Massachusetts lawmakers plan to consider a constitutional amendment that would automatically funnel a certain percentage of the state budget into a rainy-day reserve fund during healthy fiscal times.
The idea, which has been endorsed by House Speaker Thomas M. Finneran and the Greater Boston Chamber of Commerce, is designed to cushion the blow of inevitable economic downturns, allowing the state to navigate tough budget times without making deep cuts to popular programs....
If the measure were in effect this year, it would require the state to set aside about $300 million in the rainy day fund. The amount of money in the fund would be capped at 17 percent of the state budget, which is currently about $23 billion, and Beacon Hill could not drain more than 50 percent from the reserve pool in a single year.
In a speech last week, Finneran endorsed the amendment idea, though he proposed an annual contribution rate of 1 percent. The Massachusetts Taxpayers Foundation, a government watchdog group, and the Massachusetts Human Services Coalition also said yesterday that they support automatic contributions into the rainy-day fund.
The Boston Globe
Wednesday, March 24, 2004
Backers push amendment for rainy-day fund
This report advocates for the creation of a constitutionally-mandated state Rainy Day Fund as the primary method of contributing to the reliability, consistency, and long-term
vision of the state budgetary process. It makes recommendations on the various structural
features
that should be included in a constitutionally-mandated state Rainy Day Fund.
The Greater-Boston Chamber of Commerce
Wednesday, March 24, 2004
The Permanent Umbrella:
A Constitutionally Mandated Rainy Day Fund for Massachusetts
One of the great achievements of the Massachusetts Legislature in the 1990s was the establishment and steady growth of the rainy day fund, which helped the state to weather the fiscal difficulties of the last three years. Now, House Speaker Thomas Finneran and the Greater Boston Chamber of Commerce want to insert a mandate for the fund in the state Constitution. Lawmakers have acted responsibly over the past decade; there is no need to impose this fiscal straitjacket on future budgets....
Over the last decade, the most irresponsible fiscal action came not from the Legislature but the voters, who in 2000 approved a ballot question to lower the income tax rate from 5.85 to 5 percent. They were gulled by the false promise of proponents that essential services would not be cut....
Two years ago the Legislature under Finneran's leadership stopped the income tax reduction at 5.3 percent, but the rate is still too low for the many obligations of state government.
A Boston Globe editorial
Monday, March 29, 2004
Finneran's fiscal trap
Chip Ford's CLT
Commentary
Round 3 of the white-hot constitutional amendment on gay marriage
ended today with adoption of the "compromise" version. The
Constitutional Convention is scheduled to continue for the next two days
to address the other ten proposed amendments on the agenda, but still
that's not enough. Out of nowhere at this eleventh hour comes yet another proposed change to the Massachusetts constitution.
Only one of the items on the agenda is an initiative petition — an amendment on health care
put before the ConCon by voter signatures – that must be voted on. The others are legislative amendments, which include one extending legislative terms to four
years; another eviscerating the initiative process.
The late entry into this constitutional amendment orgy, proposed by the Greater-Boston Chamber of Commerce and presently being drafted in the office of House Speaker Tom "Winnie Churchill" Finneran, is a constitutionally-mandated
"rainy day fund" that will grow every year as a basic budget cost, estimated at $300 million annually. Already expressing support for the concept are the so-called Massachusetts Taxpayers Foundation and a leading Gimme Lobby special interest, the Massachusetts Human Services Coalition.
On the other hand, the Boston Globe is opposed to it, which is a reason to at least give it a fair look. Drafted correctly, a moderate constitutional rainy day fund can prevent a panicked tax hike each time there’s a recession, as has happened to us Massachusetts taxpayers many times. Our main concern, in waiting to see the actual draft, is that it will somehow be set up to prevent our
"temporarily frozen" income tax rollback from ever thawing
out.
In my commentary of March 5, 2002 (CLT Update: "A tax cut delayed is a tax cut
denied"), I said of the "temporary freeze":
Thanks to a decade of deceit and treachery by the Legislature, we now clearly understand their definition of "delay," "freeze," "eventually implement," and a "not permanent" tax hike. They each mean the same thing to pols as "temporary" ... and temporary to them, we know from experience, means "forever once we sucker you in."
