The Boston Globe
Sunday, January 19, 2003
Political Intelligence
By Frank Phillips
[Excerpt]
Cuts will please public, poll indicates
When Governor Mitt Romney makes his expected deep cuts to
state spending, he will have the public heavily on his side, according to a University of
Massachusetts poll taken last month. The survey of 400 voters shows a strong
majority - 68 percent - disapprove of the way state government spends money,
while only 28 percent approve. Democrats who suggest raising taxes to solve the fiscal crisis will be going up against
public sentiment. The poll shows 59 percent of voters prefer spending cuts to close the deficit while only 26
percent favor raising taxes.
"I am stunned," said UMass pollster Lou DiNatale, referring
to the strong antitax mood among the Massachusetts voters. Normally, 40 percent of the
electorate in the state is solidly liberal and supportive of government spending.
DiNatale thinks the antitax mood is tied to the bad economic conditions.
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The Lawrence Eagle-Tribune
Sunday, January 19, 2003
'Where did all the money go?'
By David Olson and Jason B. Grosky
Staff Writers
As Lt. Gov. Kerry Murphy Healey toured Massachusetts to
commiserate over aid cuts with the state's mayors and town managers, the governor's office was
distributing a memo to reporters noting local communities have had a pretty
sweet time of it the last decade, with local aid rising by an average of
7.5 percent a year.
And while legislators spent much of the last week on the
phone soothing the jangled nerves of officials in their home districts, they were circulating a chart
of their own, showing local aid has jumped by 20 percent over the last three
years, while aid to higher education and social services has dropped by an equal
amount.
The implication is clear: Cities and towns have enjoyed an
unprecedented run of state generosity -- and rising property values -- for the past decade, which
should have left local communities well prepared to deal with the economic
downturn of the last several months.
Still, many city and town officials have loudly derided the
cuts. In Lawrence and Haverhill, superintendents have threatened to shut down the city schools
months early. The mayor of Medford has posed for reporters at a local fire
station holding a "budget-cutting" ax to highlight his threatened cuts to public
safety. In Lynn, Mayor Chip Clancy -- a former state senator -- is threatening
to withhold tax receipts the city collects for the state if the governor
slashes aid.
Elected officials, sensitive to the pain the cuts will cause
in their districts, have been diplomatic.
"The rhetoric needs to be ratcheted down a bit," said state
Sen. Steven A. Baddour, D-Methuen.
Barbara Anderson is less tactful.
"Stop whining, moaning and carrying on," said the founder of
Citizens for Limited Taxation and Government, an anti-tax group
that pushed the historic Proposition 2½ law more than 20 years ago and the voter-approved
income tax rollback in 2000. "No one's buying it. Where did all the money go?"
The booming days of the 1990s
Since a low point in 1992, midway through Gov. William F.
Weld's first term, total local aid has risen from $2.3 billion to $5.5 billion, or 140 percent. While
much of that jump was driven by extra school spending required under the
Education Reform Act, even nonschool aid skyrocketed, up from a 1992 low
of $919 million to $1.41 billion -- an increase of 54 percent.
All that state spending, coupled with the economic boom of
the 1990s, left many cities and towns with cash in the bank. According to the state Division of
Local Services, the state's 351 municipalities started fiscal year 2002 last July
with a total of $413 million in reserves, more than four times what they had a
decade ago.
Many cities and towns also had "free cash," money left
unspent, at the end of fiscal 2002. Communities had a total of $559.4 million in free cash at the close
of the fiscal year, nearly six times the sum they had in 1992, which followed a
recession and three consecutive years of local aid cuts.
Some budget analysts say communities should be prepared to
tap into those reserves to help mitigate the local aid cuts.
"The reality is that cities and towns should start using
their reserves," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a
business-backed think tank. "That's what they are there for -- emergencies.
But they won't solve the whole problem."
Local officials agree, saying the reserve accounts aren't
the fiscal equivalent of a magic wand.
North Andover Town Manager Mark S. Rees objects to state
officials pointing the finger at communities' use of their reserve and free cash accounts.
"For them to say, 'Yeah, you have reserves,' I say thank
goodness we do because they're there for the real vagaries of our budget," Rees said. "Those
reserves are for things that are volatile in our budget, not to absorb cuts in local
aid."
