A reduction in the rate of revenue growth is not a loss if
it's more than past revenue. -- it's still an increase! Will the pols ever learn that? A "cut" in growth, a slowing of
expansion, is not a "cut" in programs if they are still funded at the same of even higher levels than last year. Spending
-- even under Governor Cellucci's soon-to-be-released FY 2002 budget proposal --
will again increase faster than the rate of
But "the sky is falling!" the Johnny-One-Note Gimme Lobby wails. More Is Never Enough (MINE), and
never will be.
Ah, but then the Globe reports: "Any turmoil could shape the 2002 governor's race, with Democrats hoping
to prove the Republican governor's $1.2 billion income tax cut, the largest in the state's history, was a huge
mistake at precisely the wrong time."
The use of that phrase, "the largest tax cut in the state's history," is so misleading and disingenuous. Question
4 simply rolled back the largest tax increase in the state's history -- a "temporary" one at that.
Nonetheless, this Boston Globe report informs us of two immutable facts:
Though we decisively won the Question 4 tax rollback ballot question, the relentless More Is Never Enough
campaign goes on; and -- unlike the rest of us -- there are no holidays for the Gimme
"You cannot spend what you do not have," House Speaker Tom Finneran profoundly observed. Mister
Speaker, that is precisely the reason why we took our money back.
The Boston Globe
Sunday, December 24, 2000
Slowing tax flow causes jitters
Revenue drop hits as rollback nears
By Tina Cassidy
Amid other unsettling signs of a softening economy, state tax collections have dropped sharply
during the past two months, setting off fears on Beacon Hill of a financial crunch
just as the governor's $1.2 billion income tax reduction begins to take effect.
While revenues are still running ahead of last year's collections, the growth during October and
November fell to 3 percent, after posting gains averaging 14 percent during the
first nine months of the year.
The sudden shift concerns state budget writers, who say it may force unexpected
belt-tightening on Beacon Hill, which has grown accustomed to years of generous outlays for
everything from cities and towns to education reform.
It is occurring as other troubling indicators emerge, including layoffs spanning "old" and "new"
"That's a colossal drop," said Stephen Crosby, the state's chief fiscal officer, of the revenue
reduction. "That's like falling off a cliff. That gives the message that we need to be
While October and November are typically weak months for tax collections, state officials say
what concerns them is the significant fall after a strong July-September period, which
seems to signal a new anxiety churning through the economy. The revenue figures reflect the taxes the
state collects from wages, retail sales, investment, and business income.
If cash flow continues to slow just as the first phase of Governor Paul Cellucci's income tax
rate reduction takes effect Jan. 1, the administration, along with the Legislature, may
face its greatest political, philosophical, and fiscal tests in the decade since the Massachusetts Miracle
House Speaker Thomas M. Finneran said rising energy and health care costs and the jittery
stock market compound the concerns. Finneran is considering inviting an economist to
address House members at the new session, which begins next month, to describe the broader
economic picture and reinforce that this is not the year to be looking for money for pet
"The economic outlook is very, very worrisome," said Finneran.
"The most important function that we have over the next 12 months is to demonstrate to the
people of Massachusetts that we are sober and capable of making responsible decisions that
allow us to continue the progress we want to make, in the face of the new economic realities
that we have."
The governor releases his budget next month, then the House and Senate draft their own.
Before revenues fell, Crosby publicly promised no "material cuts" in state programs or
services, and he has been seeking ways of funding state initiatives without raising new revenues.
Any turmoil could shape the 2002 governor's race, with Democrats hoping to prove the
Republican governor's $1.2 billion income tax cut, the largest in the state's history, was
a huge mistake at precisely the wrong time.
"I think the governor is likely to have a credibility problem over the next couple years," said
Democratic gubernatorial candidate Steve Grossman, who opposed the tax initiative. "He
promised that our most important priorities could be realized and that taxes could be cut
dramatically at the same time. When citizens realize that tough choices will
leave some of their highest aspirations unfunded, there is likely to be a significant political backlash directed toward
Cellucci, however, believes the state is well-poised for the coming year. He said that steps
taken since 1990, when Republicans took over the governor's office, have cushioned the
state from the impact of downturns, and reduced the tax burden to create a more dynamic economy.
The state now has $1.7 billion in the so-called rainy day fund, and the unemployment insurance
trust fund has grown to $2 billion. Both accounts were depleted during the fiscal crisis
of a decade ago.
Meanwhile, the welfare reserve fund has an extra $250 million, and the number of people
receiving aid is near an all-time low. There's $60 million in the capital reserve
account. Various state taxes, cut 41 times over the last decade, have also made the state a more attractive place
for businesses, the governor believes.
"I think we can handle it," Cellucci said confidently last week.
The governor insists that his tax cut, which voters overwhelmingly approved at the polls last
month, will help keep the economy humming.
Over a three-year period, it will lower the personal income tax rate from 5.85 percent to 5
percent, beginning Jan. 1, at a cost of $1.2 billion. In addition, the state will provide a
deduction for charitable contributions beginning Jan. 1., which will remove another $200 million
from the treasury.
But not everyone is thrilled that the revenue spigot will be tightened. Some economists fear if
the slight slowdown becomes a full-blown recession, the tax cut could land the state in
"We have definitely made ourselves more vulnerable" by passing the tax cut, said State Street
Corp. chief economist Frederick Breimyer. "That's the reality. That's a collective
decision we've made. I think it's going to put pressure on the financial structure here on a continual
Finneran said the message must be delivered to cities and towns, which have received big
infusions of state aid in recent years, that those days are over. Boston, for example, has seen
its aid jump 50 percent since 1993 to $550 million during the current fiscal year.
"You cannot spend what you do not have," the fiscally conservative Mattapan Democrat said.
Crosby, the secretary of administration and finance, says that is precisely what the
administration will have in mind when it releases a budget next month with only modest
spending increases of about 5.5 percent, in contrast to the double-digit
spending increases of the late 1980s before the last recession.
"I'm not predicting there won't be hard times -- there might be," Crosby said. "What the
national economy brings, we will weather it well."
After all, he said, "this is what we've been getting ready for for 10 years."