CLT UPDATE
Friday, August 29, 2008
Massachusetts: The Great State of Perpetual
"Fiscal Crisis"
Gov. Deval Patrick and Democratic
legislative leaders will find a deteriorating budget mess when they
return from the Democratic National Convention in Denver.
Patrick and the Legislature just completed work on a $28.2 billion
annual budget, but new state documents indicate tax revenues to support
the spending may fall $400 million short and the budget doesn’t address
$600 million in “likely” demands on safety net services, namely health
insurance programs, and “skyrocketing” energy costs.
“In total, these updated revenue forecasts and cost estimates for fiscal
2009 suggest the potential need for approximately $1 billion in
budgetary solutions,” state officials reported in an Aug. 14 disclosure
to bondholders....
The news makes for a fiscal quagmire for Patrick and Democratic
legislative leaders as they look ahead to fall elections. And it likely
means continued focus on budget balancing, including potential spending
cuts and additional new taxes, and difficulty during the 2009-2010
legislative session paying for investment-based priorities like
education, transportation and the 2006 law expanding access to health
insurance.
August tax collection numbers are due out next week and [Senate
President Therese Murray] said September and October revenue numbers are
being closely watched to determine whether the Legislature should
suspend rules that prohibit formal sessions late in election years. A
session after the November elections would feature numerous lame-duck
lawmakers.
State House News Service
Thursday, August 28, 2008
New state budget $1 Billion out of balance,
leader says fall session possible
State revenue figures had reached the point
where the income-tax rate might have been adjusted downward from the current 5.3
percent to 5.25 percent, according to a formula put into effect in 2002. But
that was before adjusting for inflation. So, no surprise — it's not going to
happen.
The Salem News
Friday, August 29, 2008
Weekly column [excerpt]
By Nelson Benton, editor
Steve Crawford has been around Massachusetts
politics a long time, mostly working for Democratic candidates and causes.
Today, in addition to advising Gov. Deval Patrick, he serves as spokesman for
the Boston Teachers Union, according to a recent Associated Press story, and is
helping to coordinate the campaign to defeat Question 1 on November's ballot....
While running "lean" is the new watchword for most private companies and their
employees, it's still Fat City for many who work for government. The latter
expect regular pay increases — and not based on their performance, either;
heavily subsidized health coverage; and generous retirement benefits.
Their jobs are not quite as secure as they used to be simply because many cities
and towns can't keep up with rising labor costs and have no choice but to resort
to layoffs. But between the protections provided by Civil Service, collective
bargaining contracts and a legal system that always seems to favor the employee
over the employer, those with plenty of seniority have little to worry about
even today.
It's time government gets a dose of reality. Crawford and his colleagues had
better hope it doesn't come in the form of a yes vote on Question 1 this Nov. 4.
The Eagle Tribune
Sunday, August 25, 2008
An Eagle-Tribune editorial
Taxpayer frustration at the boiling point
A recent Wall Street Journal column recounted
the experience in one New England community whose residents are facing rising
taxes at a time of declining property values and increasing economic
uncertainty:
The school board put together a citizens committee and charged it with figuring
out ways to save money. "Among its other recommendations, the 17 residents
recommended replacing some public school teachers with low-cost college interns,
restricting the use of school vehicles and increasing employee contributions to
benefit plans.
"These may seem modest steps towards fiscal responsibility," columnist Lewis M.
Andrews noted [see WSJ column at bottom, below], "but they are emblematic
of a significant change — (the) growing disenchantment with the price of
government, especially public education." ...
Hopefully compromise can be achieved before the teachers escalate hostilities.
Otherwise the mayor and school board might contemplate what another Connecticut
town is doing: In Chester the cost of educating children has gotten so high, one
selectman has proposed paying parents to send their children to private school.
