/news format that will remind listeners of WRKO-AM's powerhouse days back in the 70's and '80s.

That's no accident, either. Half of the new station's air shifts will be manned by former WRKO personnel. Onetime WRKO morning cohost and state representative Marjorie Clapprood will be the 10 a.m.-noon host.

The legendary Jerry Williams will be his old cantankerous self each weekday from noon to 2 p.m. Williams was gently pushed into retirement at WRKO and is anxious to get back on the air.

He'll be followed by fellow WRKO alumnus Gene Burns from 2-4 p.m. Burns is still doing talk radio at KGO-AM in San Francisco. But through the wonders of modern technology, he'll also do a daily two-hour show from the Left Coast exclusively for WMEX.

The Worcester Telegram & Gazette
Tuesday, January 18, 2000

Stock market profits called uncertain income
Warning sounded on state spending

By Brian S. McNiff
Telegram & Gazette Boston Bureau

BOSTON-- As the state prepares a budget for fiscal 2001, the Massachusetts Taxpayers Foundation warns that the good times are about to roll -- to a stop.

"While there is no imminent danger of a serious fiscal crisis, much tighter budgeting -- and difficult tradeoffs among priorities -- will be required over the next several years," the MTF cautions in a budget analysis released last night.

Gov. Paul Cellucci will offer a glimpse of his spending and tax cut priorities when he delivers his State of the State address Thursday in Lowell. Next week, he will file his budget recommendations with the House of Representatives for the fiscal year that begins July 1.

The MTF has always taken a cautious approach to state spending, but President Michael J. Widmer said yesterday that two factors stand out this year: the extent of tax cuts already passed, and the return of the budget busters.

"Budget buster" is a term coined by former Senate Ways and Means Committee Chairman Patricia McGovern a decade ago to describe areas of spending that were mushrooming far beyond inflation limits.

"The so-called budget busters are beginning to surge again," Mr. Widmer said, "and it will only get worse." Health care costs are rising, as are state employee health insurance costs, and the state treasurer has found a flaw in the calculation of the state's unfunded pension liability [see reports below].

"It will take $190 million in additional appropriations to get us to where we thought we were," Mr. Widmer said.

One budget buster may have lost its status. "Reworking the finances of the MBTA was the most important step taken by the Legislature in the 2000 budget to control future costs to taxpayers," the MTF report said of the Massachusetts Bay Transportation Authority.

But, the report warned, "Legislative mandates for projects that rank low on the T's list or that the T simply cannot afford could add substantially to state costs -- for both debt service and operating assistance -- undoing much of the benefit of the reforms."

Also, the report notes, state assistance to the MBTA will still grow by 16 percent in the next fiscal year.

Recent tax cuts, Mr. Widmer said, have taken more than 10 percent of the state's revenue base away. Mr. Cellucci backs an initiative to reduce the state income tax rate from 5.75 percent to 5 percent over three years. Also, another initiative would provide income tax credit for tolls and auto excise taxes, taking $700 million in revenue away as of Jan. 1, 2001.

Mr. Widmer said the MTF almost certainly will oppose the auto excise initiative. He added that the group intends to update a version of its proposal to get the state income tax rate to 5 percent.

The MTF praised the administration and the Legislature for building up the "rainy day" stabilization fund and for committing $1.3 billion over the past three years for projects that the state normally would finance by borrowing.

Describing the report, Mr. Widmer observed, "We're saying that we've been living in an unreal world, one where we can have both tax cuts and spending increases."

While the MTF sees the economic outlook as "generally positive," it notes that "the state's extremely tight labor market is likely to become an increasing drag on our economic progress."

In recent years, personal income has been growing faster than employment. Base income tax revenues increased by 20 percent from 1997 to 1999.

"It is likely that much of this growth in the taxable income base is tied to the strong performance of the stock market, which has resulted in taxable capital gains that are not included in the officially reported personal income statistics, as well as large employee bonuses and stock options," the report states. "If so, state tax revenues are now unusually vulnerable to a downturn in the public capital markets."

The MTF report concludes that tax cuts and spending increases have eliminated "much of the margin of comfort in state budgeting," and it predicts, "The combination of unrealistic expectations, clashing philosophies and political agendas, and the new financial realities will surely test the state's leaders over the next several years."

Administration and Finance Secretary Andrew S. Natsios said he couldn't comment directly on the report because he had not seen it.

But, he said, he believed the state can afford the $1.4 billion state income tax rollback, which is being backed by Mr. Cellucci, if there are no major new spending initiatives.

"You obviously can't spend an unlimited amount and have unlimited tax cuts," he said.

Mr. Natsios said the state has been careful to build up reserves of nearly $2 billion to prepare for any unexpected downturn in the economy.

Associated Press
Wednesday, January 19, 2000

Pension fund sees $5.5B gain

BOSTON (AP) The state's largest public pension fund saw a $5.5 billion gain last year, rising to $30.6 billion, officials said.

Kathy Borchick, vice president of Wilshire Associates, the Santa Monica, Calif.-based general consultant to the Pension Reserves Investment Management Board said, "It truly was a phenomenal figure for investment gains."

"This is not the sort of thing we should get used to," Scott Henderson, director of the PRIM board, told the State House News Service.

The fund pays pensions to tens of thousands of state and municipal workers.

State House News Service
Tuesday, January 18, 2000

Public Pension Funds
Rides Stock Market to $5.5 Billion Gain in 1999

By Michael P. Norton

STATE HOUSE, BOSTON, JAN. 18, 2000 ...

Treasurer Shannon O'Brien, who chairs the PRIM Board, was pleased by the fund performance even though it makes it more difficult for her to convince legislators and members of the Cellucci administration that they must revise their actuarial and pension funding figures.

During her first year in office, O'Brien cited dated assumptions about retirement ages and mortality figures and actuarial software problems that collectively caused pension system overseers to underestimate the state's unfunded liability by $4 billion. In part due to the strong investment returns, she was unable to convince the Legislature or the Cellucci administration to hike the state's annual pension fund appropriation, which totaled $910 million last year.

Now, O'Brien is telling lawmakers starting another year of budget talks that at least $1.1 billion will be required to put the state back on its pension funding schedule. She made a private appeal to House members last week and plans to make similar presentations to the Senate and Cellucci administration officials. O'Brien aides also point out that by underfunding the system, Beacon Hill officials have missed out on gigantic investment returns that the fund has realized.

O'Brien says some lawmakers still serving on Beacon Hill remember when the pension system was 44 percent funded in the 1980s and consider a funding level bordering on 80 percent great. "The party line now is it's almost 80 percent funded in spite of all of our protestations," said O'Brien. "They think it's found money. It's pretty hard to make the argument that we're in trouble when you're looking at rates of return like this." ...

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