CLT
UPDATE
Wednesday, May 7, 2003
Borrowing the state out of debt is back
on the table
As Governor Mitt Romney wrangles with the Legislature over his government reform proposals, House lawmakers have approved a series of measures that would limit the governor's power -- moves some observers see as subtle reminders from House Speaker Thomas M. Finneran that he's still a major force on Beacon Hill.
Yesterday, the House voted to expand the responsibilities of the Massachusetts Turnpike Authority to include maintenance and repair of several major roads that intersect with the turnpike, moving in exactly the opposite direction of Romney, who wants to merge the Turnpike Authority with the Highway Department. The move would have significant budget implications for the authority, which now operates independent of the state budget.
The House also voted late Monday to set an $800 million annual limit on the amount the state can borrow for new capital projects, even though that cap has always been set by the governor in the past. The cap has stood at $1.2 billion in recent years, and Romney said a lower number would hobble his ability to address pressing infrastructure needs.
The Boston Globe
Wednesday, May 7, 2003
House moves would chip away at governor's power
A House plan to slash annual state capital spending by 33 percent would derail many transportation, environmental, housing, school construction and other public works projects, according to Gov. Mitt Romney, who announced his opposition to the proposal today....
House leaders say the change will cut into a debt load that is the third highest in the nation on a per capita basis. Romney has advocated the need to bring state debt payments down and his administration is working on a plan to rationalize state spending on capital projects, but the governor today said the House plan is ill advised.
"I would prefer to keep the current cap," said Romney. "We have needs for additional capital spending in the Commonwealth on our highways, on housing, on school construction and in higher education construction. These are important missions which we have." Favorable interest rates make it an opportune time to borrow, he added.
Massachusetts Taxpayers Foundation President Michael Widmer concurred, saying the lower cap would leave many stalled public works projects on the sidelines. "There is a huge backlog of critical capital projects, from transportation to higher education, that have been deferred while we built the Central Artery," he said....
Nearly one of every ten dollars spent in the state's $23 billion annual budget is devoted to retiring outstanding debt. The state spends more than $2.1 billion a year paying off its own debt and delivering aid to cities and towns that have secured commitments for school construction and other projects....
"It seems to be arbitrary," said Sen. Mark Montigny (D-New Bedford), chairman of the Senate Committee on Long-Term Debt and Capital Expenditures. "I don't think it's as realistic or responsible as it may appear on its face, but I think that's the House prerogative and we need to look at what they've done."
Montigny said state capital spending on road and bridge projects attracts federal aid. "If you want to maximize federal money into the economy, then it means it's not very wise to go after the one part of our debt service that is reimbursable - the federal highway program," said
Montigny. "Sometimes these grand statements are more concerning when you start to look at the details."
Widmer was more blunt.
"It's a bad idea," said Widmer. "We're always going to have a high debt load. It would take a decade or two of arbitrarily low capital investments to even begin to get us down to a number to reduce our rankings. Ideally it would be good to have a lower debt load but the $1.2 billion is manageable."
State House News Service
Tuesday, May 6, 2003
Gov opposes House bid to cut debt,
says it obstructs "important missions"
The state Senate may resort to short-term borrowing as part of its solution to bridge an estimated $3 billion budget deficit next year, according to the leader of its long-term debt committee.
"My opinion is we probably will," said Sen. Mark Montigny, D-New Bedford, who previously headed the Senate budget committee for four years. "I fear that in the end some of the alternatives are much more hurtful to the people we represent. It may ultimately come down to the lesser of evils."
Associated Press
Tuesday, May 6, 2003
Committee leader predicts Senate will use borrowing
to help balance budget
Eric Kriss, secretary for the Executive Office of Administration and Finance, warned the committee against borrowing any more money given the "unbelievable amount of debt" the state currently has and the sullen economic predictions for the future.
"Any additional debt needs to be thought through very prudently," Kriss said. "Things are not looking up -- We need a structural plan for getting out of this fiscal mess." It is not a solution, but rather a fiscal Band-aid, he said.
