CLT
UPDATE
Thursday, April 20, 2006
MTF: The tax and borrow lobby
Despite three consecutive years of growing budgets
and economic growth, the state is spending about $2.5 billion less than
it was prior to the fiscal downturn of 2002 in inflation-adjusted
dollars, according to a new Massachusetts Taxpayers Foundation report.
The business-backed foundation report also suggests the state can afford
to borrow as much as $250 million more each year and accelerate its plan
to reduce the income tax rate to 5 percent, which is currently scheduled
to potentially begin in 2009 and take at least six years, under a 2002
law that ties the tax cut to annual tax receipts....
"Given the renewed strength of the state's finances, it may well be
possible to provide more tax relief sooner than permitted by the 2002
law, but at a more moderate scale and pace than the Governor's overly
aggressive proposal," the report said.
Last year, senators unanimously approved a plan to reduce the income tax
rate to 5 percent once spending on local aid reached fiscal 2002 levels.
That plan died in the House.
[MTF president Michael] Widmer said any change to the current schedule
for reducing the income tax should be tied to economic triggers to
protect the state if "our economic fortunes were to change for the
worse."
State House News Service
Wednesday, April 19, 2006
MTF report urges caution on spending
as state fiscal picture brightens
Gov. Mitt Romney on Thursday put the lid on a major business
group's suggestion that the state can afford to borrow $250 million more each
year to pay for capital projects, while the governor's chief budget aide refused
to rule out any increase.
Calling it "fiscally imprudent," the governor said in an interview that raising
the state's self-imposed annual cap on bonds from $1.25 billion to $1.5 billion
would only push the burden of paying off higher debts to future generations.
"I have been steadfast in my desire to reduce borrowing, not increase it,"
Romney said following an unrelated event today. "Borrowing just puts off on our
kids our spending and it's unnecessary, particularly at a time when we're
generating record surpluses, when our rainy day fund is full and the
Commonwealth is in a mode of economic strength."
The governor's response comes a day after the Massachusetts Taxpayers Foundation
(MTF) recommended the state raise by $250 million its capital-spending limit....
In its report on "soaring appetites" within a growing state budget, the
business-backed taxpayers foundation argues the $1.25 billion annual bond limit
has not been changed since 2002; raising it by $250 million would reflect
inflation, foundation analysts say....
"I think the public imagines that bonding is somehow free money coming from the
air," Romney said. "It's borrowing, and borrowing means that we have to repay
all the money in the future, with interest.
State House News Service
Thursday, April 20, 2006
Romney rejects biz group's idea
of raising state bond cap
Chip Ford's CLT Commentary
There's the so-called
Massachusetts Taxpayers
Foundation, right on cue as always. Michael Widmer and his
high-rolling front group can always be counted on by the tax-and-spend
lobby to chime in at the right moment to oppose the income tax rollback
by any means.
Sure, its latest "report" recommends that the state
can borrow another $250 million (no doubt from one of its major bank
sponsors, with interest of course) and decrees that, "in
inflation-adjusted numbers," the state is spending "$2.5 billion" less
that it did in 2002 -- though the state is actually spending a couple
billion more when the
items moved "off-budget" since 2002 are factored in.
But don't touch that "rainy day" fund, the MTF
scolds: build it higher. "With the fiscal emergency now
behind us, further withdrawals from the rainy day fund are unwarranted,
particularly given the recent strong revenue growth," the report stated.
"The state now needs to recommit itself to its statutory pledge to build
up the fund through annual contributions based on a percentage of tax
revenues."
Keep in mind that the taxpayers represented by MTF
are Big and regulated Business, who either do business with or feel
required to kiss up to the state. Bankers like taxes that back up
state and municipal bonding, both principal and interest payments.
Isn't the presence of banks on the
MTF executive committees and boards a conflict of interest on tax
issues?
The Legislature doesn't want the rollback. MTF gives legislators cover
by opposing the rollback, racking up brownie points on issues important
to its "Fat Cat" membership.
MTF was one of the primary brokers of the new state
health insurance law ("The Greater Boston Chamber of Commerce and other
business groups, including the Massachusetts Taxpayers Foundation, have
helped broker the deal for the business assessment." The Boston Globe,
Mar. 15, 2006, "Romney
rebuffed on health proposal - Bid rejected to cut employers' fees").
Of course that new "assessment" was imposed primarily on small
businesses which don't provide health insurance, or belong to MTF, and look who else is on MTF's executive committees. (Blue Cross Blue Shield of Mass., Harvard
Pilgrim Health Care, Tufts Health Plan, Baystate Health, Inc., Novartis
Institutes for Biomedical Research, Inc., Bristol-Myers Squibb Co.,
PhRMA, Sanofi-Aventis, Beth Israel Deaconness Medical Center, Children's
Hospital, Massachusetts General Hospital, and Tufts-New England Medical
Center, to name just a few more of its Big or regulated Business
members.)
Isn't all this a conflict of interest on health care issues?