The only thing temporary in the Legislature's
"temporary freeze" is, and always was, the
"temporary" part. But we knew that back then.
We first reported this latest scheme last year
("In Mass. the more things remain the same, the worse they become,"
CLT Update, Jul. 15, 2003), but nothing's been heard of it since ...
until now, all of a sudden, when attention is distracted elsewhere.
According to today's Boston Globe editorial,
"Winnie" Finneran has again risen to stroke his massive ego:
"Finneran, in a telephone interview last week, said he feared that the discipline shown in the 1990s was an anomaly, largely because of his leadership. "Others say, 'You're one of a kind, the only one who thinks along these terms. It's never happened before and it'll never happened again,'" he said.
This explains Mistah Speaker's motivation.
That of the Greater-Boston Chamber of Commerce and the so-called Massachusetts Taxpayers Foundation are just as transparent: The more money taken from all of us average taxpayers and stashed away in an ever-growing "rainy day" fund, the less chance of the Fat Cats being hit up for higher taxes in the next recession ... and of course there will always be one, as there always has been.
The Gimme Lobby's advocacy could just be concern about the cuts that occur during the cyclical fiscal crises, but such long-term thinking would be out of character; we would expect them to prefer a rainy day slush fund to tax cuts and we are watching to make sure this is not the issue here.
"Winnie" Finneran hasn't even filed his proposed amendment yet. But it could come out of his office and onto the ConCon agenda for a vote very quickly.
Tomorrow and Wednesday if necessary the Legislature
will continue meeting in constitutional convention to take up the other
known ten proposed amendments before it. This action was touted as
unexpected, but is exactly why we delivered our
memo on Friday — it doesn't surprise us. For the next two days we will be
closely watching for inclusion of this possible eleventh amendment, and
will be prepared to respond.
|
|
|
Chip
Ford |
The Boston Globe
Wednesday, March 24, 2004
Backers push amendment for rainy-day fund
By Scott S. Greenberger, Globe Staff
Massachusetts lawmakers plan to consider a constitutional amendment that would automatically funnel a certain percentage of the state budget into a rainy-day reserve fund during healthy fiscal times.
The idea, which has been endorsed by House Speaker Thomas M. Finneran and the Greater Boston Chamber of Commerce, is designed to cushion the blow of inevitable economic downturns, allowing the state to navigate tough budget times without making deep cuts to popular programs.
"Governments don't easily or always plan for the future," said Paul
Guzzi, president and CEO of the Greater Boston Chamber of Commerce, which released its detailed amendment proposal yesterday. "We don't view this as fiscally conservative or fiscally liberal -- we think it's fiscally sound."
House and Senate leaders say the amendment is likely to come up in July, when lawmakers reconvene in a constitutional convention to deal with issues other than gay marriage. The Legislature would have to approve the amendment again in the next session in order to place it on the November 2006 ballot.
Because Massachusetts built up its reserves during the booming 1990s, it didn't have to cut as deeply when the economy slumped and tax revenues plunged. At its peak in June 2001, the rainy-day fund contained about $2.3 billion. The state has cut about $3 billion from its budget over the last three fiscal years, but it would have slashed even more if it hadn't taken $1.65 billion from the reserve fund.
Under the chamber's proposal, the state would have to put 2 percent of its total revenues into the reserve fund at the beginning of every fiscal year, except during years when revenue is down or in the years immediately following such difficult times.
If the measure were in effect this year, it would require the state to set aside about $300 million in the rainy day fund. The amount of money in the fund would be capped at 17 percent of the state budget, which is currently about $23 billion, and Beacon Hill could not drain more than 50 percent from the reserve pool in a single year.
In a speech last week, Finneran endorsed the amendment idea, though he proposed an annual contribution rate of 1 percent. The Massachusetts Taxpayers Foundation, a government watchdog group, and the Massachusetts Human Services Coalition also said yesterday that they support automatic contributions into the rainy-day fund.
