CITIZENS   FOR  LIMITED  TAXATION  &  GOVERNMENT

 

CLT Update
Thursday, October 18, 2001

Another "fiscal crisis" -- another tax hike?


Stephen E. Collins, executive director of the Massachusetts Human Services Coalition, said it's possible to avoid major cuts through the use of reserve funds and by putting a halt to the voter-approved income tax cut, which is costing the state an estimated $400 million this fiscal year.

The Boston Globe
Oct. 18, 2001
Shortfall seen as bad news for social services


If anything should be sacrosanct, it is the voters' decision last fall. Their vote to lower taxes was preceded by a vigorous statewide debate in which the pros and cons were thoroughly aired and the details widely disseminated. The public overwhelmingly agreed that taxes are too high; that is why they are now gradually being reduced. If spending is also too high, the budget should be reduced as well.

The swollen state budget
By Jeff Jacoby
The Boston Globe - Oct. 18, 2001


Up for action is legislation to raise the pre-tax-cut cap on money in the Stabilization Fund from 7.5 percent to 10 percent of budgeted revenues, thereby preventing the one-time tax break that would have occurred automatically when fiscal 2001 ended June 30.

State House News Service
Rainy Days - Oct. 17, 2001


Many sitting House and Senate members have become accustomed to significant spending increases during the unprecedented economic expansion of the 1990s. As a result, they've been able to deliver on many popular spending programs that benefit constituents. Soon, they will be asked to vote on whether to cut some of those services and programs. And advocacy groups will be pressing to preserve their gains.

State House News Service
Oct. 17, 2001
Swift, budget writers drastically revise budget,
revenue projections


"Those who fail to learn from history are doomed to repeat it." But in Massachusetts, most Beacon Hill pols are beyond educating.

Yesterday the Legislature held a hearing at which those who helped create the last fiscal crisis explained what went wrong, what mistakes led to the crisis, and how it was handled.

What created the fiscal crisis of the late-80s was years of overspending while the good times rolled.

For years now, CLT has been warning it would come to this. With a state budget now bloated to twice the size, here we are again, for the very same reason: Unchecked spending growth during the good times, about a billion additional dollars a year of larding.

They didn't learn from the 1980s fiscal debacle, and their solution back then was to raise taxes. What will it be this time? As Boston Globe columnist Jeff Jacoby recognized in his column today, "Raising taxes ... is what halting the scheduled cuts would amount to..."

This time, the pols don't need to raise taxes anew -- we're still paying most of the "temporary" increase from the last time. They've just got to kill our decade-overdue rollback to achieve the same result.

Take it seriously, folks: that attack has been launched.

"Those who fail to learn from history are doomed to repeat it." In Massachusetts, the pols never learn ... and the voters keep electing them.

Chip Ford


The Boston Globe
Thursday, October 18, 2001

The swollen state budget
By Jeff Jacoby
Globe Staff

THE MASSACHUSETTS fiscal year began 110 days ago, on July 1, 2001. The Legislature's deadline for passing a law to fund state government for the next 12 months, therefore, was June 30. But the fiscal year is nearly one-third gone, and the 2002 budget has yet to make its appearance.

If you don't follow Massachusetts politics, you might imagine that only a dire emergency could be keeping legislators from meeting such a key deadline. In 47 other states, after all, budgets for this fiscal year have been completed. What terrible crisis has so paralyzed Bay State lawmakers that they cannot complete a spending plan that was due more than 3 months ago?

No crisis at all. The only thing keeping them from doing their job is the disregard they have for the voters who elected them. If there were penalties to pay for missing key deadlines, as there are in real life, legislators might take the budget more seriously. But Massachusetts long ago stopped holding competitive legislative elections, and House and Senate members know that their reelection is more or less assured. With little reason to fear voter reprisals, lawmakers find it easy to blow off their obligations.

To be sure, it makes little difference what 99 percent of the Legislature thinks or does. Decisions are made by just two people: House Speaker Thomas Finneran and Senate President Thomas Birmingham. Each rules his chamber like an autocrat, and the Legislature approves nothing without their blessing. Which means that Beacon Hill will get around to finalizing this year's budget when Finneran and Birmingham want to finalize it, and not a day earlier.

