CLT UPDATE
Wednesday, September 24, 2008
Yes on Question 1 -- or what?
Members from the Committee on Small
Government and the Massachusetts Taxpayers Association [sic-Foundation]
squared off Thursday in Lexington over Ballot Question 1, the repeal of
the state’s income tax.
Kamel Jain, spokesperson for the Committee on Small Government, and
Michael Widmer, the president of the Massachusetts Taxpayers
Association, traded barbs and statistics, and answered questions about
Ballot Question 1 from the audience at the Depot Building in Lexington
Center.
The event was the first session of the 14th season of Rep. Jay Kaufman’s
(D-Lexington) “Open House,” a public cable forum on government policy.
Kaufman served as moderator for the discussion, but stated early on that
he was vehemently against Ballot Question 1.
Lexington Minuteman
Friday, September 19, 2008
Tax groups battle in Lexington over Ballot Question 1
Although the statutory budget is $28.2 billion, that figure
is only part of the overall budget. There are also nonbudgeted spending, capital
spending, and expendable trust spending. Taken together, these four items add up
to $47.3 billion.
In addition, Massachusetts cities and towns are spending more than $27 billion
this year for local services. That totals $74.3 billion in Massachusetts
government spending. Subtract $5 billion in state funds given to cities and
towns (to avoid double counting) and subtract another $12.5 billion if the state
income tax is abolished, and there is still $56.8 billion for city, town, and
state governments - more than enough to fund every essential government
service....
Ending the income tax would cut state spending by just 27 percent, leaving
billions of dollars in state government waste still to cut - without even
touching the waste in local government spending.
The Boston Globe
Sunday, September 21, 2008
Repeal eliminates waste, lines our pockets
By Carla Howell
As I travel across the state speaking in opposition to
Question 1, the refrain is the same. There is a palpable sense of frustration
with political leaders, and unfortunately Question 1 - the proposed income tax
repeal on the November ballot - has become the misguided means for expressing
that frustration....
An upcoming analysis by the Massachusetts Taxpayers Foundation shows that if one
were to preserve the 2008 level of spending for Medicaid, health reform, state
aid to municipalities, and debt service, then one would have to eliminate every
other program of state government - from prisons, courts, and State Police to
funding for higher education and the elaborate network of services for the
elderly, disabled, and others in need.
Absurd, of course - which is the point....
"But I only want to send a message," some voters might say.
Find some other way. It's no exaggeration to say that your future, and the
Commonwealth's future, are at stake.
The Boston Globe
Sunday, September 21, 2008
Find another way to send a message
By Michael J. Widmer
Investors and public finance officials in the $2.66 trillion
municipal bond market have their eyes trained on a 30-square-mile former Navy
town in northern California.
There, the city of Vallejo is fighting to tear up its labor contracts with
police and firefighters through bankruptcy court. A ruling allowing the pacts to
be dissolved may give other towns precedent to run to court and overturn
collective bargaining agreements they can no longer afford....
Cities and towns across the U.S. are suffering as declining home sales and the
slowest growing economy since 2001 erode tax revenue while labor and benefit
costs rise. In California, the average amount that cities, counties and schools
pay for pension benefits, as a percentage of their payroll, has more than
doubled to 26 percent from 12.4 percent in 2001, according to the Public
Employee Post Employment Benefits Commission.
"A lot of eyes are on us now," said Vallejo councilwoman Stephanie Gomes. "We
may be ahead of the pack but there's definitely a pack behind us that has gotten
themselves into unsustainable labor contracts and expenditures." ...
"Other cities are now saying they could just do a Vallejo," said Dean Gloster, a
lawyer for the city's unions.
A recent McDonnell survey of 350 local governments found the average amount of
money needed to make future pension payments more than doubled over the past
five years. Those cities spent $3.39 million in 2007 to meet their pension
obligations, up from $1.23 million in 2003.
"The legacy costs of more prosperous days are coming home to roost," Ciccarone
said. "Like the auto and steel industries, the boom times are over and you have
a harder time paying those costs." ...