In addition, rating agencies like Moody's and Standard &
Poor's consider a community with ample cash reserves a better credit risk for lenders. Towns
with high bond ratings pay lower interest rates on borrowed money, saving
taxpayers money in the long term. If a town spends those reserves, its rating
will eventually drop and future bonds will be more expensive.
North Andover cannot deplete its reserves to offset cuts by
Romney, Rees said, noting that the town already used $400,000 from its reserves to balance this
year's budget. Rees said he will pull another $775,000 to cover underestimated
special-education and health-insurance costs, not to mention added snow-removal expenses.
Lawrence Mayor Michael J. Sullivan, however, said communities should be
paring down extra cash accounts to help deal with the state crisis. He's
committed to using $4 million of his $11.6 million in reserve and free cash
money to deal with state aid cuts over the next five months, but is dedicated
to saving the balance for next year.
"Cities and towns need to go into (the next fiscal year)
with free cash, and you don't want to deplete that," he said "We need to be preparing for the economy
in Lawrence right now, rather than come up with a quick fix in six months."
Communities better off than the state
In its memo to reporters, the Romney administration notes
that most cities and towns are in better fiscal shape than the state. Massachusetts state
government has shed 5,000 jobs from January 2001 to November 2002, the
memo notes. During that same time, local government employment figures
have increased 5,200. Municipal property tax revenues grew 6.3 percent in the
last fiscal year, while the state's revenues fell 14.6 percent. Many communities
also have the power to raise taxes under Proposition 2½.
Such is the case in Methuen, where Mayor Sharon M. Pollard
fears her city will get whacked for good management. Methuen is $5.8 million below its tax levy
-- meaning the city could legally charge its property owners another $5.8
million a year, and then raise taxes another 2.5 percent on top of that. The
city has another $2 million in its reserve accounts, which she said will be empty by
July 1, the first day of the fiscal year.
Pollard said she spent $1 million in reserves -- "a big
piece of change" -- to cushion this year's budget.
The ex-state senator said there is a "great misunderstanding" on Beacon Hill
that the state is suffering while communities are swimming in money.
"That is absolutely not the case at all," Pollard said. "I'm
down at least 17 positions in the DPW and am only hiring essential personnel. We started
realizing that tough times were ahead a year ago and I started to look
personally at each and every requisition form."
This is the third major state budget crisis Andover Town
Manager Reginald S. "Buzz" Stapczynski has seen in two decades, recalling the creation of
Proposition 2½ in 1981 and the tough times in the early years of the Weld
administration, when declining state revenues and falling property taxes led to
three straight years of local aid cuts.
"We laid off teachers, firefighters, the DPW, cut library
hours -- the same things we're doing now," he said. "We are in contraction mode now, and in a
couple of years, the economy will turn around and will be expanding again. The
trick is to do it modestly."
Sullivan doesn't believe his city has learned much from the
tough days seen in the Weld years. If anything, the subsequent influx of money saw Lawrence
leaders get lazy, the first-term mayor said. Delinquent citizens owed Lawrence
$14 million in back taxes and another $3 million in water bills when he took
office. Since them, the city threatened to put liens on properties and shut off
people's water, leading to the collection of $3 million in back taxes and $1.4
million in water bills over three months, he said.
"When the cities and towns come out of this, we're going to
be healthier for having done it," he said.
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The Lawrence Eagle-Tribune
Sunday, January 19, 2003
Romney to unveil money-saving proposals
By David Olson
Staff Writer
First came the stick. Now comes the carrot.
Gov. Mitt Romney and the Legislature just finished teaming
up to cut state aid to cities and towns by as much as 10 percent over the next five months, and
the budget news isn't any better for next year.
But even as local officials begin to grasp the impact of the
$200 million in expected cuts, lawmakers are putting together a package of legislation and
regulatory changes designed to save municipalities money during the fiscal
crisis.
Lt. Gov. Kerry Murphy Healey has been touring the state for
the last week, meeting with dozens of mayors and town managers to gather money-saving
suggestions. She said the Romney administration will unveil a package of those
solutions next week.
Legislators, their phone lines clogged with calls from their
home districts, have also been hard at work on the issue.
Just as the two branches teamed up to speed the cuts, the
Legislature and the Romney administration expect to move with equal quickness on the
money-saving proposals, which range from raising the excise tax on motor
vehicles to offering municipal workers an early retirement package to changing
the way local schools are designed and built. Lawmakers could also lift
onerous state mandates, at least temporarily, to give local officials a breather until the
economy picks up.