Meanwhile, the gathering recession (and the economic blow that struck on Sept. 11) is taking its toll on Massachusetts. Unemployment is up to 4 percent and is expected to go higher. Sales are down and there is fear they will go lower. For the third month in a row, tax revenues shrunk. In September, the drop was especially steep: $228 million less than the same month a year ago, a 13 percent reduction. The economic quarter that ended on Sept. 30 was the state's worst in more than a decade. And it seems clear that things will get worse before they get better.

So naturally Beacon Hill thinks this is a good time to enlarge its budgets.

Since that is the opposite of what Beacon Hill claims to be doing, some background is in order.

All through the booming '90s, the Massachusetts state budget grew fatter and fatter. Last year was no exception. The fiscal 2001 budget (passed in 2000) totaled $21.5 billion, a $700 million increase over the budget enacted the year before. It marked the ninth consecutive increase in state spending, swelling it far beyond anything Michael Dukakis ever proposed.

This year, despite the obvious weakening of the economy, the governor and Legislature had every intention of continuing their binge. The (unreconciled) budgets passed by the House and Senate in early summer came to roughly $22.9 billion -- a jump of $1.4 billion, or 6.5 percent, from the budget passed a year earlier.

Only after Sept. 11 did it finally occur to Beacon Hill's budgeteers that this might not be the best time to be spending at more than twice the rate of inflation. So late last month, amid much talk of "cuts," they let it be known that the final budget -- when it shows up -- will total $22.6 billion. Their response to falling revenues, in other words, will be to hike the budget by $1 billion instead of $1.4 billion. This is what passes for belt-tightening in the Massachusetts State House.

"Everyone must be prepared," says Finneran, "to make a collective sacrifice." Spare us the unction, Mr. Speaker. It's bad enough that you're jacking up spending at a time when taxpayers are seeing their investments, their savings, and even their jobs vanish. Must you also dissemble?

Speaking of taxpayers, Finneran suggested a few weeks ago that they forgo the rest of the tax cut they voted for last November. In the face of a veto threat by Acting Governor Jane Swift, Finneran now says that talk of killing the rollback of the income tax rate from 5.85 percent of 5 percent is "entirely premature."

But it was outrageous to even propose such a thing. Raising taxes in a weakening economy -- which is what halting the scheduled cuts would amount to -- would be disastrous. Besides, the state has more than $4 billion stashed away in assorted "rainy day" and trust funds; citizens do not have to be robbed of their tax cut to balance the state's books.

If anything should be sacrosanct, it is the voters' decision last fall. Their vote to lower taxes was preceded by a vigorous statewide debate in which the pros and cons were thoroughly aired and the details widely disseminated. The public overwhelmingly agreed that taxes are too high; that is why they are now gradually being reduced. If spending is also too high, the budget should be reduced as well. Assuming, of course, that there's going to be a budget this year. Is there?


The Boston Globe
Thursday, October 18, 2001

Shortfall seen as bad news for social services
By Rick Klein
Globe Staff

Social-service programs launched amid flush times just a short while ago face likely slashing as state leaders scramble to close a sudden budget gap of $1.1 billion.

Acting Governor Jane Swift and legislative leaders are trying to cut between $500 million and $750 million, and will also probably tap state reserve funds for hundreds of millions more.

"It will go from bloodiness in some programs to the death of some programs," said Senate Ways and Means Chairman Mark C. Montigny, a New Bedford Democrat. "Every single item is under scrutiny for potential paring back and cutting."

Among the sacrifices could be $100 million in proposed services for the mentally ill and mentally retarded, including a program to help so-called "stuck kids" -- teenagers now in mental hospitals or emergency rooms who were slated to be moved into group homes or other settings.

Also in jeopardy could be the Senate's proposal to give an extra $29 million to the fledgling Prescription Advantage program, which provides prescription drug insurance to senior citizens and the disabled. Another $4 million to help people who are homeless or in danger of losing their housing could also go.

"We simply can't afford some of the programs that we were promising earlier in the year," said House Ways and Means Chairman John H. Rogers, a Norwood Democrat.

Swift has moved to freeze state hiring and cut back travel, but cautioned that painful choices must be made to avoid a budget deficit. Layoffs of government workers may be needed if the state economy worsens, she said.

"We'll have to make much more significant [cuts]," Swift said. "Everything's on the table, and we will make the best choices we can."

