CLT
UPDATE
Tuesday, July 8, 2003
Proposition 2½ survives intact
The bill, to be debated by the House and Senate this week, does not let communities raise meal and restaurant taxes, an option many municipal leaders had sought as a way to cope with depleted local budgets.
Also left out of the legislation is a provision that would have exempted communities' overlay accounts for tax abatements from the tax limits of Proposition 2½.
Administration officials - who said yesterday they were reviewing the measure - had indicated that Gov. Mitt Romney would veto the package if it included any taxes.
The Telegram & Gazette
Tuesday, July 8, 2003
Local relief package unveiled
Tax options are not in plan
House and Senate conferees presented a relief package Monday for cities and towns to raise local revenues by increasing fees and fines ...
Lt. Gov. Kerry Healey indicated last week that the governor would veto any new taxes. Rosenberg said that marks a change from Romney's stance that he would veto any local option taxes that did not require a voter approval....
Provisions for cities and towns to collect an extra fee for state park usage and a proposal that would have exempted money set aside for tax abatements from Proposition 2½, known as overlay accounts, were also left out of the report....
State House News Service
Monday, July 7, 2003
[Excerpt] Municipal package praised
though it includes no taxes, overlay change
Heeding Gov. Mitt Romney's no new taxes warning, lawmakers ditched plans to allow cities and towns to hike taxes on diners and shoppers but rained fee increases down on everyone else from motorists to hotdog vendors to junkyard owners.
"There are fees galore," said Sen. Stanley C. Rosenberg (D-Amherst) of the municipal relief package released yesterday. "But no new taxes." ...
Anti-tax advocates hadn't seen the plan last night but said many of the more than two dozen fee hikes appear sound.
"As long as it's a true fee and you can avoid it by not doing bad things or it legitimately covers the true cost of providing a service, it's OK," said
Barbara Anderson of Citizens for Limited Taxation. "It's when it's a tax parading as a fee that we have a problem."
The Boston Herald
Tuesday, July 8, 2003
No new taxes, but fees will soar
The state ended the fiscal year with a $133 million budget surplus, thanks to a 4.7 percent increase in tax revenues. But the Massachusetts economy is hardly booming, Governor Mitt Romney's budget chief said yesterday.
Secretary of Administration and Finance Eric A. Kriss said the growth was due almost entirely to the closing of tax loopholes and an amnesty program. Without those, he said, tax collections for the fiscal year that ended June 30 would have been essentially flat....
The closing of tax loopholes and a tax amnesty program together generated $413 million, Kriss said. But such revenues are frowned upon by economists, who say the onetime cash infusions artificially prop up spending, and allow the state to avoid addressing fundamental fiscal problems.
Cameron Huff, a senior policy analyst with the Massachusetts Taxpayers Foundation, said the state still hasn't confronted the core issue. Huff said ultimately the state has three basic choices: slash spending further, increase revenues, or overhaul the state's healthcare delivery system.
But "those are places that nobody has really wanted to go," Huff said. "There's a tremendous mismatch between what the economy can deliver in terms of tax [revenue] and the growth in healthcare and other largely unavoidable costs, like debt service. It has to be dealt with." ...
Even if revenues increase by 4 percent as predicted, Kriss said, unavoidable cost increases related to the state pension fund, debt obligations, and healthcare could generate a budget deficit of as much as $1 billion for fiscal 2005, which begins a year from now.
The $1 billion figure, he said, could easily jump if state spending grows more than 1 percent or if the economy sputters.
"Despite everything we have done, we have at least a $1 billion problem," Kriss said. "These are the conservative assumptions."
The Boston Globe
Tuesday, July 8, 2003
Fiscal year ends on surplus note
Chip Ford's CLT
Commentary
The proposal to increase Proposition 2½ Overlay
accounts never made it out of the joint House/Senate conference
committee yesterday. Defeating this attack on Prop 2½ has recently
been one of our top agenda items and the 23-year old CLT property tax
reform has survived intact for at least another year. Our thanks go to
Governor Romney for announcing in advance that he'd veto it if the
Legislature adopted this assault on local taxpayers.
Unfortunately the use of fees as the newest form of
"revenue enhancement" continues to burgeon, still enlarging
the potential for more spending. Back in 1989 during the last
"fiscal crisis" the income tax was increased
"temporarily." That enabled the Legislature to double state
spending when the economy recovered (and Democrat legislators refused
to keep their "temporary" promise), to provide
municipalities their "embarrassment of riches" which doubled
municipal spending as well throughout the roaring '90s -- and to
create this latest "fiscal crisis."