"People are thinking very creatively," Healey said.
But even as they pledge to work together, state and local
officials and budget analysts admit the changes will have a limited immediate effect, and won't go so
far as to offset the looming local aid cuts.
"These kinds of reforms clearly would be positive, but the
local aid cuts and the state's fiscal problems would dwarf the impact of any of these solutions,
especially in the short term," said Michael Widmer, president of the Massachusetts
Taxpayers Foundation, a business-backed think tank.
Here's a look at some of what's on the table:
* Raising taxes. The state-set excise tax on motor vehicles
hasn't been changed in years, Widmer said, and an increase could mean hundreds of thousands of
dollars for local communities, especially as people buy more expensive
automobiles and sport utility vehicles.
Some mayors, most notably Boston Mayor Thomas Menino, have
proposed adding a tax to everything from movie tickets to restaurant meals and
parking-garage fees, ideas that are popular in cites like Salem and Beverly but
useless in towns like Hamilton, which has one restaurant, no movie theater and
no parking garage.
And Romney himself has been wishy-washy on the issue, first
saying he would not rule out approving such taxes before contradicting himself last week.
"I do not see raising taxes as the answer to our fiscal
problems," the governor said.
* Slowing state education mandates. Every time the state
Department of Education makes a change in curriculum, or decides teachers need extra
training in a certain subject, the local school districts share in the cost.
State Sen. Susan C. Tucker would like to see the state
suspend "the constant stream" of education mandates, ranging from compulsory professional
development training to rapid-fire, state-required curriculum changes that
schools have to pay to implement.
"It's critical that we give them the flexibility to manage,
to decide what's a priority when they're seeing reduced funding," said Tucker, D-Andover.
* Renegotiating health-care coverage. In a meeting with
North Shore mayors last week, Healey suggested the state change public employment laws to make
it easier for communities to seek a reduction in their share of health-care costs
with their unions. Right now, cities are required by law to negotiate with
all unions at once if they try to reduce health-care benefits.
And those costs are climbing rapidly. Beverly, for instance,
pays 90 percent of its union employees' costs, at a cost of $10 million in a nearly $80 million
budget.
"Every town I know of would love the flexibility to deal
with this issue," said Geoffrey Beckwith, executive director of the Massachusetts Municipal
Association.
* Reforming public construction laws. Under the current law,
public contracts for projects such as new schools are subject to several different rounds of
bidding, including separate bids for general contractors, subcontractors and
architects.
When communities can't do the design and building bids
together, "it breaks up the system and creates inefficiencies," said Beckwith, who estimates that
construction costs could be reduced by as much as 20 percent if the laws are
changed.
A 1999 Pioneer Institute study showed that, even after
normalizing for labor costs and other variables, the overall cost of erecting a public building in
Massachusetts is twice the cost in Texas, Florida and Nova Scotia. Over the life
of a Massachusetts building project, construction costs rose 24 percent over
initial contract amounts, compared to 3 percent in Texas.
* Suspending the Quinn Bill. The Quinn bill, initially
championed by former Massachusetts Attorney General Robert H. Quinn in the early 1970s, created a
program that awards pay increases to police officers who earn higher education
degrees. They gain a 10 percent boost for an associate's degree, 20 percent for
a bachelor's degree and 25 percent for a master's or law degree. The state
splits the cost of the raises with cities and towns that opt into the program.
The total taxpayer cost for the program, which has come
under fire for having uneven academic standards, is over $100 million.
"It's excessive. It's getting out of control," said Widmer,
who notes that most new police recruits have college degrees when joining the force. "It's a
questionable incentive."
* Passing another early retirement package. If and when
local aid is cut, many cities and towns are going to be forced to make massive layoffs, Beckwith said.
An early retirement incentive might ease some of that pain, by letting older,
higher paid staffers leave early, saving money and reducing the number of
layoffs necessary.
Few of these changes, if they occur, will happen quickly,
Widmer said, adding that their long-term potential for savings could help when the next budget
emergency rolls around.
"This kind of crisis presents an opportunity that wouldn't
be present if finances were fine," he said. "It's very important that the new administration find
something positive from this."
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The Boston Herald
Wednesday, January 22, 2003
Not all cities, towns are broke
by Elisabeth J. Beardsley
Suburban communities and some cities have squirreled away
about $700 million in reserves - even as local leaders publicly cry poormouth in the face of
looming cuts in state aid.