After five years during which revenues poured into state coffers, and the budget increased about 6 percent annually, the state is facing the possibility of spending less this year than it did last year. House, Senate, and administration officials are unanimous in saying that the $22.9 billion budget they have been discussing is about $1 billion too high.

State officials are not yet detailing publicly where the cuts will come, and there's vast disagreement over spending priorities -- so much so that the Legislature is more than 3 months late in finishing the budget. But with widespread support to maintain proposed spending levels for most programs in education, health care, and public safety, a handful of other areas of state government figure to be especially hard hit.

Any number of proposed spending increases could be slashed, including $1.5 million for libraries, a possible $12.3 million increase for the state Department of Elder Affairs, and about $20 million spread among health and human services programs, according to a report prepared this month by the Tax Equity Alliance for Massachusetts. Legislative sources say that funding for housing, the judiciary, and environmental affairs could also be cut.

The state now has $2.3 billion in two reserve accounts, but state leaders say they do not want to dip too heavily into those funds in a single year. Swift said she'd like to spend less than a third of that money this year.

Stephen E. Collins, executive director of the Massachusetts Human Services Coalition, said it's possible to avoid major cuts through the use of reserve funds and by putting a halt to the voter-approved income tax cut, which is costing the state an estimated $400 million this fiscal year. But Swift said she will not budge on the tax cut, and House and Senate leaders say they probably won't be able to muster the two-thirds vote that would be needed to override her veto.

Swift said that budget cuts, while painful, are a necessary part of efforts to cope with the economic downturn.

"The one lesson we learned in the early '90s is that the sooner we respond and take the necessary difficult steps, the less impact it will have on the families of the Commonwealth," Swift said.


State House News Service
Wednesday, October 17, 2001

RAINY DAYS: House members on Wednesday will be recorded for or against letting last year's budget surplus trigger a tax cut as the law requires, or changing the rules of the game in light of a weakening economy.

Up for action is legislation to raise the pre-tax-cut cap on money in the Stabilization Fund from 7.5 percent to 10 percent of budgeted revenues, thereby preventing the one-time tax break that would have occurred automatically when fiscal 2001 ended June 30.

In addition to hundreds of differences over items and language in the new budget, the House and Senate are also at odds over what to do with $579 million of left over money in the old one. They have placed the money in a transitional escrow account but, if they fail to act by Nov. 30, the money will flow back to the General Fund and trigger a tax refund.

Legislative leaders have argued that many needs will go unmet as the state's revenue "take" declines but they disagree over which needs should be funded and how many of the surplus dollars should be squirreled away in reserves like the Stabilization Fund.

House Speaker Thomas Finneran has invited two of the principals involved in budget matters during the fiscal chaos of the late 1980s to brief his colleagues Wednesday on what they should have done then to prevent that chaos. Addressing a noontime caucus in Room A-1 will be former Senate Ways and Means Chairman Patricia McGovern and former House Ways and Means budget director Richard Lord of AIM. They are expected to be available to the press following the closed-door caucus.


State House News Service
Wednesday, October 17, 2001

Swift, budget writers drastically revise budget,
revenue projections

By Michael P. Norton and Helen Woodman

STATE HOUSE, BOSTON, OCT. 17, 2001 ... Until today, Beacon Hill leaders have been talking about cutting the proposed state budget by about $300 million to balance it during tough economic times. Now leaders are preparing for much deeper cuts and substantial raids on reserves to make fiscal ends meet.

Acting Gov. Jane Swift announced she plans to implement a hiring freeze, that layoffs are possible, and that the gap between revenues and expenditures could reach $1.1 billion. The House and Senate have passed budgets requiring substantial spending increases, but tax receipts that fuel spending are declining.

Swift said $300 million in cuts won't balance the budget, which is nearly four months overdue. "They'll have to double or maybe triple that," Swift said. "I think it's only prudent to curb spending, travel and new hiring."

The details of Swift's plans, to be rolled out by executive order, are not yet available. Just three weeks ago, Swift's fiscal deputies agreed that reducing the budget by about $300 million would probably be sufficient. The new, more pessimistic budget assumptions are based on "additional information and projections regarding revenue," said Swift press secretary James Borghesani.

House Ways and Means Chairman John Rogers (D-Norwood) said House budget writers are also planning for a worst-case scenario. He indicated that the proposed $22.9 billion budget bills approved by the House and Senate in the spring will probably need to be pared back by $500 million, not $300 million.