We argued for years that, as long as taxpayer
overpayments remained on the table the Beacon Hill pols would spend
it, get used to the high-rolling times, and come back for more when
the cyclical economy inevitably slowed ... and here we are.
State government has steered clear of general tax
increases -- primarily due to the results of Carla Howell's income tax
abolition ballot question and the shockwaves it sent through the
political establishment when 45 percent of voters supported it. That
was the opening shot, but contributing to the reticence to introduce
the "T" word has been legitimate opinion polls saying
"cut spending, don't raise taxes," the rejection of CLT's
voluntary tax check-off, and the defeat by local voters of so many
Proposition 2½ overrides throughout the spring. Then, of course,
there was the landslide election of Mitt Romney as governor based in
large part on his "No New Taxes" promise and his subsequent
determination to hold the line and keep that promise.
There is some $400 million in increased fees in the
state budget already, and now the "Municipal Relief Bill"
allows cities and towns to increase local fees as well. When the
economy turns around, as it always does, general revenues will again
increase ... along with spending because More Is Never Enough and
never will be. On top of increased general revenues (income,
corporate, investment and sales taxes on the state level, property and
excise taxes on the local level) pouring in again, government on both
levels will have further increased revenues from fee increases and
creations. This of course will again lead to increased spending,
additional waste and further unsustainable expansion, setting us up
for the next fiscal crisis eight or ten years down the road when
inevitably the cyclical economy again cools.
By then, the state budget will probably be over $30
billion and hordes of "the sky is falling" bell-ringers will
on cue be activated and launched upon our sensibilities and our
wallets.
Not that anyone pays real attention to it except when the pols need cover, but once again the so-called Massachusetts Taxpayers Foundation is shooting up red flares warning that real reforms must occur to cure the state's structural imbalance ... or the next fiscal crisis is but a year away. Faithful
Update readers will recall that CLT was the only group to casually dismiss the gloom-and-doom forecasts for this fiscal year from the get-go, while MTF was quietly advocating tax hikes
(income and sales). Now we find that in fact the commonwealth has a $133 million surplus for the fiscal year that just ended -- the result of working to get state spending under control instead of
the usual knee-jerk tax-raising bailouts.
MTF is correct that the state has a structural deficit because too many
necessary reforms have been ignored or rejected, but its track record for achieving those reforms is dismal.
Predictably in the end, MTF will arise to advocate tax hikes on average taxpayers
and more state borrowing as the "only" solution to the
fiscal crises they consistently enable and help foment.
Finneran's Pay-Raise Power-Grab never came up
yesterday as many had predicted it would. This evidently means he
doesn't have the necessary two-thirds vote to override the governor's
veto ... at least not yet. He can still try for his override (it's that
personal) at any moment and has until the end of the year to pull off
his power-grab, which is a lot of time for him to maneuver and
manipulate in the shadows, so stay tuned. We'll be watching.
Average taxpayers across the commonwealth can rest
a little easier today. As bad as the host of fee increases are, it
could easily have been far worse. It still might be, but we'll have to
wait until September to see if tax hikes resurface.
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Chip
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The Worcester Telegram & Gazette
Tuesday, July 8, 2003
Local relief package unveiled
Tax options are not in plan
By Shaun Sutner
Cities and towns could charge fees for school bus rides, raise fines, offer early retirement to employees and give tax breaks to developers of downtown housing under a municipal relief package unveiled yesterday by lawmakers.
The bill, to be debated by the House and Senate this week, does not let communities raise meal and restaurant taxes, an option many municipal leaders had sought as a way to cope with depleted local budgets.
Also left out of the legislation is a provision that would have exempted communities' overlay accounts for tax abatements from the tax limits of Proposition 2½.
Administration officials - who said yesterday they were reviewing the measure - had indicated that Gov. Mitt Romney would veto the package if it included any taxes.
While the governor had previously said he would agree to "local option" taxes if approved by a public referendum, state revenue officials determined that such taxes would hurt the economy, administration officials said.
"There are no taxes in this bill," state Sen. Stanley C. Rosenberg, D-Amherst, a member of the joint House-Senate conference committee that negotiated the package, said at the Statehouse. "This is our continuing effort to provide some relief to communities and continues to address the government reform agenda."
Worcester lawmakers and officials welcomed the bill as a significant aid to the city's efforts to rejuvenate its struggling downtown.
