It was only a few months ago that Beacon Hill lawmakers, worried
about financial crises overseas and a spate of local layoffs, were talking about
belt-tightening, hoarding cash, and boosting the state's rainy day fund in anticipation of
a recession that some seemed certain was just over the horizon.
But money kept pouring in. The political rhetoric about how many
months the $1.2 billion emergency reserves could sustain the state began to fade. Agendas
blossomed. Spending became the order of the day.
Governor Paul Cellucci produced the largest budget ever filed in
Massachusetts history containing plans to lower the income tax rate and heap millions of
dollars on pet projects and programs. Weeks later he said he wanted to spend another $300
million from a projected state surplus on one-time road and bridge improvements.
Even before Cellucci got the spending bug, Speaker Thomas M. Finneran
unveiled an ambitious and expensive plan to offer public preschool and full-day
kindergarten. And Senate President Thomas F. Birmingham cited the surging economy as a
reason to sharply increase the minimum wage.
Despite the spending euphoria, economists are still nervous about the
not-too-distant future. They say fewer jobs will be created. The financial service sector
could be hit by a stock market crash. And consumer confidence may wane.
"One way or another, the economy is going to slow in '99,"
says Nicholas Perna, chief economist for Fleet Financial Group. "It doesn't have to
go down the tubes like it did a decade ago.... A recession is unlikely and Massachusetts
wouldn't do any worse than the rest of the country in terms of job loss and how long it
stayed down, but the fact that we haven't had a slowdown yet means people should be more
cautious, not less cautious."
While Cellucci's budget message for next year is filled with warnings
about "profligate spending" and reminders "of what can happen when
government gets caught up in the euphoria that prevails during a robust economy," his
record $20.4 billion spending plan represents a 5 percent boost over fiscal 1999, giving
across-the-board increases to dozens of agencies and programs.
The Massachusetts Taxpayers Foundation, a fiscal watchdog group,
issued two reports last month, "Reaching the Breaking Point: The Commonwealth's
Capital Dilemma" and "Budget '99: Containing the Euphoria,"
both flagging the potential for a crisis.
"We're still phasing in last year's tax cuts. The economy has
already outperformed everyone's expectation for much longer than anyone anticipated. This
clearly can't go on forever and there are some problems," said Michael Widmer,
executive director of the taxpayers foundation.
He points to the so-called budget busters -- funding for the MBTA,
health care for state employees, and Medicaid -- climbing to unforeseen levels.
"The budget is exploding," Widmer added. "At the same
time, we have this huge problem of trying to identify enough capital resources to invest
in a long list of important priorities while paying for the Central Artery."
Last week, Cellucci said he would pour much of the state's cash
surplus into one-time highway and bridge projects, taking some of the pressure off the
But such a spending luxury could be short-lived.
The state's infrastructure -- roads, buildings, bridges, pipes, etc.
-- is among the oldest in the nation and could easily siphon millions out of the general
fund for needed repairs over the next few years. If Cellucci's pitch to
reduce the income tax rate in stages from 5.95 percent to 5 percent is successful, it
could take $1.2 billion out of the coffers in just the first year [sic],
possibly eliminating any surplus, thereby stretching the capital budget thinner.
Frederick Breimyer, chief economist at State Street Bank who believes
the state's soaring times are in for a "soft landing," said it is evident that
politicians are struggling to determine how to spend this year's cash without permanently
"Growth is likely to diminish," Breimyer said. "The
political establishment here is trying to find a middle line. I think they've done a
reasonably good job. There has been a sense of prudence. And I think prudence is
However, cities and towns, which have received local aid increases
each of the last eight years -- a 113 percent overall jump in spending since 1992 -- are
already clamoring for more than the $4.5 billion Cellucci is offering for next year.
Holyoke Mayor Daniel Szostkiewicz says major local aid increases over
the last four years have fueled a renaissance in his city, luring young families back who
once would have shunned the shabby schools, which now have new books and are wired for the
"It was great. It was absolutely phenomenal," Szostkiewicz.
"But when you go from multimillion dollar increases to level funding, it feels like
you're just hitting a wall."
Of course, he is already talking about "working the
Legislature" on getting more than the $60 million Holyoke is already promised.
All this frustrates the governor's office.
"You can't open the piggy bank for everyone all the time,"
said Cellucci spokeswoman Ilene Hoffer. "You have to impose controls. The most
critical way to do that is to take money off the table by reducing the income tax."
Will the Legislature approve the rate cut?
Senate President Birmingham hopes not.
"I'm not Nostradamus," he said. "And I don't know if
the governor has Nostradamus advising him. I don't know when the economy will slow down
... and for that reason I take a cautious approach."