Again, MTF "urges caution on spending," as it does
perennially with little further follow-up or enthusiasm -- apparently done
automatically for cover, as few pols on Beacon Hill give this lame annual
admonition even a passing thought or show the slightest hesitation.
But hey, MTF now admits "it may well be possible to
provide more tax relief sooner than permitted by the 2002 law." Of
course, that's with its caveat "but at a more moderate scale and pace
than the Governor's overly aggressive proposal."
In his budget -- which is always considered
dead-on-arrival in the House -- Governor Romney called for lowering the
tax rate to 5.15 percent next year and finally back to 5 percent in
FY'08. It's incomprehensible that finally rolling back the "temporary
18-month" income tax hike to 5 percent after nineteen years can
be termed "overly aggressive." Only MTF can get away with such
crass and insulting absurdity.
Apparently though, MTF deigns it perhaps possible to
"provide more tax relief sooner than permitted by the 2002 law." That's
the "temporary freeze" of the voters' 2000 ballot mandate, imposed by
the Legislature which might -- under perfect conditions with no further
economic slowdowns in the next eight years, or further treachery --
reach 5 percent by 2014.
After seventeen years I'm damned tired of waiting on
the next interminable excuse, or MTF's next pronouncement for why we
can't have our tax rollback while it calls for more borrowing to further
enrich lending institutions, or for a reason why it's perfectly
acceptable to the elite for legislators to ignore a voter mandate which they
collectively never liked and strenuously opposed, and lost at the ballot
box.
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Chip Ford |
State House News Service
Wednesday, April 19, 2006
MTF report urges caution on spending
as state fiscal picture brightens
By Amy Lambiaso
Despite three consecutive years of growing budgets and economic growth,
the state is spending about $2.5 billion less than it was prior to the
fiscal downturn of 2002 in inflation-adjusted dollars, according to a
new Massachusetts Taxpayers Foundation report.
The report, "State
Budget '07: Soaring Appetites, Competing Priorities," describes a
state with a stabilized budget picture characterized by modest
surpluses, but pent-up demand for a "long and enticing list" of programs
and priorities that "far exceed the state's ongoing fiscal capacity."
The most high profile new program and expense is the state's new law
expanding access to affordable health insurance, the "ultimate cost" of
which "will not be known until the reforms unfold," according to the
report. The law is designed to deliver insurance to more than 500,000
uninsured people in three years.
The business-backed foundation report also suggests the state can afford
to borrow as much as $250 million more each year and accelerate its plan
to reduce the income tax rate to 5 percent, which is currently scheduled
to potentially begin in 2009 and take at least six years, under a 2002
law that ties the tax cut to annual tax receipts.
Growing tax receipts and state budget flexibility are being "partially"
consumed by the new health care law and a plan to lift the cap on the
distribution of Lottery aid to cities and towns, according to the
report.
"As the state's leaders consider other initiatives in the months ahead,
it will be critical to hold in check the appetite for a profusion of
expensive new initiatives," the report said. "Taking on commitments that
exceed our ongoing fiscal capacity not only would be a step backward
from the prudent decision-making that saw the state through the recent
crisis, it would undercut our ability to weather future financial
downturns."
The report comes as budget season begins to heat up on Beacon Hill, with
the House set to debate its $25.3 billion spending plan for fiscal 2007
and the proposed 1,600 amendments next week, and gubernatorial
candidates making their desire to cut the state's income tax rate a
central campaign issue.
Areas that weathered some of the most drastic cuts during the economic
recession are still far below fiscal 2001 levels, according to the
report. When adjusted for inflation, higher education and spending on
human service programs remain 30 percent and 11 percent below that year,
respectively, according to the report. Lawmakers are also pushing to
increase school aid and expand Medicaid programs.
The House budget released last week uses roughly $275 million from the
state's rainy day fund, while Gov. Mitt Romney's House 2 budget draws on
$60 million from the fund to cover capital gains tax refunds authorized
under a law approved late last year.
State leaders relied heavily on reserves during the fiscal downturn to
cushion the drop in tax receipts, and the MTF report recommends building
that fund to prepare for a possible future downturn. State estimates
project the rainy day fund will end this fiscal year with a $1.7 billion
balance.
"With the fiscal emergency now behind us, further withdrawals from the
rainy day fund are unwarranted, particularly given the recent strong
revenue growth," the report said. "The state now needs to recommit
itself to its statutory pledge to build up the fund through annual
contributions based on a percentage of tax revenues."
Recognizing the plethora of spending request now under review, report
authors recommend four programs move to the top of the list:
implementation of new health care reforms; gradually moving toward the
dedication of 40 percent of tax revenues to local aid; restoring funding
to public higher education; and increasing the annual $1.25 billion cap
on bond spending by $250 million to expedite improvements to
transportation, higher education and other state infrastructure.
"It is clear that the state now has the financial capacity to act on
some - but nowhere close to all - of the initiatives before the
Legislature," the report said. "While the unusually strong revenue
performance of recent months is unsustainable, annual growth at close to
the historical average of 5 to 6 percent appears achievable for several
years to come."