Kriss said he was told in private conversations that any deficit financing would almost immediately result in a downgrading of Massachusetts' bond rating such as the situation in the late 1980s when the state fell to nearly "junk bond" status....
State Treasurer Timothy Cahill regards the School Building Assistance program as a growing hole in the state budget that is in great need of reform.
"We are building more than we need or can afford right now," Montigny said of the program, which provides money to cities and towns building or rehabilitating schools. "It has become an inexcusable mess."
Cahill said he is drafting a partial school building assistance reform package. He also stands strongly against any short-term borrowing proposal.
"It is not in the best interest of the Commonwealth at this time and will end up costing the state more in the long run," he said. His aides predicted borrowing $100 million would cost the state $21.84 million more per year for five years, or $16.35 million per year for seven years....
"Unless deficit borrowing will deal with the structural deficit, this is a bad idea," Cahill said.
Massachusetts Taxpayer Foundation President Michael Widmer said borrowing $300 million to $500 million and paying it back over five to seven years is a reasonable idea. "This is hardly a radical proposal," Widmer said.
State House News Service
Tuesday, May 6, 2003
Montigny: Short-term borrowing still a possibility,
despite criticism of idea
Chip Ford's CLT
Commentary
There's borrowing, and then there's borrowing.
Taking out a mortgage on a home or a loan for a new
car is one kind of borrowing. The debt is repaid over the extended life
of the possession over many years. When you're finally done paying it
off, you still have something to show for the loan. This is capital
borrowing on a personal level.
Putting your groceries and unaffordable luxuries on a
nearly maxed-out credit card is borrowing too, but when the bill comes
in at the end of the month, you have to either pay it off or stop
borrowing, stop eating and living high. If you do neither, your card is
yanked and your credit rating trashed. This is borrowing for
operating expenses on a personal level.
Michael Widmer's so-called Massachusetts Taxpayers
Foundation is like a predatory credit card company that mails
applications to everyone -- men, women and children -- in the hope of
luring them in, hooking them on credit so it can siphon off the interest
for as long as they can keep you making payments. This is
understandable, since Widmer and MTF represent many of the state's
largest financial institutions. They profit and depend on using other
people's money.
Widmer is still hawking more Beacon Hill borrowing
and has found a willing mark, literally.
Sen. Mark Montigny, chairman of the Senate Committee on Long-Term Debt and Capital
Expenditures, said short-term borrowing is still "on the
table" in the Senate, despite last week's House vote. In a vote of
126-31, the House last week defeated a proposal for $300 million in
borrowing for operating expenses.
Finneran's apparent ego-stroking attempt to assert
he's the Alpha Male on Beacon Hill has Gov. Romney now battling to keep
the executive ability to decide the level of capital borrowing.
Yesterday the House voted to take that decision away from the governor
by lowering the state's capital borrowing ceiling.
Simultaneously, the Senate is considering floating a
loan to pay for programs the state can no longer afford since the
economic downturn lowered the boom on the boom years, when spending
raced out of control.
Legislators admit that a $300 million 5-year
operating expenses loan would cost taxpayers some $65 million annually
in interest. If such foolishness occurs -- if the state borrows money to
fund unaffordable programs through the next fiscal year, FY'04 -- what
happens the following year? The FY'05 budget will still be short the
program costs and the state will be squandering additional
millions in interest, digging the deficit hole even deeper ... just so
the pols can avoid making the necessary tough decisions today.
As it is, "Nearly one of every ten dollars spent in the state's $23 billion annual budget is devoted to retiring outstanding debt. The state spends
more than $2.1 billion a year paying off its own debt,"
according to the State House News Service [emphasis is mine].
"Our debt service is $200 million higher than the last fiscal year,"
said Rep. Marie J. Parente, chairwoman of the House Committee on Long-Term
Debt, during last week's House debate.
There would be no "fiscal crisis" if
the politicians weren't handing $2.1 billion a year of our money
over to Big Banking. But Michael Widmer and his Massachusetts Taxpayers
Foundation proclaimed that charging $300-$500 million more on the
state's credit card "is hardly a radical proposal."