The Salem News
Friday, August 29, 2008
A Salem News Editorial
Taxpayers are fed up all over
Chip Ford's CLT
Commentary
"We are concerned that
their frustration might be reflected at the ballot box," said Steve
Crawford, an advisor to Gov. Deval Patrick about voters and Question
One, repeal of the state income tax.
Pardon me if that concern
doesn't show, Steve.
Pardon me again, Steve, but
we've heard this all before, year after year. Massachusetts is the
State of Perpetual "Fiscal Crisis." All of last year we heard it
again, but in the end there was an over-billion dollar revenue surplus,
aka, taxpayer overpayment. The pols spent it, all of it and then
borrowed billions more. It's always the same, Steve. Ever
heard of The Boy Who Cried Wolf?
What the Bacon Hill pols
absolutely don't want to see is a majority of frustrated voters
passing Question One in November, especially a large majority.
Life up there in the thin air of Boston would be so much simpler if the
voters just reject the proposal, don't force the political class to need
deal with it. But already they're preparing for the worst in their
usual, heavy-handed way, besides the special interest multi-millions
they're raising for their campaign to defeat it on the ballot.
Instead of even tossing
taxpayers a miniscule sop, instead of trying to convince us they're
trying to adopt Obama's mantra of "Change," instead of keeping their
collective word and "unfreezing" the voters' 2000 rollback of the income
tax rate by a tiny point-zero-five (.05) percent -- like they'd miss
$100-$120 million the way they spend our money -- instead,
they're still playing their games, determined unto death to cling onto
that 5.3 percent rate at any cost.
So now the latest report of
Massachusetts' perpetual state of "fiscal crisis" has surfaced,
conveniently enough -- a mere month no less after just adopting the
current budget. The state has alleged "fiscal crisis" after
"fiscal crisis" for years now, and each year the Legislature has found
and spent an additional billion dollars or more, last year borrowing
over $3 billion on top of that.
The next "fiscal crisis"
has been announced -- the purported reason for recalling the Legislature
in an unusual special session so as to deal with it. After the
election, of course. Again the "T" word is on their lips --
another tax hike or hikes is a thread running through their dreams, more
of our money to spend is being added to their post-election wish list.
What a convenient time for
them to repeal the voters' repeal of the income tax, if voters so
decide. Better yet, what an opportunity to jack up taxes
sky-higher, if voters give them the green light by voting "NO" in the
majority on Question One, ratifying Beacon Hill's ways and methods.
A "NO" vote will send the message that voters don't mind paying higher
taxes, and this rationale will surely be used when Bacon Hill returns
and jacks them up again in post-election November. "The voters
have spoken, and we agree with them -- this time -- hah, hah,
harrrr!"
That's all a "NO" vote on
Question One will accomplish. That's it, more and higher taxes.
Voters who vote "NO" will give them the green light, just enable them
more, will have endorsed more of what the pols love to do: Spend,
spend, and spend more. Of our money. Then take more after
they've squandered it and run out.
Vote "YES" on Question One
to repeal the state income tax . . .
Or vote "NO" and get even
higher taxes.
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Chip Ford |
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Sneak
preview of coming attractions |
State House News Service
Thursday, August 28, 2008
New state budget $1 Billion out of balance,
leader says fall session possible
By Michael Norton and Gintautas Dumcius
Gov. Deval Patrick and Democratic legislative leaders will find a
deteriorating budget mess when they return from the Democratic National
Convention in Denver.
Patrick and the Legislature just completed work on a $28.2 billion
annual budget, but new state documents indicate tax revenues to support
the spending may fall $400 million short and the budget doesn’t address
$600 million in “likely” demands on safety net services, namely health
insurance programs, and “skyrocketing” energy costs.
“In total, these updated revenue forecasts and cost estimates for fiscal
2009 suggest the potential need for approximately $1 billion in
budgetary solutions,” state officials reported in an Aug. 14 disclosure
to bondholders.
The uptick in demands on state services that accompany an economic
downturn and a stock market-driven decline in capital gains tax revenues
are prompting active consideration of a special session this fall to
address the situation.