A filing that allowed Vallejo to rewrite its labor agreements and cut costs
might weaken the bargaining power of workers' elsewhere by showing the
bankruptcy option has "teeth," said Fabian at Municipal Market Advisors....
Salary costs for the 75 most-populous U.S. cities rose 47 percent between 1995
and 2005, U.S. Census Bureau data shows. Detroit's annual public employee
payroll surged to $143 million from $50 million during that decade. Los Angeles
saw its payroll increase to $304 million from $191 million.
A survey of government finance officers by the National League of Cities in
Washington found that 64 percent of cities are less able to meet their fiscal
needs now than in 2007.
Bloomberg News
September 19, 2008
Muni Market 'Vallejo' Puts Investors, Police on Edge
Chip Ford's CLT
Commentary
The battle is waging over Question One on the November
4th ballot. Both sides are trying their hardest to sway the
undecided: Carla Howell of the
Committee
for Small Government, spokeswoman for the "Yes" side, and; Michael
Widmer of the so-called
Massachusetts Taxpayers Foundation and apparently designated
spokesman for the "No" side of the ballot question, are having at it.
Carla is representing taxpayers; Widmer is, as usual, representing
business as usual on Beacon Hill.
The massive army of public employee unions and
private sector unions feeding off government contracts have unlimited
financial resources, and brigades of trough-feeding members who'll go
anywhere, do anything, to keep their gravy train running on its tracks
at taxpayer expense. They are organizing cells in every community
across the Commonwealth. The Big Government establishment and, I
expect, most if not all the media, are or will be behind the unions'
cause, promoting the tax-borrow-and-spend status quo.
This won't change the outcome. Oh, it may
affect the election results -- but it won't change the outcome.
The real outcome is the spiraling cost of government
at the local and state level. We now know the real cost of
government at the federal level -- what it is and what it'll be very
soon, after its bail-out of Big Business and fatter cats than even
belong to Widmer's MTF cabal.
As Bloomberg -- a business publication -- notes, the
cost of government is skyrocketing. This is primarily due to
public employee unions. This explains why so many millions from
those unions are pouring into the "Coalition for Our Communities" -- the
"No" on Question 1 ballot committee. This growth of government is
unsustainable. It's a
ticking time
bomb sitting in our collective living room. That's a given.
The question is, how much more will taxpayers pay before either they go
bankrupt (with no government bail-out), or before they stand up and
shout "Enough!"
A "Yes" vote on Question 1 is that shout, and not as
some symbolic "message," as Widmer put it. It's now or likely
never.
I've been following the Vallejo, California
bankruptcy case for a while. A federal judge
recently ruled that, if the city and its public employee unions
can't reach a mutually agreeable settlement, then the city will be
declared bankrupt and all contracts will become null and void --
including those made made with its public employee unions. If that
can happen in Vallejo, why couldn't it happen to Massachusetts and its
351 municipalities -- if that's what it actually comes to, if Widmer's
latest predictions finally for once prove to be more accurate than in
the past? End of problem: Taxpayer liberation at last!
Widmer was finally correct about one thing:
"It's no exaggeration to say that your future, and the Commonwealth's
future, are at stake."
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Chip Ford |
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Lexington Minuteman
GateHouse News Service
Friday, September 19, 2008
Tax groups battle in Lexington over Ballot Question 1
By Ian B. Murphy
Lexington — Members from the Committee on Small Government and the
Massachusetts Taxpayers [sic-Foundation] Association squared off
Thursday in Lexington over Ballot Question 1, the repeal of the state’s
income tax.
Kamel Jain, spokesperson for the Committee on Small Government, and
Michael Widmer, the president of the Massachusetts Taxpayers
Association, traded barbs and statistics, and answered questions about
Ballot Question 1 from the audience at the Depot Building in Lexington
Center.
The event was the first session of the 14th season of Rep. Jay Kaufman’s
(D-Lexington) “Open House,” a public cable forum on government policy.
Kaufman served as moderator for the discussion, but stated early on that
he was vehemently against Ballot Question 1.