City officials were the original authors of a "tax increment financing" measure that gives tax advantages similar to those offered commercial developers to builders of mixed-income housing complexes in urban centers.
"It will allow Worcester to take some of their boarded-up buildings and use them for housing," said state Sen. Harriette L. Chandler, D-Worcester, chairwoman of the Legislature's Housing Committee. "This slows down urban sprawl."
Also under the bill, communities could set up District Improvement Financing zones where infrastructure improvements could be financed by bonds funded by the increase in value of the property being developed.
Worcester City Manager Thomas R. Hoover said he was not surprised that local option taxing ability was left out of the measure, though the city could have benefited from it.
"There didn't seem to be widespread support for local option taxes," Mr. Hoover said.
However, the early retirement provision, which allows most municipal employees other than teachers who are nearing retirement to add five years of service will help the city and school system avoid layoffs, Mr. Hoover said.
Also left out of the final bill were surcharges on agricultural fairs, a higher sales tax for Nantucket and user fees for state parks. The bill does allow Cape Cod and island communities to tack $1 fees on ferry trips.
Under the legislation, municipal governments would be given more leeway in transferring money between accounts and bidding on snow removal contracts.
Municipalities could also defer pension fund payments until fiscal 2006, and regional school committees could refinance debt under the same terms as cities and towns.
Local governments would also have more power to collect vehicle excise taxes from non-state residents who garage their vehicles in Massachusetts.
"This gives communities some flexibility," said Rep. Patricia A. Walrath, D-Stow, a House conference committee member. "Certainly people who are driving without state plates will be paying their fair share, and that will mean more revenue for communities."
Other provisions of the bill allow local governments to:
l Raise license fees and fines for fire department inspections; street vendors; parking and moving violations such as blocking intersections; auto lease surcharges; towing; and salvage yards.
l Use proceeds from sale of municipal assets for any purpose in fiscal 2004 and 2005.
l Extend or adopt tax amnesty programs until June 30, 2004.
l Establish added stabilization funds and earmark a specific amount of revenue for such funds. This measure requires approval by local selectmen or councilors.
The municipal relief package also makes a number of changes designed to reduce paperwork for local communities.
They include reducing the number of reports that must be filed with the Department of Education; requiring state agencies and authorities to post grant information on the Internet; speeding up criminal background checks; and extending the time allotted for submission of traffic citations to the state.
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The Boston Herald
Tuesday, July 8, 2003
No new taxes, but fees will soar
by Elizabeth W. Crowley
Heeding Gov. Mitt Romney's no new taxes warning, lawmakers ditched plans to allow cities and towns to hike taxes on diners and shoppers but rained fee increases down on everyone else from motorists to hotdog vendors to junkyard owners.
"There are fees galore," said Sen. Stanley C. Rosenberg (D-Amherst) of the municipal relief package released yesterday. "But no new taxes."
Under the plan, having your car towed in Boston won't be the bargain it now is at $12. Instead, it will cost $75 - the going rate in most other communities.
Mayor Thomas M. Menino, who has long railed against the quirk in Massachusetts law which froze the capitol city's towing fee at 1960 rates, called the fee hike a victory. "It was one of those archaic mandates that made no sense," he said. "The Legislature finally recognized the inequity."
If you lease a car, it will cost more in Boston and a few other cities where they charge a daily surcharge. Lawmakers have given communities the power to double the surcharge from 30 to 60 cents per day.
And ferry boat riders from the Cape and the Islands and New Bedford could be paying a $1 fee for each ticket. Voters in the cities or towns where ferries dock will decide whether to charge the new fee.
The municipal relief plan also punishes over anxious drivers caught blocking traffic by rolling into an intersection or crosswalk. They'll pay $150, up from $100.
Auto graveyard owners will pay twice as much for a license, from $100 to $200. And property tax deadbeats will pay more to local collectors for, among other things, the official's travel expenses incurred while coming to arrest someone in arrears.
Anti-tax advocates hadn't seen the plan last night but said many of the more than two dozen fee hikes appear sound.
"As long as it's a true fee and you can avoid it by not doing bad things or it legitimately covers the true cost of providing a service, it's OK," said
Barbara Anderson of Citizens for Limited Taxation. "It's when it's a tax parading as a fee that we have a problem."
The package of fee options came as local leaders yesterday watched and waited for lawmakers to take up Romney's $201 million in budget vetoes.
The House voted to restore $15.8 million worth of spending slashed by Romney, including $10 million in kindergarten grants and $4 million for literacy programs.
