The Boston Herald
Tuesday, February 25, 2003
A Boston Herald editorial
Stop overspending to fix state budget
The seriousness of the state's budget crisis justifies
tonight's unusual "State of the State" speech by Gov. Mitt Romney. He should use the speech to, once and
for all, lay to rest the notion that undertaxing is the villain behind the
budget crisis, instead of state government overspending.
A recent Cato Institute report on the spending habits of the
50 states bears this out. Cato, a Washington, D.C.-based think-tank, found the states with the
biggest budget deficits were also the biggest spenders. And guess which state
was right up there in the rankings?
The Cato report ranked Massachusetts eighth in the list of
big spenders when comparing state spending sprees in the last decade. Specifically, from 1990 to
2001, state tax revenue grew from $9.369 billion to $17.225 billion. The Cato
report points out that if the state had limited spending increases over the
same period to inflation plus population growth, Massachusetts would have $3.764
billion more in state coffers today. Or even better, $3.764 billion could have
been returned to the taxpayers.
The Cato report sums up our budget woes nicely: "State
coffers become flush with revenues during economic booms, prompting politicians to expand
eligibility for programs and to launch expensive multiyear projects, which
nearly always end up far over budget."
That is exactly what happened here. (Think Medicaid
expansion and education reform just to name two.)
Locally, the Massachusetts Taxpayers Foundation released a
report yesterday which supports Cato's diagnosis of overspending. They found that state
spending would have to grow by $1.6 billion just to sustain programs and
services at 2003 levels. They also point out that the consensus revenue
forecast for 2004 is only $30 million greater than expected 2003 revenues.
Their report also notes that $1.6 billion has been cut from
state spending already in addition to last year's $1.14 billion tax increase, yet here we are still
facing an estimated budget deficit of $3 billion.
That's where foundation goes off track. They caution that
"the sheer scale of the reductions that have already taken place underscores how extraordinarily
difficult it will be to close an even larger 2004 budget gap through spending
cuts alone."
Difficult, yes, impossible, no. A good place to start would
be examining the $3 billion Massachusetts spent above inflation levels in the past decade. It is
certain that every dollar was not well spent.
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Massachusetts Taxpayers Foundation
For Immediate Release
February 24, 2003
MTF Report on State Spending: The Perfect Storm ... Unleashed
In releasing its annual report on state spending today, the
Massachusetts Taxpayers Foundation called on state leaders to develop a fiscal blueprint for
2004 and 2005 to address the Commonwealth's massive and growing structural deficit.
The report, State Budget '03: The Perfect Storm ...
Unleashed, recommends that legislative leaders and the Romney administration work together over the
next three months concurrent with the fiscal 2004 budget process and the
consideration of structural reforms -- to produce a multiyear fiscal recovery
plan.
Two years ago the Foundation's report, The Perfect Storm,
warned that a series of forces were conspiring to change dramatically the state's fiscal
fortunes. The new report documents the "gigantic gap" between available
revenues and the spending needed to sustain programs and services at their
current levels.
"The Commonwealth faces a multiyear problem which requires a
multiyear strategy to address its worst fiscal crisis in more than 50 years," said MTF
President Michael J. Widmer. "The problem cannot be adequately addressed
through the annual budget process."
According to the report, two important structural forces are
creating an ever widening budget gap in 2004 and beyond:
* An imbalance between ongoing revenues and expenditures
that will total more than $1 billion in 2003.
* A mismatch between the rate of annual spending growth,
especially in health care, and the rate of annual revenue growth.
Specifically, the Foundation's analysis estimates that
spending would need to grow by $1.6 billion in 2004 to sustain programs and services at 2003 levels,
while the consensus revenue forecast for 2004 is only $30 million greater than
2003 revenues. In addition, the state is relying on more than $1 billion of
reserves and one-time revenues to pay 2003 bills. This combination of factors
produces an estimated budget deficit of $2.4 billion in 2004, with reserves
largely depleted.
"Strikingly, these shortfalls are occurring despite almost
$1 billion of tax increases enacted last year, spending cuts approaching $2 billion over the last
18 months, and the expectation that the state economy will begin to recover in
fiscal 2004," the report said.
The report concludes that a deficit of this size cannot
practically be addressed in a single budget year. "Without action on the structural problem that is
driving the shortfall in 2004, the Commonwealth will face an even larger
problem in 2005," the report said.
According to the Foundation's analysis, over the past 18
months the state has reduced spending in a broad array of specific programs by $1.6 billion below
actual 2001 expenditures, a 20 percent reduction that does not include the
additional cuts required to offset inflationary and other cost increases in these
programs.
"The sheer scale of the reductions that have already taken
place underscores how extraordinarily difficult it will be to close an even larger 2004 budget gap
through spending cuts alone," the report said.
The Foundation strongly supports the Romney administration's
commitment to improving the delivery of state services, and the report highlights major
opportunities to reform state government.
However, the report cautions that, "the dollar savings from
such efforts are much more likely to be counted in the tens of millions than in the billions.
Moreover, their benefits will be realized over years, not months, providing little
relief from the immediate crisis."
The report documents that the vast majority of spending is
devoted to basic services, with almost half directed to health care and human services, one
fourth to education and other aid to cities and towns, and 20 percent to the
costs of capital borrowing, pensions, courts, prisons and public higher
education.