The question, which will appear on all state ballots in the Nov. 4
election, seeks to repeal the state’s income tax in two stages. If
passed, the new law proposed by the Committee on Small Government will
remove $12.5 billion from the state’s coffers and presumably put it back
into taxpayers’ pockets. That will force legislators and the governor to
either severely cut programs, or find new revenue sources, or most
likely, do both.
From the outset, Jain and Widmer could not find common ground even in
the statistics for state spending. Jain claimed that the state was
projected to spend $47 billion this year; Widmer argued it was closer to
$32 billion. Jain’s numbers suggested that the $12.5 billion cut would
represent roughly 27 percent of the state’s budget.
Widmer said the cuts represent closer to 65 percent of the state’s
discretionary budget, because nearly $12 billion of the state’s $32
billion is mandatory funding of federal programs like Medicaid.
“When you take away the legal and constitutional obligations … all the
rest of state government you’re cutting by 65 percent,” Widmer said.
“This will have enormous consequences for the citizens of the state, and
the commonwealth itself.”
Jain said those consequences would be to reduce the size of state and
local government — precisely the reason why the ballot initiative was
created. He maintained that the legislature could work out the numbers
in order to make government function, despite the cuts. He said the
state had spending issues, with towns spending combined $20 billion on
top of the state’s spending.
“We want to reduce spending across the board,” Jain said. “State
spending and municipal spending is out of control. Some [state]
functions are more important to people than other functions, and that
[decision] needs to be made by the citizens.”
When pressed by the audience, Jain could not single out any specific
areas that should be cut down, noting that the state’s budget had 5,000
individual line items and was difficult to decipher.
Widmer said $12.5 billion in cuts would be very difficult to make.
“If one were to lay off every single state employee — professors, prison
guards, MBTA workers — you would save $5 billion,” Widmer said. “So we’d
have to find somewhere else to get the remainder. I think there is a
responsibility for the proponents of this to show exactly where these
cuts are going to come from.”
Widmer said that if the income tax were repealed, it would force a hike
in the state’s property tax, which would affect low- and middle-income
families.
“Fundamentally, this is a tax cut for the wealthy,” Widmer said. “It may
not be the intention of the proponents, but it will be the inevitable
outcome.”
When asked by the audience how Widmer would reduce the size of the
state’s budget, he said cuts needed to come from state employees’ health
benefit and pension packages.
“At one time, [those benefit packages] were competitive with the private
packages,” Widmer said. “That absolutely needs to be addressed.”
Kaufman agreed with Widmer’s assessment and pointed out that any cut in
benefits would have to be passed by the employee unions, a difficult
proposition at best.
Kaufman also said money could be saved by regionalizing services instead
of having separate entities in the state’s 351 towns.
“I don’t think we can afford to have 351 police departments, school
departments, and a whole host of other services,” Kaufman said. “We may
need to reinvent some form … of regional services.”
Members of the audience were concerned that unions’ strength would make
pension and benefit cuts impossible.
“We have the fourth-highest cost of doing business in this country,”
said Garrett Quinn Jr., a resident of Cambridge. “How are you going to
break the [union’s] stranglehold on the taxpayers’ dollar and our
wallets?”
Widmer said that with the current economic climate, smaller government
was inevitable anyway.
“The combination of the economic situation, the voters’ reluctance to
pass operating overrides, and the divide that is growing between the
benefits in the private and public sector will lead to smaller
government,” Widmer said. “We’re going to see fewer and fewer overrides,
and tighter and tighter budgets [at the local level]. We’re about to
fall off the cliff on revenues.”
The Boston Globe
Sunday, September 21, 2008
Repeal eliminates waste, lines our pockets
By Carla Howell
Why are an estimated 1,350,000 Massachusetts voters planning to vote
"yes" on Question 1 to end the state income tax? Consider these numbers.
If voters end the state income tax, 3.4 million workers would each get
back an average of $3,700 annually, and roll back annual state
government spending to $34.8 billion. A no vote would require those
workers to keep paying an average of $3,700 each year, and maintain
state government spending at $47.3 billion.