Perhaps not in Massachusetts, with one of the highest
debt burdens of any state in the nation, and we expect nothing less from
the voice of that "fiscally conservative" Fat Cat big
business lobbying group.
|
|
|
Chip
Ford |
The Boston Globe
Wednesday, May 7, 2003
House moves would chip away at governor's power
By Rick Klein, Globe Staff
As Governor Mitt Romney wrangles with the Legislature over his government reform proposals, House lawmakers have approved a series of measures that would limit the governor's power -- moves some observers see as subtle reminders from House Speaker Thomas M. Finneran that he's still a major force on Beacon Hill.
Yesterday, the House voted to expand the responsibilities of the Massachusetts Turnpike Authority to include maintenance and repair of several major roads that intersect with the turnpike, moving in exactly the opposite direction of Romney, who wants to merge the Turnpike Authority with the Highway Department. The move would have significant budget implications for the authority, which now operates independent of the state budget.
The House also voted late Monday to set an $800 million annual limit on the amount the state can borrow for new capital projects, even though that cap has always been set by the governor in the past. The cap has stood at $1.2 billion in recent years, and Romney said a lower number would hobble his ability to address pressing infrastructure needs.
And in a series of budget amendments approved over the first two days of this week's budget debate, House members set aside funds for a range of favored projects and programs. The practice -- known as earmarking -- divides up money already in the budget, limiting the discretion of managers in the executive branch in directing scarce resources.
"It's a reminder that the executive branch is not imperial," said Jeffrey Berry, a political science professor at Tufts University. "Finneran and Romney have clearly gotten under each other's skin, and gotten testy with each other. This is part of their feeling each other out."
Earmarking is a common practice among lawmakers anxious to secure funding for programs in their districts, and it has returned in force this year, with little money to spend and important priorities likely to be left without funding. Aides to the House Ways and Means Committee are spending hours drafting budget amendments that a majority of lawmakers find acceptable, and many House members trade their support for leadership measures in exchange for earmarks benefiting their districts.
Several members of Finneran's leadership team have done well through that process. House Judiciary Committee chairman Eugene L. O'Flaherty won earmarks of $312,000 for the Soldier's Home in his hometown of Chelsea, and $200,000 for a rehabilitation commisssion office in Charlestown, which is also in his district.
House Government Regulations Committee head Daniel E. Bosley of North Adams secured a $200,000 earmark for the Berkshire Area Health Education Center. Representative Marie St. Fleur, cochairwoman of the Education Committee, won $348,850 for Casa Esperanza, a substance-abuse treatment facility in her Dorchester-based district.
Finneran declined to comment yesterday. Democratic and Republican House leaders have both defended the earmarks by pointing out that the practice has been used far more extensively in previous years, and that in most cases the funding would simply keep important programs at the same level they're receiving this year.
But yesterday, Romney raised the possibility of vetoing earmarks if he and his aides determine that they are not in the public interest. The governor said he would rather have agency managers determine where to put resources, instead of allowing lawmakers to put "politicians and friends ahead of our people."
"We've got to be careful not to over-earmark," Romney said. "Those that represent real problems for our ability to serve the people, I will certainly go after."
The governor also came out strongly against the House's creation of an annual borrowing limit, noting that many crucial road, environmental, and school construction projects will go unfunded for years if the bond cap is reduced from its current level. In any event, he said such a cap should be set by the administration, since only the executive branch has an accurate view of the borrowing which the state can responsibly handle in a given year.
Several House leaders said Romney's opposition to the new cap suggests that the governor is interested in accumulating power for power's sake -- because he has repeatedly called for the state to limit its debt load. Representative Marie J.
Parente, chairwoman of the House Committee on Long-Term Debt, said the governor and his
administration "should be congratulating us for getting his message."
"Do they want to centralize power, so they have a CEO instead of a governor?" asked
Parente, a Milford Democrat. "It's called a democracy. We set the policy, and he executes."