Since the fiscal crisis dawned 18 months ago, the state has
burned through almost all of its $2.3 billion "rainy day" fund - mostly to protect cities and
towns from harrowing cuts in state aid.
But now the cuts are coming and mayors are howling - while
quietly glossing over what is, in many cases, a hefty local kitty.
As of the June 30 start of the fiscal year, cities and towns
reported a combined $400 million in surplus or "free cash," as well as $296 million in stabilization, or
"rainy day," accounts, according to the state Department of Revenue.
The average community is sitting on savings that amount to
7.5 percent of their budgets - well in excess of the 5 percent that Wall Street overseers
regard as a comfortable operating margin.
Fiscal watchdogs see a classic urban/suburban split in terms
of which communities possess savings accounts - and which do not.
Many suburbs have "very substantial" reserves, which will
allow them to absorb the mid-year cuts without devastating effects, said Massachusetts
Taxpayers Foundation analyst Cameron Huff.
A few of the state's poorest cities also have savings that
could bail them out of local aid cuts. Chelsea, for instance, has $9.6 million in reserves, a hedge of 8.5
percent against its budget of $113 million. Holyoke has a $16.9 million
reserve, a fat 13.3 percent its $127 million budget.
But most cities are on thin ice, lacking reserves and facing
local aid cuts that will force drastic service cuts, Huff said.
"Though I wouldn't say it's easy to tap (local reserves) in
terms of the politics of it, they're going to be able to weather state aid cuts better than the
communities which have no reserves," Huff said.
Five suburban House lawmakers last week persuaded Romney to
inflict the cuts in equal percentages on all communities - a strategy that will hurt cities
that are heavily reliant on state aid.
The leader of the suburban coalition, Rep. David Linsky,
hails from Natick - a relatively affluent suburb that's sitting on $10.3 million in reserves, an amount
equal to 11.1 percent of its budget.
Down the road, the posh suburb of Dover has amassed $3.3
million in reserves - a hefty 18.4 percent hedge on its $18.2 million budget.
By contrast, Lawrence and Haverhill have no local reserves
to buffer their respective $197 million and $158 million budgets against the looming local aid
cuts.
Linsky defended the suburbanites' push to be spared the
worst of the cuts, despite their substantial reserves - saying communities shouldn't be
"penalized" for "good management."
"Even after those cuts are made, the cities will be
receiving many times more dollars on a per capita basis than the suburbs ever will," Linsky said.
Likewise, Rep. Frank Hynes lobbied Romney for favorable
treatment for the suburbs - while his hometown Marshfield tucked away $13.8 million in savings,
representing 20.2 percent of its budget.
Meanwhile, cities like Lynn and Worcester possess meager
savings accounts that amount to 1.5 percent of their budgets - $3.3 million in reserves for Lynn
and $6.6 million for Worcester.
The city of Boston lies somewhere between the extremes, with
between $60 million and $70 million in reserves - an amount equal to roughly 3.3 percent of
the city's $1.8 billion budget.
"That's a pretty small number," said Sam Tyler of the Boston
Municipal Research Bureau. "The city is going to have to be prudent in how it applies
those dollars over the next couple of years."
The Greater Boston suburbs aren't the only ones hoarding
cash - the Western Massachusetts town of Rowe, for instance, has $3 million in reserves, which
actually exceeds its $2.8 million budget.
In North Adams, where Mayor John Barrett has been blasting
Romney over the coming local aid cuts, the city began the year with $2.8 million in reserves -
a healthy 7.8 percent of budgeted revenues.
Between skyrocketing health care costs and Romney's local
aid cut, Barrett said he expects to have only $700,000 left in reserves by the end of this year - not
much margin against future cuts, he said.
"We're really not whining as bad as it sounds," Barrett
said.
Reservations
Reserves of 5 percent are considered a comfortable buffer.
These communities have considerably more or less.
The haves:
Dover - $3.3 million reserves, 18.4 percent of budget
Natick - $10.3 million reserves, 11.1 percent
Marshfield - 13.8 million reserves, 20.2 percent
Barnstable - $14 million reserves, 12 percent
The have nots:
Lawrence - No reserves
Lynn - $3.3 million reserves, 1.5 percent of budget
Haverhill - No reserves
Worcester - $6.6 million reserves, 1.5 percent
Source: State Department of Revenue.