But even those cuts would cover only about half the shortfall. Rogers said the remaining $600 million gap, if it materializes over the next several months, could be addressed by borrowing against the state's sizeable reserves -- taxpayers have built a $1.7 billion rainy day fund and have $590 million in surplus funds left over from fiscal 2001. The downturn coincided with the July start of a new fiscal year.

House Speaker Thomas Finneran, noting that state spending has nearly doubled in a decade, has said that implementing major cuts could be accomplished "without undue hardship." Others disagree, and veteran lawmakers have been cautioning their colleagues to brace for protests that might accompany budget cuts.

It appears inevitable that the rainy day fund will be tapped. With budget writers uncertain about the length and depth of the recession, the question is how much will be drawn down. "We'll have to use but not exhaust the rainy day fund," said Swift, who added that she agrees with the Massachusetts Taxpayers Foundation that no more than one-third of the rainy day fund reserves should be used this year.

The budget remains tied up in private talks and no one on Beacon Hill has offered specific suggestions for cutting the budget. By contrast, Democrats and Republicans have talked mostly about major spending areas where they intend to keep boosting appropriations, including education, health care and public safety. At the same time, leaders all agree that acting soon to address overspending is a necessity. "One lesson we learned in the early 1990s was that the sooner we act, the fewer adverse effects there will be on families," said Swift.

Emerging from a closed door, two-hour budget caucus with his House colleagues, Rogers said House members are acknowledging the necessity of significant budget cuts. According to other caucus attendees, the discussions revolved around how to balance cuts with spending from reserves. The talks are a private prelude to what will likely be a pivotal public rehashing of the fiscal 2001 budget priorities.

Inevitably, the debate about budget cuts will lead to banter about the wisdom of cutting and raising taxes.

While the state has big fiscal reserves that didn't exist during the fiscal crunch of the early 90s, it is implementing a voter-approved $1.2 billion tax cut. Back in the early 1990s, former Gov. William Weld took office pledging to cut government and balance the budget and he did it with the help of a $1.2 billion tax hike approved by the Legislature and Gov. Michael Dukakis over the objections of many angry voters.

Some Beacon Hill Democrats and liberal advocacy groups are talking about stopping or delaying the income tax cut. But Beacon Hill leaders say talk of that kind is premature and Swift, who supported the tax cut at every turn during the 1998 campaign, has promised to veto any new tax or tax hike. "I don't think it should be on the table because right now it's families that are hurting," Swift said today.

During the House caucus, former Senate Ways and Means Chairwoman Patricia McGovern and Richard Lord, a former House budget aide, told stories about the fiscal crisis of the early 90s, emphasizing mistakes made. Lord said too many fiscal problems were covered up. The festering problems then compounded, he said. And because Beacon Hill leaders weren't honest about the extent of the crunch, voters were outraged and angry when they were hit with the $1.2 billion tax hike to bail out the state.

Lord encouraged lawmakers to be honest about affordable spending levels, to communicate with voters and special interest groups about the changing budget picture, and to act quickly. "It happened so fast, although it's happening very fast again," said Lord, now president of Associated Industries of Massachusetts, the state's largest employer trade organization.

Beacon Hill leaders should also put aside as many differences as possible and work together, Lord said, noting friction among leaders made a bad fiscal problem even worse in the late 80s and early 90s.

The House and Senate today are locked in an institutional rivalry and the branches, while dominated by Democrats, are frequently at odds over most public policy issues. The House generally portrays the Senate as too liberal. Senate leaders say the House isn't willing to consider bills with widespread support.

Rogers says he gets along well with his Senate counterpart, Mark Montigny (D-New Bedford). "That level of acrimony is not there," said Rogers. "We're going to have to work together. Both sides have acknowledged there is a problem" with the budget.

And Lord also advised lawmakers to prepare for a different time at the State House. Many sitting House and Senate members have become accustomed to significant spending increases during the unprecedented economic expansion of the 1990s. As a result, they've been able to deliver on many popular spending programs that benefit constituents. Soon, they will be asked to vote on whether to cut some of those services and programs. And advocacy groups will be pressing to preserve their gains. "We had groups up here every day protesting," Lord said, recalling the angst that predominated during the early 90s.


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