“We’re anticipating there will be a slide in capital gains and if that
indeed happens, then we will have to come back,” Senate President
Therese Murray told the News Service at the Denver convention.
The news makes for a fiscal quagmire for Patrick and Democratic
legislative leaders as they look ahead to fall elections. And it likely
means continued focus on budget balancing, including potential spending
cuts and additional new taxes, and difficulty during the 2009-2010
legislative session paying for investment-based priorities like
education, transportation and the 2006 law expanding access to health
insurance.
August tax collection numbers are due out next week and Murray said
September and October revenue numbers are being closely watched to
determine whether the Legislature should suspend rules that prohibit
formal sessions late in election years. A session after the November
elections would feature numerous lame-duck lawmakers.
State tax collections fell 2.7 percent in May and in June were down by
almost 1 percent compared to June 2007. July tax receipts totaled $1.383
billion, up 6.7 percent over July 2007, but revenue officials said the
monthly take was “soft” with the bulk of growth tied to a one-time $80.3
million corporate tax settlement payment.
Patrick administration documents reviewed by the News Service point to
“worsening” economic conditions and the possibility of tax revenues
dropping below projections as demand for state services and programs
rises.
The other big question mark, Murray said, is the outcome of talks over
federal health care funds.
Based on talks with the Patrick administration, which is locked in
prolonged discussions over permissible Medicaid and health care reform
reimbursements, “we think that’s going well right now,” Murray said.
“It won’t be exactly what we have today but I’m encouraged by the
administration, that they say things are going well, and Sen. [Richard]
Moore is on top of those negotiations,” Murray said.
The Legislature finished formal sessions July 31 without acting on Gov.
Deval Patrick’s request to expand his power to cut the state budget if
imbalances develop, and after adding $56.5 million in spending back to
the budget that Patrick vetoed. Currently, Patrick may cut from
executive branch agency budgets but not from local aid or the budgets of
the judiciary, district attorneys, sheriffs or constitutional officers.
In early August, federal officials were prepared to reimburse
Massachusetts $2 billion less than the state was requesting over the
next three years, according to a source familiar with the talks. Since
then, state officials have released new figures highlighting growing
private insurance enrollment rates and lower costs associated with
treating the uninsured, two issues that federal officials have been
focused on. But the talks remain unsettled.
On Monday night, Murray cited the possibility of fiscal 2009 budget cuts
“across the board” and said lawmakers were preparing to revisit the
budget, which likely means another look at Patrick’s request to expand
his limited budget-cutting authority.
“We'll be revisiting our budget probably in the late fall,” she said.
“And [fiscal 2010] is going to be really bad."
Apprised of the new budget difficulties and Murray’s suggestion of a
special fall session, a spokeswoman for House Speaker Salvatore DiMasi
did not return phone calls. DiMasi returned to Boston Thursday night to
attend to a personal matter.
According to state finance documents reviewed by the News Service,
capital gains realized in 2006 were $28.7 billion, up 8.5 percent from
$26.4 billion in 2005. The surge boosted capital gains tax revenues to
$1.63 billion from $1.51 billion on a preliminary basis, with 10 percent
growth anticipated once all tax returns are received.
The documents say that consensus estimates used to build the state
budget assumed no change in capital gains realizations in tax years 2006
through 2009, but that Moody’s Economy.com, the only forecaster that
estimates capital gain realizations on a state-by-state basis, estimates
realizations in Massachusetts would decline by 4 percent in tax year
2007 and 13 percent in tax year 2008, then surge 25 percent in tax year
2009.
Capital gains taxes totaled only $337 million in tax year 2001 but
totaled $1.688 billion in fiscal year 2007, an increase that Michael
Widmer, president of the Massachusetts Taxpayers Foundation, attributes
to higher corporate profits, stock market increases over several years,
and a 2002 state law that raised taxes on capital gains.