Shawn Feddeman, Romney's press secretary, said it's the members of the Legislature who are forgetting their civics lessons. She cited the move to expand the responsibilities of the Turnpike Authority, and noted that the governor -- not the Legislature -- is supposed to be in charge of executive functions like road maintenance. She added that the House's move could lead to toll booths on roads other than the Mass. Pike, because the Turnpike Authority is an independent state agency that would have to raise money to fund additional responsibilities.
"The state constitution is very clear: Each branch of government has different functions," Feddeman said. "I sure hope the Legislature isn't confusing their role."
But House leaders said the transportation budget amendment is a common-sense way to cut costs. House Transportation Committee chairman Joseph F. Wagner said that by having the Turnpike Authority oversee Interstates 290, 391, and 91, in addition to Interstate 90, maintenance trucks and workers can more efficiently fan out across the state's roads. "It's not a message at all," said Wagner, a Chicopee Democrat, adding that the increased maintenance can be accomplished without toll hikes. "This is a win for taxpayers."
The House proposals have to be included in the final budget passed by the Legislature before they could reach Romney's desk. The Senate will debate its own version of the budget later this month, and House and Senate negotiators hope to work out their differences before the July 1 start of fiscal 2004.
Return to
top
State House News Service
Tuesday, May 6, 2003
Gov opposes House bid to cut debt,
says it obstructs "important missions"
By Michael P. Norton
A House plan to slash annual state capital spending by 33 percent would derail many transportation, environmental, housing, school construction and other public works projects, according to Gov. Mitt Romney, who announced his opposition to the proposal today.
The House plan was adopted on a 130-24 vote Monday night. It statutorily caps annual state borrowing at a record low $800 million for each of the next five years. The Romney administration is presently operating under a self-imposed $1.2 billion-a-year bond cap.
House leaders say the change will cut into a debt load that is the third highest in the nation on a per capita basis. Romney has advocated the need to bring state debt payments down and his administration is working on a plan to rationalize state spending on capital projects, but the governor today said the House plan is ill advised.
"I would prefer to keep the current cap," said Romney. "We have needs for additional capital spending in the Commonwealth on our highways, on housing, on school construction and in higher education construction. These are important missions which we have." Favorable interest rates make it an opportune time to borrow, he added.
Massachusetts Taxpayers Foundation President Michael Widmer concurred, saying the lower cap would leave many stalled public works projects on the sidelines. "There is a huge backlog of critical capital projects, from transportation to higher education, that have been deferred while we built the Central Artery," he said.
The House plan also calls on the administration to file a detailed five-year capital spending plan with the Legislature by Sept. 1, 2003. The proposed cap is lower than the original cap, instituted in 1992, of $825 million.
Nearly one of every ten dollars spent in the state's $23 billion annual budget is devoted to retiring outstanding debt. The state spends more than $2.1 billion a year paying off its own debt and delivering aid to cities and towns that have secured commitments for school construction and other projects.
Romney pointed out that Democratic legislators over the years have not been shy about authorizing all sorts of expensive capital projects. The Legislature and previous governors have approved more than $10 billion in projects, Romney said. Many of those have never taken root because of the limits on state borrowing.
The governor said he would like to see the Legislature leave debt levels and the selection of projects that advance to administration and finance officials, who make decisions after consulting with executive branch agency heads.
House Republicans on Monday night argued the cap may be unconstitutional. The amendment itself suggests that's a possibility by stipulating that if the change is unconstitutional, other valid parts of the debt-cap proposal would not be affected.
Rep. David Flynn (D-Bridgewater), the Dean of the House, said the cap would set an "extremely dangerous precedent." In 1975, during another recession, Flynn said, state government made an active attempt to boost the economy by increasing the bond cap and financing more public works projects, which create construction jobs.
"We have an obligation to do everything we possibly can do to help a faltering economy," said Flynn. "We need to expedite and get as much work out on the streets as we can."
But House leaders said the annual cost of retiring state debt is too high. "We see what happens when we borrow into oblivion," said Rep. Peter Larkin (D-Pittsfield), vice-chairman of the House Ways and Means Committee.
Rep. Marie Parente (D-Milford), chairwoman of the House Committee on Long-Term Debt and Capital Expenditures, said "it's odd" that the Democrat-controlled Legislature is calling on the Republican administration to get borrowing under control, but argued the change is necessary. "We need to stop the borrowing," Parente said.
