and the
Citizens Economic Research Foundation


Barbara's Column
January 2002 #5

Fiscal Ed

by Barbara Anderson

The Salem Evening News
Saturday, January 26, 2002

I knew a fiscal crisis once, and this is no fiscal crisis.

In 1989 the commonwealth was in real trouble. Governor Michael Dukakis had run for president the year before on the strength of "the Massachusetts Miracle." By inflating revenue projections and not paying bills, his administration hid serious budget deficits. Still living in fantasy land, Dukakis returned home and filed another budget that increased spending by $1 billion.

Salem state representative and budget watchdog Mike Ruane sounded a warning and the Massachusetts House, using a lower revenue estimate, cut the proposed increase in half. Then the so-called Massachusetts Taxpayers Foundation (MTF) told a Senate hearing that the House was wrong and the governor's revenue projections were correct, so that attempt at fiscal restraint ended rather abruptly.

It turned out that MTF's numbers were a billion dollars too high. The commonwealth hit a fiscal wall and its bond rating dropped.

There was a huge unfunded pension liability then, and no rainy day fund. The result was the first of two income tax rate hikes as well as other tax increases, followed by real budget cuts.

The deficit was bonded and funded by the tax hike; when those bonds were paid off and the economy was strong again, Governor Paul Cellucci suggested returning the income tax rate to 5 percent.

MTF, whose views were still respected for some reason, resisted this by insisting that "state revenues are slowing" despite the fact they actually increased by 6.5 percent , 9.2 percent, and 10 percent in subsequent years.

The income tax rate rollback went on the ballot in 2000. During that campaign voters were told by MTF that revenues were slowing, and by politicians that the state couldn't afford the tax cut. Voters still chose to repeal the "temporary" tax that was contributing to a doubling of the state budget.

Economic cycles being inevitable, eventually we did slip into a small recession, during which a tax cut is a nice thing to have. With a slowdown in the rate of budget growth, the Legislature for some reason began setting priorities by cutting services to the mentally retarded. It eventually went along with Governor Swift's vetoes of real service cuts and in the end, the budget did increase, but by much less than the amount to which the state had become accustomed.

Now the governor has released her budget for the coming fiscal year with its 2.7 percent increase. Meanwhile MTF is comparing "the fiscal crisis" to "the perfect storm," which killed people, and suggesting that the responsible thing to do is raise taxes immediately. Some people are listening to this with a straight face.

Peabody state Rep. John Slattery demands that Swift delay the final phase of the three-year rollback. Despite the fact that the state spends over $5 billion on education, that K-12 spending is 18.3 percent of the budget, and the governor is increasing Department of Education spending by $135 million, Slattery accuses her of hurting kids in the classroom. Please.

Keeping calm here: After using some of the rainy day fund for the present budget, there is still $1.5 billion left -- more than the amount of the fully-implemented tax rollback.

After Dukakis was gone, the state started funding its pension liability. The governor wants to slow down payments to this fund, just as you might slow down your retirement savings if you had a temporary financial difficulty.

Is it hard to imagine that a state budget that was increasing by a billion dollars a year might have some waste and inefficiency built into it? Can't new programs, that we got along without in the past and that were started just to use up the giant surpluses, be revisited?

And do lottery gamblers really need a long-shot payout that is higher than other states' lotteries' more than we taxpayers deserve a guaranteed tax cut? Do smokers still need the state to spend taxpayer dollars to tell them not to smoke? Does the business community, which funds MTF, really need two more taxpayer-backed convention center boondoggles?

It's time for management and setting priorities. Instead, the so-called Mass Taxpayers Foundation wants to take the easy way out and make us taxpayers keep paying for the last real fiscal crisis, which it helped cause with its inaccurate revenue projections.

Both Salem and Peabody voted for the rollback. Mike Ruane still respects his constituents, while John Slattery is apparently planning to run for lieutenant governor on a platform that insists the voters don't know what they're doing on ballot questions.

Maybe the difference between them is that Slattery believes no amount of spending is ever enough; while Mike Ruane knew, and tried to prevent, a real fiscal crisis once upon a time.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem Evening News and the Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in other newspapers.

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