“We’ve seen a huge increase in capital gains taxes,” said Widmer. “That
makes us more vulnerable to a decline in the stock market, which
obviously we’ve experienced. The only question is how much will it
decline.”
The foundation claims this year’s $28.2 billion budget is about $1
billion out of balance, due in part to underestimated spending levels
and overestimated revenues tied to tax increases, and Widmer says a $500
million drop in capital gains tax revenues “would not surprise me.”
While tax revenue growth of less than 1 percent is needed in fiscal 2009
to hit the number used to build this year’s budget, the “impact of new
and higher than projected tax credits” and projections of slower rates
of economic growth have Patrick administration officials closely
monitoring tax revenues and developing contingency plans in case the
governor and his aides decide the lower their official estimate of tax
receipts.
Patrick’s budget aides have identified spending and revenue exposures in
the current fiscal year of between 1.037 billion and $1.49 billion,
according to an Executive Office of Administration and Finance budget
briefing used to launch fiscal 2010 budget hearings. The briefing points
to a “likely” fiscal 2010 budget gap of more than $1 billion.
“There is recognition that economic circumstances have been worsening,
and it is possible that tax revenues will drop below budgeted
projections at a time when state programs, particularly for safety net
services, will be in higher demand,” according to the briefing.
Widmer said the idea of the Legislature returning in the fall to address
budget difficulties is a “positive plan,” whether it involves giving
Patrick new powers or joining the administration to jointly address
imbalances. “Either way I think it’s important that they be part of the
process,” he said of the Legislature. He said the state has $2.3 billion
in reserves, but cautioned against excessive drawdowns that might
complicate fiscal 2010 budgeting.
Asked about Murray’s suggestion of a fall session, Patrick spokeswoman
Cyndi Roy said, “We are continuing to monitor revenues and will work
closely with the legislature to address any issues that may arise.”
One sign that the Legislature is weighing a special formal session would
be the introduction of a special order specifying a date for the session
and the agenda.
The Eagle Tribune
Sunday, August 25, 2008
An Eagle-Tribune editorial
Taxpayer frustration at the boiling point
"We understand that people are frustrated with the economy,
frustrated with the situation with foreclosures and the price of
gasoline. We are concerned that their frustration might be reflected at
the ballot box."
-- Gubernatorial advisor Steve Crawford
Steve Crawford has been around Massachusetts politics a long time,
mostly working for Democratic candidates and causes. Today, in addition
to advising Gov. Deval Patrick, he serves as spokesman for the Boston
Teachers Union, according to a recent Associated Press story, and is
helping to coordinate the campaign to defeat Question 1 on November's
ballot.
The ballot initiative would repeal the state income tax and cut the
state's revenue stream almost in half. And what has officials from
Patrick on down particularly concerned is the fact that a similar
measure was endorsed by a surprising 39 percent of the voters (44
percent in Essex County) in 2002.
Crawford is right when he says this is a drastic, even "reckless," way
to achieve change. A cut of this magnitude would likely result in the
elimination of all state aid to cities and towns and significant
reductions in services at the state and local levels.
And he's right when he says voters are frustrated. But in this case it's
not declining real-estate values or rising gas prices that have them so
upset. Rather, it's the failure by those on Beacon Hill to address the
profligate spending practices in the public sector.
While running "lean" is the new watchword for most private companies and
their employees, it's still Fat City for many who work for government.
The latter expect regular pay increases — and not based on their
performance, either; heavily subsidized health coverage; and generous
retirement benefits.
Their jobs are not quite as secure as they used to be simply because
many cities and towns can't keep up with rising labor costs and have no
choice but to resort to layoffs. But between the protections provided by
Civil Service, collective bargaining contracts and a legal system that
always seems to favor the employee over the employer, those with plenty
of seniority have little to worry about even today.
It's time government gets a dose of reality. Crawford and his colleagues
had better hope it doesn't come in the form of a yes vote on Question 1
this Nov. 4.