Although the statutory budget is $28.2 billion, that figure is only part
of the overall budget. There are also nonbudgeted spending, capital
spending, and expendable trust spending. Taken together, these four
items add up to $47.3 billion.
In addition, Massachusetts cities and towns are spending more than $27
billion this year for local services. That totals $74.3 billion in
Massachusetts government spending. Subtract $5 billion in state funds
given to cities and towns (to avoid double counting) and subtract
another $12.5 billion if the state income tax is abolished, and there is
still $56.8 billion for city, town, and state governments - more than
enough to fund every essential government service.
Government waste is one reason so many voters already plan to approve
Question 1. Last April, Fabrizio Surveys asked voters: "How many cents
out of every dollar you pay in state taxes would you say is wasted by
the state government?" Their average response was "41 cents."
Ending the income tax would cut state spending by just 27 percent,
leaving billions of dollars in state government waste still to cut -
without even touching the waste in local government spending.
According to three recent polls, 45 percent of Massachusetts voters plan
to vote yes on Question 1, approximately the same number that polls show
will vote against the question. With voter turnout estimated to be 3
million, that comes to 1,350,000 votes to end the state income tax.
The numbers show we can easily afford to end the income tax, but it's
the benefits to the people of Massachusetts that make a yes vote a real
winner.
In addition to giving each worker an annual average of $3,700, it will
take $12.5 billion out of the hands of Beacon Hill politicians - and put
it back into the hands of the men and women who earned it. Every year.
In productive, private hands this $12.5 billion a year will create
hundreds of thousands of jobs in Massachusetts.
A yes vote will force the Legislature to streamline and cut the waste
out of the budget.
It will force the Legislature to get rid of the failed, flawed
government programs that don't work - and often make things worse.
It will make the Legislature accountable to Massachusetts workers and
taxpayers - instead of to government employees, lobbyists, and special
interests who profit from high government spending.
With less government and no income tax, Massachusetts will become a
magnet to private, productive businesses and individuals. This will
bring the state more good jobs and more good workers.
Massachusetts families will be able to pay off mounting bills and debts.
By making the Massachusetts total tax burden more affordable, more young
people will be able to stay in Massachusetts near their family, friends,
and home.
These are the reasons why you should vote "yes" on Question 1 to end the
income tax. It's not just what's best for you. It's what's best for 3.4
million Massachusetts workers and taxpayers - and their families.
Carla Howell is chairwoman of the Committee For Small Government,
sponsor of ballot Question 1.
The Boston Globe
Sunday, September 21, 2008
Find another way to send a message
By Michael J. Widmer
"It's time to send them a message. They just don't get it."
As I travel across the state speaking in opposition to Question 1, the
refrain is the same. There is a palpable sense of frustration with
political leaders, and unfortunately Question 1 - the proposed income
tax repeal on the November ballot - has become the misguided means for
expressing that frustration.
And given the economic squeeze facing individuals and families -
increasing costs of food, energy, and other essentials, declining
property values and retirement investments, and concerns that their jobs
may be eliminated - it is not surprising that they would be tempted to
vote themselves a tax cut. Though it is the wealthy who would get a tax
cut and the lower-income people who would likely end up paying more.
Massachusetts is already facing enormous fiscal and economic problems
that would increase manyfold if the income tax were repealed. There is
at least a $1.5 billion shortfall in the fiscal 2009 state budget, and
with a likely sharp decline in capital gains taxes the deficit could be
larger. Cities and towns are reeling from a combination of higher
property taxes and cuts in services. Roads, bridges, and transit systems
are deteriorating at an alarming rate.
The income tax produces $12.5 billion, or 40 percent, of the
approximately $30 billion state budget. What would be the result if it
were eliminated? To put it in perspective, if you were to lay off all
67,000 state employees - e.g. correctional officers, highway engineers,
college professors, judges, mental health counselors - you would save
only $5 billion.