Another lawmaker, Rep. John Lepper (R-Attleboro), said the Legislature can curb borrowing without imposing a cap. "If we want to do something to reduce bond spending, don't authorize it," he told his colleagues, who have routinely signed off on politically popular capital spending bills over the years.
Senate leaders are preliminarily indicating they oppose the idea.
"It seems to be arbitrary," said Sen. Mark Montigny (D-New Bedford), chairman of the Senate Committee on Long-Term Debt and Capital Expenditures. "I don't think it's as realistic or responsible as it may appear on its face, but I think that's the House prerogative and we need to look at what they've done."
Montigny said state capital spending on road and bridge projects attracts federal aid. "If you want to maximize federal money into the economy, then it means it's not very wise to go after the one part of our debt service that is reimbursable - the federal highway program," said
Montigny. "Sometimes these grand statements are more concerning when you start to look at the details."
Widmer was more blunt.
"It's a bad idea," said Widmer. "We're always going to have a high debt load. It would take a decade or two of arbitrarily low capital investments to even begin to get us down to a number to reduce our rankings. Ideally it would be good to have a lower debt load but the $1.2 billion is manageable."
Return to
top
Associated Press
Tuesday, May 6, 2003
Committee leader predicts Senate will use borrowing
to help balance budget
By Jennifer Peter
The state Senate may resort to short-term borrowing as part of its solution to bridge an estimated $3 billion budget deficit next year, according to the leader of its long-term debt committee.
"My opinion is we probably will," said Sen. Mark Montigny, D-New Bedford, who previously headed the Senate budget committee for four years. "I fear that in the end some of the alternatives are much more hurtful to the people we represent. It may ultimately come down to the lesser of evils."
But Gov. Mitt Romney's finance chief argued that borrowing money to help cover the deficit a proposal the House rejected last week would lead to an immediate reduction in the state's bond rating.
"If you want to move one step closer to financial disaster, then go right ahead," finance secretary Eric Kriss told Montigny's long-term debt committee Tuesday. "This would put at risk everything that's been done in the past. We're on the precipice."
A spokeswoman for Senate President Robert Travaglini, D-Boston, said short-term borrowing is "just one of many ideas" that Senate leaders have been investigating.
Senate Ways and Means Chairman Therese Murray, D-Plymouth, did not immediately return calls for comment.
The House last week rejected a proposal to borrow $300 million to help soften the impact of budget cuts on the poor and elderly. The House budget, however, reduces the amount of debt the governor's office can issue from $1.2 billion to $800 million a move Kriss and Montigny said might leave room for future short-term borrowing.
A spokesman for House Speaker Thomas Finneran, D-Boston, disagreed, arguing it was the first step toward limiting the state's high debt load.
Montigny, who called for Tuesday's hearing, said that it would be irresponsible for lawmakers not to fully explore the possibility of borrowing to cover the shortfall, given the deep cuts Romney and the House have proposed in social services.
Kriss predicted it could lead to a downgrading of the state's rating to junk-bond status a claim Montigny called "super hyperbolic."
The president of the Massachusetts Taxpayer Foundation, who was called to testify at the hearing, also disputed Kriss' claim, arguing that a short-term, limited amount of borrowing might be acceptable if approved as part of a budget solution that also included significant reform.
"Given the dire nature of the fiscal crisis, it's at least worth considering limited borrowing as part of a larger strategy," said foundation president Michael
Widmer.
Return to
top
State House News Service
Tuesday, May 6, 2003
Montigny: Short-term borrowing still a possibility,
despite criticism of idea
By Amy Lambiaso
Weighing the lesser of evils - going deeper into debt or cutting popular programs - Senate leaders are leaving their short-term borrowing cards on the table during the budget-writing process after watching their House counterparts and the governor recently reject the idea.
Sen. Mark Montigny (D-New Bedford) is considering a short-term borrowing proposal that would allow the state to maintain some services and programs cut in the budget proposals offered by Gov. Mitt Romney and the House Ways and Means Committee. Senators are drafting a spending plan to close a projected $3 billion budget gap.