Representative John H. Rogers, the chairman of the House Ways and Means Committee and a key Finneran lieutenant, said an amendment is needed to force lawmakers and the governor to act prudently.
"There's always a political need to either spend money or give it back to taxpayers when there are surpluses. Those are very real political pressures," Rogers said. "There is absolutely no political pressure to sock money away."
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The Greater-Boston Chamber of Commerce
Wednesday, March 24, 2004
The Permanent
Umbrella:
A Constitutionally Mandated Rainy Day Fund for Massachusetts
This report advocates for the creation of a constitutionally-mandated state Rainy Day Fund as the primary method of contributing to the reliability, consistency, and long-term vision of the state budgetary process. It makes recommendations on the various structural features that should be included in a constitutionally-mandated state Rainy Day Fund.
In this report, the Chamber recommends a constitutionally-mandated Rainy Day Fund with the following features:
Source and Rate of Deposits: A dual-mode contribution methodology featuring an annual contribution rate of 2 percent of revenues during healthy fiscal periods, and year-end budget surplus deposits. This will provide the fund with two dedicated revenue streams during times of statewide economic growth.
Fund Cap: A cumulative Rainy Day Fund cap that restricts the total fund amount to 17 percent of the budget. This cap level will ensure that the fund is allowed sufficient room to grow to adequate levels, given Massachusetts' disproportionate reliance on cyclical revenue sources.
Supermajority Requirement on Spending: A two-thirds supermajority vote requirement to spend dollars in the Rainy Day Fund. By raising the withdrawal standard above a simple majority vote requirement, this provision provides reassurance that funds will only be used for vital purposes and that a clear legislative consensus has been reached to dispense of these funds.
Annual Withdrawal Limit: An annual withdrawal limit of 50 percent of the total fund. This provision will provide an additional safeguard against rapid depletion of these funds so that the state is sufficiently prepared to weather a prolonged fiscal downturn.
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The Boston Globe
Monday, March 29, 2004
A Boston Globe editorial
Finneran's fiscal trap
One of the great achievements of the Massachusetts Legislature in the 1990s was the establishment and steady growth of the rainy day fund, which helped the state to weather the fiscal difficulties of the last three years. Now, House Speaker Thomas Finneran and the Greater Boston Chamber of Commerce want to insert a mandate for the fund in the state Constitution. Lawmakers have acted responsibly over the past decade; there is no need to impose this fiscal straitjacket on future budgets.
Finneran, in a telephone interview last week, said he feared that the discipline shown in the 1990s was an anomaly, largely because of his leadership. "Others say, 'You're one of a kind, the only one who thinks along these terms. It's never happened before and it'll never happened again,'" he said.
It's true that Finneran was the driving force behind the creation of the fund, but he is not the sole holder of wisdom. Legislators who worked through the last three years and their successors should be trusted to replenish the fund without the strictures of a constitutional amendment.
Under the plan, the Legislature would have to appropriate money for the fund in most years when state revenues grow. That might make sense in a time of stable prices, but suppose inflation was running at 5 or 10 percent a year, as happened in the 1970s. Much of the growth would be an illusion, and the rainy day mandate would be devastating to state government.
Finneran has an answer for that. He is thinking of including a provision that would allow the Legislature by a two-thirds vote to tap into the fund as long as it provides an explanation. That might work with today's lawmakers, but who knows what the composition of the body will be far into the future. A minority should not get constitutional sanction to veto budget decisions.
Over the last decade, the most irresponsible fiscal action came not from the Legislature but the voters, who in 2000 approved a ballot question to lower the income tax rate from 5.85 to 5 percent. They were gulled by the false promise of proponents that essential services would not be cut.
The Legislature will not be considering Finneran's proposed amendment for weeks. In the meantime, it will be addressing next year's budget, in which health care and education have a special urgency. If tax revenues come in higher than expected, as now seems likely, legislators ought to devote some of the extra money to the rainy day fund.
Two years ago the Legislature under Finneran's leadership stopped the income tax reduction at 5.3 percent, but the rate is still too low for the many obligations of state government. Raising taxes to maintain essential services rather than restricting the actions of successor Legislatures ought to be the top fiscal priority this year.
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