An upcoming analysis by the Massachusetts Taxpayers Foundation shows
that if one were to preserve the 2008 level of spending for Medicaid,
health reform, state aid to municipalities, and debt service, then one
would have to eliminate every other program of state government - from
prisons, courts, and State Police to funding for higher education and
the elaborate network of services for the elderly, disabled, and others
in need.
Absurd, of course - which is the point.
The loss of the state's principal revenue source would create fiscal,
political, and legal chaos. The state's bond rating would plummet, and
what business that depends on predictability would make an investment
under such circumstances?
The ultimate irony is that the inevitably huge cuts in state aid to
cities and towns would lead to large increases in property taxes. So the
lower- and middle-income families who thought they were voting
themselves a tax cut would likely end up paying more in taxes, just out
of a different pocket. Meanwhile, the wealthier who pay a higher share
of income taxes would get a big tax break.
So how do the nine states without a personal income tax survive?
Several have a strategic asset, such as oil in Alaska, minerals in
Wyoming, gaming resorts in Nevada, or tourism in Florida, that raises
large amounts of money. Five of the states rely heavily on state and
local sales taxes - Florida, Nevada, South Dakota, Tennessee, and
Washington rank among the top 11 states in terms of their sales-tax
burden. New Hampshire ranks third in the nation in the burden of state
and local property taxes.
Yes, government needs to be reformed, but in the end there is a close
connection between the level of taxation and the services the citizens
receive.
"But I only want to send a message," some voters might say.
Find some other way. It's no exaggeration to say that your future, and
the Commonwealth's future, are at stake.
Michael J. Widmer is president of the Massachusetts Taxpayers
Foundation.
Bloomberg News
September 19, 2008
Muni Market 'Vallejo' Puts Investors, Police on Edge (Update1)
By Michael B. Marois and Adam L. Cataldo
Investors and public finance officials in the $2.66 trillion municipal
bond market have their eyes trained on a 30-square-mile former Navy town
in northern California.
There, the city of Vallejo is fighting to tear up its labor contracts
with police and firefighters through bankruptcy court. A ruling allowing
the pacts to be dissolved may give other towns precedent to run to court
and overturn collective bargaining agreements they can no longer afford.
"It's a landmark situation for the municipal credit market because the
city has some of the same characteristics that are so common to many
other cities across the country," said Richard Ciccarone, a managing
director and chief research officer for Oak Brook, Illinois-based
McDonnell Investment Management. The firm oversees about $5.4 billion of
municipal bonds.
A Vallejo win might benefit bondholders by putting the city in a better
fiscal position to pay investors holding its $200 million of debt, said
Matt Fabian, managing director at Concord, Massachusetts-based research
firm Municipal Market Advisors.
"So long as bondholders are paid, that will add comfort to the market,"
Fabian said. "They are first in line. The city realizes they need access
to the capital markets."
Lots of 'Eyes'
Cities and towns across the U.S. are suffering as declining home sales
and the slowest growing economy since 2001 erode tax revenue while labor
and benefit costs rise. In California, the average amount that cities,
counties and schools pay for pension benefits, as a percentage of their
payroll, has more than doubled to 26 percent from 12.4 percent in 2001,
according to the Public Employee Post Employment Benefits Commission.
"A lot of eyes are on us now," said Vallejo councilwoman Stephanie
Gomes. "We may be ahead of the pack but there's definitely a pack behind
us that has gotten themselves into unsustainable labor contracts and
expenditures."
The town of 117,000 on the northern edge of San Francisco Bay may win.
Bankruptcy Judge Michael McManus rejected a plea on Sept. 5 by labor
unions to dismiss the case, saying it's broke and deserves protection
from creditors. Last week, he gave Vallejo and its unions until December
to work out a deal before he rules on whether to void the labor
agreements.
'Do a Vallejo'
"Other cities are now saying they could just do a Vallejo," said Dean
Gloster, a lawyer for the city's unions.
A recent McDonnell survey of 350 local governments found the average
amount of money needed to make future pension payments more than doubled
over the past five years. Those cities spent $3.39 million in 2007 to
meet their pension obligations, up from $1.23 million in 2003.
