The Wall Street Journal
Tuesday, December 18, 2001
Review and Outlook
The 50-State Hangover
After the binge comes the headache. That's the reality state
governments are now facing as the slow economy pinches their budgets after a decade of high living, er, spending. Voters
are now going to get a chance to separate the profligate from the genuine fiscal
More than 40 states are reporting budget woes, and no
wonder. For a decade state politicians lived it up like the Great Gatsby. Even last year, with the slowdown obvious, the
majority of states raised spending by more than 5%, about double the rate of inflation. It's no
wonder that families now pay almost twice as much of their income to states and
localities as they did in 1960.
A new study by the American Legislative Exchange Council
shows what could have happened had states merely kept their spending increases to the level of personal income
growth over the past decade. They would have saved enough either to give an
annual tax cut of nearly $400 a year to every family or to dramatically increase the rainy-day funds they
socked away for stormy economic times. But having lived it up in the good
times, they now want to send taxpayers the bar tab.
Democrat Mike Easley of North Carolina kicked off his first
term this year by raising income and sales taxes by a whopping $435 million. Democratic Governor Frank O'Bannon of
Indiana wants tax hikes on cigarettes and casinos while he suspends two
property tax cuts. Next door in Ohio, GOP Governor Bob Taft has proposed $465 million in tax increases
over two years, warning that he has already cut into the "bone and tissue and nerve" of
state government. Skeptical legislators note that the budget has grown at more than twice the rate
of inflation over the past decade.
In New Jersey, a GOP Governor and legislature ballooned the
state's budget by 50% over the past eight years, while inflation increased only 20%. Now that the good times are over,
the new Democratic legislature is talking about borrowing $2 billion to balance the budget. It
would pay off the debt over the next 20 years using the state's tobacco settlement
payments. State Senate Democratic leader Richard Codey declares it "a great idea." Proposals for tax
increases are also on the table in Alabama, Wyoming, Tennessee and Washington state.
At least a few states are resisting this familiar spend and
tax pattern. Last week, Florida Governor Jeb Bush signed a bill cutting the growth in state spending by $1 billion although it
also included a delay in the scheduled repeal of the state's tax on savings and investments.
House Speaker Tom Feeney says it is tough to win the sound-bite war for smaller
government, in part because the news media don't report on how inefficiently tax dollars are
being spent. "Last year, even with a Republican legislature and Governor we still identified
$800 million in turkey programs and pork-barrel projects," he told us. "If they're honest,
legislators in any state can save money without undue hurt."
About half the states have an easier time adjusting to
fiscal hard times because they've had their hands tied in some way. Arizona has a budget deficit of $1.6 billion, but tax-hike
proposals are nowhere to be seen. That's because in 1992, voters approved a ballot initiative
that requires a two-thirds vote of the legislature to raise taxes.
That same year, Colorado voters capped the amount of revenue
that state and local authorities can collect and required that they return money above that level to taxpayers. But
taxes can always be raised by referendum if the public can be convinced
they're for a useful purpose. Colorado voters have approved many local tax hikes for targeted projects such as
police improvements and new playgrounds.
Some states are bravely viewing the current slowdown as an
opportunity to streamline their tax systems so they can smooth out future fiscal hard times. This month, Oklahoma Governor
Frank Keating proposed scrapping the state's personal income tax, repealing the sales tax on
groceries and replacing the lost revenue with a 5.9% sales tax on goods and services. This
will help Oklahoma compete with next-door Texas, which has no income tax.
Minnesota Governor Jesse Ventura is also biting the bullet.
In October, he stared down state employee unions that launched a two-week strike involving half of the state's work force. He
settled the strike after agreeing to pay hikes that averaged a reasonable 3.25% a year while
noting that state employees had gotten a raise every year but one during the 1990s, unlike
many private-sector workers. "If you're unhappy with your job, you have the availability to
go to the private sector," he told state employees.