With the vote on kindergarten programs, "they just saved me from having to lay off six more teachers," said Medford Mayor Michael McGlynn. "It's the first positive thing about the budget I've been able to say in 18 months."
McGlynn, Menino and Brockton Mayor John Yunits pressed lawmakers yesterday to keep up the work and restore more than $40 million in local aid cut by Romney. Despite ending the dismal 2003 fiscal year in June with a $133 million surplus, Administration and Finance Secretary Eric Kriss said Massachusetts is far from out of its budget mess.
"We've got a $1.6 billion monster, at least, coming in fiscal year 2005," Kriss said, referring to the state's remaining structural deficit. "Taxes can't fix the problem and the federal government isn't going to come to our rescue."
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The Boston Globe
Tuesday, July 8, 2003
Fiscal year ends on surplus note
By Raphael Lewis, Globe Staff
The state ended the fiscal year with a $133 million budget surplus, thanks to a 4.7 percent increase in tax revenues. But the Massachusetts economy is hardly booming, Governor Mitt Romney's budget chief said yesterday.
Secretary of Administration and Finance Eric A. Kriss said the growth was due almost entirely to the closing of tax loopholes and an amnesty program. Without those, he said, tax collections for the fiscal year that ended June 30 would have been essentially flat.
"It is not time to declare an end to the fiscal emergency," Kriss said. "We still have a long road to go, although we've made a very first step."
As the state's unemployment rate has risen during the past year, income tax collections from paycheck withholdings have fallen 3 percent. It marks the second year in a row that withholding collections have declined.
Still, the lagging income tax revenues, which represent about half of the state's tax base, were offset somewhat by rising consumer spending which boosted sales taxes.
Kriss anticipates a modest 4 percent rise in overall tax revenues in fiscal year 2004. "If this economy stumbles again and starts dipping down," he said, "then we're going to have another problem."
The state collected $14.96 billion in fiscal 2003, or $673 million more than the prior year. That was still well below the $16.6 billion reaped in fiscal year 2001, before the terrorist attacks of Sept. 11, and the bursting of the Internet investment bubble sent the state's economy into a tailspin.
The closing of tax loopholes and a tax amnesty program together generated $413 million, Kriss said. But such revenues are frowned upon by economists, who say the onetime cash infusions artificially prop up spending, and allow the state to avoid addressing fundamental fiscal problems.
Cameron Huff, a senior policy analyst with the Massachusetts Taxpayers Foundation, said the state still hasn't confronted the core issue. Huff said ultimately the state has three basic choices: slash spending further, increase revenues, or overhaul the state's healthcare delivery system.
But "those are places that nobody has really wanted to go," Huff said. "There's a tremendous mismatch between what the economy can deliver in terms of tax [revenue] and the growth in healthcare and other largely unavoidable costs, like debt service. It has to be dealt with."
Kriss used the revenue figures yesterday as an opportunity to press anew the governor's reform and restructuring agenda, which calls for reorganizing transportation, courts, and higher education.
But with a few minor exceptions, that agenda has been roundly defeated by the Legislature. Huff said he had hoped to hear some new ideas from the governor as he leads the state toward an unsettled economic future.
"It was pretty much the same list of items which they had not gotten very far on," Huff said. "If you stack this list of potential items for providing relief to the size of the problem, we're nowhere close."
Economists said yesterday they were unsure how to interpret the latest economic data.
Wayne Ayers, FleetBoston Financial's chief economist, said a few trends persist that are likely to keep the state's economy from growing at a fast pace.
Typically, employers wait to expand jobs until they are certain a recovery is fully in place, Ayers said. And these days, Massachusetts companies seem to be succeeding at increasing productivity from a smaller workforce. As long as productivity continues to rise, employers have little incentive to hire.
"We're a job-losing economy right now," Ayers said. What's more, Ayers sees consumer spending going flat after several months of robust purchasing of major appliances and cars throughout the New England region.
"First, you can only buy so many cars and computers and refrigerators, and second, the larbor market isn't getting much better any time soon," Ayers said.
Even if revenues increase by 4 percent as predicted, Kriss said, unavoidable cost increases related to the state pension fund, debt obligations, and healthcare could generate a budget deficit of as much as $1 billion for fiscal 2005, which begins a year from now.
The $1 billion figure, he said, could easily jump if state spending grows more than 1 percent or if the economy sputters.
"Despite everything we have done, we have at least a $1 billion problem," Kriss said. "These are the conservative assumptions."
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