"We have a responsibility to keep everything on the table even if it's our pet peeve, and then pick off the greater evils as we go along," said
Montigny, chairman of the new Senate Committee on Long Term Debt and Capital Expenditures. "Everything we do here is going to be painful."
Senate President Robert Travaglini (D-Boston) said short-term borrowing is one of the many ideas for fiscal relief currently being considered. "Unfortunately there are no quick fixes or simple solutions to the fiscal deficit," Travaglini said. "We are not going to commit to any one idea until it has been thoroughly reviewed and debated."
The House voted 126-31 to reject a plan calling for the state to borrow $300 million and pay it back over five years.
Few on Beacon Hill are eager to embark on short-term borrowing. Top budget writers, administration officials and government watchdogs are outspoken against the practice, calling it a "fiscally irresponsible" procedure that would cause a "meltdown like a nuclear reactor" in the state's bond rating, as one administration official put it today.
Eric Kriss, secretary for the Executive Office of Administration and Finance, warned the committee against borrowing any more money given the "unbelievable amount of debt" the state currently has and the sullen economic predictions for the future.
"Any additional debt needs to be thought through very prudently," Kriss said. "Things are not looking up -- We need a structural plan for getting out of this fiscal mess." It is not a solution, but rather a fiscal Band-aid, he said.
Kriss said he was told in private conversations that any deficit financing would almost immediately result in a downgrading of Massachusetts' bond rating such as the situation in the late 1980s when the state fell to nearly "junk bond" status. Massachusetts is currently rated as Aa2 minus, and could see itself falling to a lower rating should revenues not improve, some predict.
But short-term borrowing, contrary to what some may suggest or fear, would not have an immediate impact on Massachusetts' bond rating, said Nicole Johnson, senior vice president for Moody's Investor's Service.
"Deficit financing is not addressing the issues, but that's a policy call by the state," she said. "Borrowing would not immediately cause a downgrade in bonds for Massachusetts ... but it would be a move in the wrong direction."
Johnson said Moody's has placed Massachusetts on the "negative outlook" list since December 2001, along with nearly a dozen other states.
Others who testified before Montigny's committee echoed Johnson's sentiment.
"Under any circumstances, relying on debt to finance ongoing operations is expensive and risky fiscal policy," said Stephen Adams, president of the Pioneer Institute. "In the case of Massachusetts it would be especially imprudent."
Adams called the short-term borrowing procedure an "expensive Band-aid" as well, noting that the state's fiscal problems mostly require "wholesale restructuring." Adams suggested the state look into suspending some of its assistance payments to the Big Dig or have state employees pay a larger percentage of their health insurance rather than put the state into further debt.
Montigny opposes many provisions of Gov. Mitt Romney's budget, saying the numbers still don't add up, but agrees with many of the restructuring proposals and changes suggested. State Treasurer Timothy Cahill regards the School Building Assistance program as a growing hole in the state budget that is in great need of reform.
"We are building more than we need or can afford right now," Montigny said of the program, which provides money to cities and towns building or rehabilitating schools. "It has become an inexcusable mess."
Cahill said he is drafting a partial school building assistance reform package. He also stands strongly against any short-term borrowing proposal.
"It is not in the best interest of the Commonwealth at this time and will end up costing the state more in the long run," he said. His aides predicted borrowing $100 million would cost the state $21.84 million more per year for five years, or $16.35 million per year for seven years.
"It would end-up costing us $5 million to borrow $100 million," said Sen. Stephen Brewer
(D-Barre).
"Unless deficit borrowing will deal with the structural deficit, this is a bad idea," Cahill said.
Massachusetts Taxpayer Foundation President Michael Widmer said borrowing $300 million to $500 million and paying it back over five to seven years is a reasonable idea. "This is hardly a radical proposal," Widmer said.
Return to
top
NOTE: In accordance with Title 17
U.S.C. section 107, this material is distributed without profit or
payment to those who have expressed a prior interest in receiving this
information for non-profit research and educational purposes only. For
more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
|