There are some useful lessons to be learned from all of
this. One is that if surpluses aren't returned in tax cuts, the politicians will spend them and then during hard economic times
they will claim the only solution is to raise taxes again. Another is that rainy-day funds turn out to
be leaky budget vessels; tax cuts are a better way to restrain spending. The
best way to avoid a hangover is not get drunk in the first place.
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The Boston Herald
Thursday, December 20, 2001
The troubled reigns of the two Toms
by Wayne Woodlief
House Speaker Thomas M. Finneran and Senate President Thomas
F. Birmingham shouldn't get too comfortable about beating back immediate challenges to their authority this year.
The two Toms had better shape up fast - end a lot of their
secrecy and tight control and bring more democracy to both chambers - or it will be only a matter of time before they are
stripped of power.
Birmingham, of course, will be gone after his term ends next
December, since he's all but officially announced for the governor's race in 2002.
But to stand a realistic chance even to win the Democratic
nomination, he'd be smart to scram from the Senate even sooner, say next spring or early summer.
That would give him time to raise more campaign money from a
power position, then campaign full time and escape another brutal round of budget cuts and howls from critics that
he's just another insider.
Sure, Birmingham just won a "vote of confidence" from
Democratic senators. But several complained that he doesn't give them and their agendas enough time. At least seven of the
33 Democrats are eager to see Birmingham go so they can pursue their own campaigns to
"Few members of the Senate think he'll be around much past
spring," said a political consultant. "Why take another hit on the budget?"
See, Birmingham hasn't been able to separate himself from
Finneran as part of a backroom duo that couldn't produce a budget until five months beyond the deadline - and then came in
with horrendous cuts in social services that helped make a heroine of the Republican
governor who moved to restore them.
Worse, Finneran is usually portrayed as the top dog in their
relationship, the powerful speaker, King Tom to Birmingham's Prince Tom, the would-be governor.
Yet Finneran shouldn't rest too easy either, even if
dissidents unhappy with his autocratic rule have retreated from plotting an open attempt to oust him in January and are now
talking about reforms in the "process" instead.
Just look at history: In 1983, a move to unseat then-Speaker
Thomas McGee (D-Lynn) drew only 26 of the 160 members of the House on a resolution to "vacate the chair." It was
as premature as the mini-revolt of the past few days.
Yet, House Majority Leader George Keverian, yearning to be
speaker, bided his time. He recruited candidates loyal to him to run in 33 House districts with open seats in 1984.
Thirty-two of those 33 won, and Keverian soon had the votes to topple McGee in January
1985, recalled a Keverian strategist.
(Among members who swung to Keverian to put him over the
top: Finneran and his Boston pals, Sal DiMasi and Angelo Scaccia.)
Now the anger at Finneran among his members is widespread,
very real across ideological and geographical lines, not the customary and familiar outbursts from frustrated liberals:
Real enough to have Rep. Dan Bosley (D-North Adams), House
chairman of the Government Regulations Committee and a longtime Finneran leadership ally, openly risk
revealing his desire to "be the next speaker" and criticize Finneran's reign.
Real enough to cause dozens of moderate members, according
to several sources, to join the liberals in urging change - in Finneran's attitude and style as well as the rules.
"Members have to feel more engaged," Bosley said. "We face a
budget next year that will make this year's look like a piece of cake. Some people talk of a possible $2 billion revenue
shortfall. We can't hold the budget in conference [with the Senate] for months and then force
members to vote it up or down in a day."
Real enough to rile the public beyond the speaker's
Mattapan-Dorchester district and have voters put the heat on their elected representatives.
The Abington Democratic Town Committee has passed a
resolution rebuking the Legislature. And moderate and liberal reps said constituents are e-mailing, writing and
telephoning to ask why they don't "stand up" to the speaker.
It's dawning on voters that if Finneran and Birmingham can
stiff them on a Clean Elections law approved at the polls 2-1 in 1998, they might try next to take away the tax cut of 2000.
So even if Finneran is elected from one district, he'd
better start thinking more about his members' constituents - or face a more serious mutiny in his ranks.
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The Boston Globe
Thursday, December 20, 2001