"The legacy costs of more prosperous days are coming home to roost,"
Ciccarone said. "Like the auto and steel industries, the boom times are
over and you have a harder time paying those costs."
Cities and towns rarely go bankrupt. Since 1937 there have been 543
municipal filings, two-thirds of which were small tax districts
established to sell bonds for projects, according to James Spiotto, an
attorney and municipal bankruptcy specialist at Chapman and Cutler LLP
in Chicago.
The remainder was mainly caused by unique circumstances. Orange County,
California, was felled in 1991 by bad bets with leveraged investments.
Desert Hot Springs, a California town of 20,000 near Palm Springs, filed
for bankruptcy protection in 2001 after it was hit by a legal verdict it
couldn't afford.
The stigma of heading to debtors' court may prevent a municipality from
borrowing money for years to come and erode confidence among investors,
Spiotto said. Municipal bonds are down an average of 0.01 percent this
year, according to Merrill Lynch & Co. index data.
'Third Rail'
"Chapter 9 is the third rail of municipal finance," said Spiotto,
referring to the part of the bankruptcy code dealing with
municipalities.
A filing that allowed Vallejo to rewrite its labor agreements and cut
costs might weaken the bargaining power of workers' elsewhere by showing
the bankruptcy option has "teeth," said Fabian at Municipal Market
Advisors.
Vallejo in May sought bankruptcy protection after incurring a $17
million budget deficit. City officials blame the shortfall on labor
agreements that date back more than 15 years, when the current employee
contracts were first signed.
Police and firefighting salaries, pensions and overtime consume more
than 70 percent of Vallejo's $89 million general fund budget, higher
than the 60 percent average throughout the state, according to the
League of California Cities.
Those expenses have been harder to meet as a housing slump crimped tax
receipts. Sales-tax revenue dropped 7 percent in the fiscal year ended
in June.
Rising Payrolls
"We're dealing with the same types of problems as Vallejo, just not to
the same magnitude," said Lee Feldman, city manager of Palm Bay,
Florida, a community of about 100,000 people 74 miles (120
kilometers) from Orlando.
Salary costs for the 75 most-populous U.S. cities rose 47 percent
between 1995 and 2005, U.S. Census Bureau data shows. Detroit's annual
public employee payroll surged to $143 million from $50 million during
that decade. Los Angeles saw its payroll increase to $304 million from
$191 million.
A survey of government finance officers by the National League of Cities
in Washington found that 64 percent of cities are less able to meet
their fiscal needs now than in 2007.
"For cities that are facing binding arbitration requirements and their
public safety costs are higher than they feel they can afford, the
Vallejo situation might signal a new strategy cities might use to push
for a renegotiation of those contracts," said Chris Hoene, the league's
director of policy and research.
'Nuclear Option'
Clovis, California, a farming community of 93,000 people in the state's
rural central valley, avoided the bankruptcy option. The city this month
reached an agreement with its public safety labor unions that includes
almost $750,000 in pay and benefit cuts for police and firefighters as a
way to help that city fill a $4 million budget gap. City workers were
asked to give up $1.4 million in salaries and benefits.
"What's going in Vallejo is like the nuclear option in negotiating with
city employees, and it is destructive to your community, its citizens
and the city's employees," said Clovis Mayor Bob Whalen. "It's a button
you would never want to push, and it's a button you don't have to push
if you have open and fair dialogue with your employees."
Danger to Unions
Vallejo is a danger because it will give politicians an excuse to blame
their own mistakes on public employees, said Jeff Zach, spokesman for
the International Association of Fire Fighters. The Washington-based
union represents 288,000 fire fighters and paramedics in the U.S. Giving
a judge the power to re-write a contract is a "huge concern" and may put
public safety at risk, Zach said.
Vallejo's firefighters say their pay is the result of forced overtime
because there aren't enough of them on the job.
"What does a bankruptcy judge know about how many fire fighters you need
to arrive on a scene and how much time it takes to attack a fire and
execute a rescue?" Zach said.
The Vallejo case is In re City of Vallejo, U.S. Bankruptcy Court,
Eastern District of California (Sacramento).
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:
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