Tax receipts dropped by 15 percent in fiscal 2002, coinciding with the
recession that hit states across the country. Once the economy
recovered, revenues began to grow, rising by roughly 7 percent in fiscal
years 2004 and 2005. Through the first nine months of fiscal 2006,
revenues are up 9 percent over last year, but are mostly accounted for
in capital gains, corporate and non-withholding receipts.
The governor has used the growth in tax revenue as support for his
continued call for an income tax reduction, a proposal that would result
in the loss of nearly $700 million a year to state coffers. In an effort
to compromise with the Democrat-controlled Legislature that has resisted
the tax cut, Romney this year has proposed phasing in the reduction from
5.3 percent to 5 percent over two years, with a "relatively manageable"
$130 million impact on the budget year that begins July 1, the report
said.
Democrats who have rejected that plan say a 2002 law that ties a series
of triggers to economic targets is in place to ensure the income tax
rate is eventually rolled back to what the voters approved in 2000. But
MTF says that schedule could be moved up, a "slight shift" in its
position that is justified by the growth in revenues, said foundation
president Michael Widmer.
"Given the renewed strength of the state's finances, it may well be
possible to provide more tax relief sooner than permitted by the 2002
law, but at a more moderate scale and pace than the Governor's overly
aggressive proposal," the report said.
Last year, senators unanimously approved a plan to reduce the income tax
rate to 5 percent once spending on local aid reached fiscal 2002 levels.
That plan died in the House.
Widmer said any change to the current schedule for reducing the income
tax should be tied to economic triggers to protect the state if "our
economic fortunes were to change for the worse."
The MTF report also points out that the state has recently adopted more
than $100 million in tax cuts by providing incentives for movie
production companies to shoot films in Massachusetts, property tax
relief for seniors, and home heating tax credits for income-eligible
homeowners.
The state's financial picture is also clouded by the lack of job growth,
the report says, noting that employment remains 161,000 jobs below the
pre-recession peak in 2001. The state's unemployment level rose .4
percent to 5 percent in February.
Return to top
State House News Service
Thursday, April 20, 2006
Romney rejects biz group's idea
of raising state bond cap
By Amy Lambiaso
Gov. Mitt Romney on Thursday put the lid on a major business group's
suggestion that the state can afford to borrow $250 million more each
year to pay for capital projects, while the governor's chief budget aide
refused to rule out any increase.
Calling it "fiscally imprudent," the governor said in an interview that
raising the state's self-imposed annual cap on bonds from $1.25 billion
to $1.5 billion would only push the burden of paying off higher debts to
future generations.
"I have been steadfast in my desire to reduce borrowing, not increase
it," Romney said following an unrelated event today. "Borrowing just
puts off on our kids our spending and it's unnecessary, particularly at
a time when we're generating record surpluses, when our rainy day fund
is full and the Commonwealth is in a mode of economic strength."
The governor's response comes a day after the Massachusetts Taxpayers
Foundation (MTF) recommended the state raise by $250 million its
capital-spending limit. Some Democratic lawmakers have in the past
unsuccessfully lobbied the administration to raise the cap to expedite
job-producing public works projects important to their districts, the
state, and economic development.
As a way to increase capital spending without borrowing more, lawmakers
and the administration in recent years have used some operating budget
surpluses to pay for capital projects.
In a separate interview, Administration and Finance Secretary Thomas
Trimarco said he is putting together the fiscal 2007 capital budget,
based on the $1.25 billion figure. But as the process unfolds, he may
propose a "modest increase," he said.
"There's no question that the demand for worthy capital projects exceeds
that number," Trimarco said. "Therefore an argument certainly can be
made to raise the cap, but at the same time we have to keep reminding
ourselves that we are the number two indebted state in the nation."
In its report on "soaring appetites" within a growing state budget, the
business-backed taxpayers foundation argues the $1.25 billion annual
bond limit has not been changed since 2002; raising it by $250 million
would reflect inflation, foundation analysts say.
"This increase would help address the urgent need to repair and expand
the physical systems and facilities - in transportation, higher
education, and other areas - on which our future economic growth
depends," the report said. "It is an increase that almost certainly
would be accepted by the rating agencies and add little to yearly debt
service costs." The agencies assign credit ratings to the state, based
on its condition.
Foundation analyst Cameron Huff said the addition of $250 million in
capital spending would add between $10 million and $15 million in annual
debt service.
"I think the public imagines that bonding is somehow free money coming
from the air," Romney said. "It's borrowing, and borrowing means that we
have to repay all the money in the future, with interest. And it's
saying, we don't want to pay for this now, we want someone to pay for it
in the future."
In Massachusetts, bonds are floated each year to fund capital projects
authorized by the Legislature. The administration picks from that list
of projects to advance those that fit within the $1.25 billion budget.
Trimarco said his office is "taking a hard look at" raising the bond
cap, but added: "I'm not saying it will happen."
The Bonding, Capital Expenditures and Assets Committee plans to hold its
annual hearing on the state's capital spending plan in early May.
Trimarco said he plans to forward his capital recommendations to the
governor within the next few weeks, with the capital plan being released
by the end of May.
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