With state revenues already $300 million behind last year,
Acting Gov. Jane Swift is taking necessary steps to curtail state spending.
Officials blame the Sept. 11 terrorist attacks for aggravating an already slumping regional
Several proposals are on the table to meet the state
Constitution's requirement for a balanced budget.
One option is to use a portion of the state's $2.3 billion
reserve account for any shortfall; another is to freeze state hiring and cut existing jobs.
Lawmakers are also likely to reduce spending plans for the
fiscal 2002 budget by $200 million to $500 million.
Across the country, economic fallout from the terrorist
attacks of Sept. 11, as well as a general slowing of the economy, is starting to be reflected in state coffers,
according to a Stateline.org survey of the 50 states.
The survey found 40 states reporting fiscal problems,
ranging from mildly depressed revenues in Idaho to a severe budget deficit in Washington, Florida, California and
Swelling unemployment ranks, stock market losses and
strengthened security and public health measures are straining limited resources. At least 15 states have made budget cuts or
frozen spending since the attacks or have plans to do so soon.
All these measures and more must be taken before the
Massachusetts Legislature even considers another option to balance the budget: postponing the second phase of the income
tax rate reduction.
Last year, voters overwhelmingly approved a gradual
reduction of the state income tax to 5 percent.
Fortunately, Swift opposes postponing the tax cut, but the
Legislature has contradicted the will of the voters in the past, as it did recently by inadequately funding the Clean
The income tax reduction will put more money back in the
pocket of consumers, which will be good for the economy. The tax cut must be preserved.
Thursday, October 18, 2001
Slump may delay tax cut
Layoffs, spending cuts and a delay in the state's income tax
cut are some of the options being weighed as lawmakers struggle with an increasingly dismal fiscal future.
Acting Gov. Jane Swift said Wednesday she will impose a
state government hiring freeze, end unnecessary out-of-state travel by state employees, and propose cuts in state programs.
"This is a good first step to start to constrain spending at
the executive level," Swift said.
State revenues are already $300 million behind last year.
Officials blame the Sept. 11 terrorist attacks for aggravating an already stumbling regional economy.
The steep decline is fueling calls to postpone by one year
the second, $400 million phase of the state's new income tax cut. The $1.4 billion cut, approved by voters last year, lowers
the income tax rate to 5 percent over three years.
"There's no active movement to do anything about it now, but
it's one of the options on the table," said Charles Rasmussen, spokesman for House Speaker Thomas
Finneran, D-Boston. "We're going to make cuts first, but nobody knows where this (decline)
is going to end."
The Tax Equity Alliance for Massachusetts, which opposed the
ballot question, is circulating a petition calling for a one-year delay.
Michael Widmer, president of the business-backed watchdog
group the Massachusetts Taxpayers Foundation, said the state should only consider delaying the tax cut after it has
made spending cuts and used a portion of its "rainy day" reserve account.
"If there is still a shortfall, we need to put everything on
the table," including the tax cut, he said.
Swift rejected any change to the tax cut, which she
"My opinion is the tax cut will help our economy recover
more strongly and more prosperously in the future," Swift said.
The hiring freeze, which Swift can do by executive order,
will not affect plans to hire and train 150 new State Police troopers. But some other state workers are likely to lose their
"Unfortunately, layoffs will have to be on the table to get
the level of reductions that the fiscal picture is going to demand," Swift said.
Lawmakers are currently locked in negotiations about how to
chop between $200 million and $500 million from their original spending plans for the fiscal year that began July 1.
Swift plans to meet with Finneran and Senate President
Thomas Birmingham soon to develop a bipartisan strategy to deal with the expected shortfall.
The state Constitution requires a balanced budget.
Swift also could propose using some of the state's $2.3
billion cash reserves. Widmer said the state should spend no more than a third of its reserves in a single year.
Swift also could urge the Legislature to spend more of the
money the in its settlement with the big tobacco companies, aides said.