The Salem News
Friday, August 29, 2008
A Salem News Editorial
Taxpayers are fed up all over
A recent Wall Street Journal column recounted the experience in one New
England community whose residents are facing rising taxes at a time of
declining property values and increasing economic uncertainty:
The school board put together a citizens committee and charged it with
figuring out ways to save money. "Among its other recommendations, the
17 residents recommended replacing some public school teachers with
low-cost college interns, restricting the use of school vehicles and
increasing employee contributions to benefit plans.
"These may seem modest steps towards fiscal responsibility," columnist
Lewis M. Andrews noted [see WSJ column below], "but they are
emblematic of a significant change — (the) growing disenchantment with
the price of government, especially public education."
He wasn't talking about Peabody where teachers are clamoring for a new
contract, but he could have been. As in Enfield, Conn., here the rise in
the cost of public education has far outstripped the growth in school
population.
Like their counterparts in Massachusetts, Connecticut residents are
growing tired of giving every teacher lucrative pay and benefits
regardless of performance or the demands of their job. They'd rather see
scarce resources go to reward those who get the most out of their
students or have the most difficult classrooms.
Voters are starting to connect the dots and come to the realization that
the fees they pay for everything from bus transportation to allowing
their children to participate in sports is simply taxation by another
name. Put the additional spending on the ballot in the form of a
Proposition 2½ override and see how much support there would be for an
improved contract in Peabody or anywhere else.
While both management and the union are limited in what they can tell
the public about the negotiations underway in Peabody, one can surmise
that a major sticking point is the Bonfanti administration's desire to
get all city workers to pay a greater share of health insurance costs.
The city's chief executive, Michael Bonfanti, who also serves as School
Committee chairman, is smart enough to know that he won't get the unions
to budge from their current deal requiring the city to pay 90 percent of
those premiums, for nothing. But the unions, including the one
representing the teachers, should also realize that the property tax is
not a bottomless well.
Hopefully compromise can be achieved before the teachers escalate
hostilities. Otherwise the mayor and school board might contemplate what
another Connecticut town is doing: In Chester the cost of educating
children has gotten so high, one selectman has proposed paying parents
to send their children to private school.
The Wall Street Journal
Saturday, August 23, 2008
Connecticut Faces a School Tax Revolt
By Lewis M. Andrews
On June 30, the board of education and the town council in Enfield,
Conn., convened to hear the results of a citizen cost-cutting committee.
Among its other recommendations, the 17 residents recommended replacing
some public school teachers with low-cost college interns, restricting
the use of school vehicles, and increasing employee contributions to
benefit plans.
These may seem modest steps toward fiscal responsibility -- but they are
emblematic of a significant change in this very blue state: growing
disenchantment with the price of government, especially of public
education.
Over the past two and a half decades, the student population in
Connecticut has increased only 10%. Yet the cost of schooling more than
doubled -- to $8.8 billion in 2006, up from $3.4 billion in 1981.
Seventeen years ago, the state enacted an income tax with promises to
cut other taxes. Instead, real-estate assessments soared, creating a
massive income transfer from the private to the public sector, fueled in
part by a state cost-sharing formula that uses taxes on residents in the
suburbs to subsidize urban schools. Helping to soak up all that money
were binding arbitration laws, skewed to give teacher unions an
advantage in collective bargaining negotiations.
The result is that the average teacher salary is now the highest in the
nation -- $57,750 *excluding* benefits, according to the latest survey
of the American Federation of Teachers. Meanwhile, the American
Legislative Exchange Council reports that Connecticut is one of the 10
states with the heaviest property-tax burdens. According to a calculator
on the Web site of the Nonpartisan Action for a Better Redding, a local
taxpayer group, even the smallest municipalities unnecessarily spent
millions on school construction, much of it to meet a predicted increase
in population that never materialized.
The calculator enables the resident of any town to compare the cost of
constructing and staffing a new building (or addition) to the cost of
simply subsidizing the overflow number of students to attend private,
parochial or home schools. Says David Bohn, president of the group: "You
could extend the subsidy to children already in such schools and still
save hundreds of millions long term."
Now taxpayers find themselves caught between falling real estate values
and ever increasing property taxes. And for what? The National
Assessment of Educational Progress puts eighth-grade proficiency figures
in the state at 37% for reading, 35% for math, 33% for science and 53%
for writing.
Connecticut law does not allow a statewide referendum to curb school
spending with a property-tax cap, as do ballot measures this year in
Nevada and Florida. Nevertheless, most towns in Connecticut fold the
school budget into the municipal budget, which can be voted on at a town
meeting, or by annual referendum, or by a petition-inspired referendum,
depending on the local rules. So citizens do have the ability to rein in
public spending if they choose to act -- and that is what they are
beginning to do.
This spring Avon, Farmington, Stonington and Ridgefield -- all affluent
communities -- rejected the politicians' original spending plans. On
June 17, the voters of suburban West Hartford, where public schools have
often ranked among the best in the state, rejected the town budget by a
lopsided 7,037 to 3,711. As of the end of June, a record 85 of
Connecticut's 169 municipalities had or were planning budget referenda;
and the median approved spending increase was 3.8%, lower than the 5%
last year and 5.3% in 2006.
Limiting government at the state level is more difficult, thanks in part
to a 1964 Supreme Court decision (Butterworth v. Dempsey) requiring that
representation in state legislatures be based solely on population. By
depriving rural regions of their traditional influence, urban Democrats
and public sector unions have more influence. From 1970 until 2005,
total state spending skyrocketed to $4,322 per capita from $863 in real
dollars -- in spite of near-zero job growth and a decline in net
population for every year except one in the decade between 1997 and
2006.
But at the local level, there are nearly as many Republican chief
executives as Democrats, and both parties outside the big cities are
relatively conservative on fiscal issues. This is leading to more than
just budget defeats.
Mike Guarco, chairman of the finance board in Granby, has formed the
Connecticut Municipal Consortium for Fiscal Responsibility, a bipartisan
alliance of elected officials representing 117 of the state's towns. The
group fights against binding arbitration, "prevailing wage" laws for
public building projects, and burdensome state mandates (such as a
requirement that all student suspensions be supervised in-house). These
are the three largest cost drivers of K-12 education.
There are other ideas in the air. In Chester, First Selectman (Mayor)
Tom Marsh proposes to pay students not to attend public school. He wants
to give $1,500 a year to families who send a child to vocational school,
$3,000 to families who homeschool, and to put $5,000 in a college
scholarship fund for anyone transferring to a private high school.
Mr. Marsh also wants to give a full two-year community college
scholarship worth $5,000 to students who graduate from public high
school in three years. "If we can persuade families to consider options
outside the system," he says, "we have the potential to save
significantly long term."
With this gathering grass-roots rebellion -- and with the archbishop in
Hartford advocating a tax credit for corporations that help poor
students attend private schools -- the public education establishment is
increasingly nervous. Last December, the Connecticut Association of
Boards of Education and the Connecticut Association of Public school
Superintendents wrote an unprecedented joint letter to every school
board and superintendent in the state criticizing Armand Fusco, the
retired school superintendent who advises the citizen cost-cutting
committee in Enfield.
Mr. Fusco has not backed away. He notes that even before the Enfield
citizens' commission offered its recommendations, the very existence of
the committee spurred the town council to reject a requested 3% increase
in the school budget, and to forestall efforts to raise the property tax
rate. For next year, Enfield has already adopted zero-based budgeting.
The time is coming, says Mr. Fusco, for all Connecticut schools to
"distinguish between needs and wants."
Mr. Andrews is executive director of the Yankee Institute in
Hartford, Conn.
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