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CLT UPDATE
Friday, May 5, 2017
Surprise, surprise . . . another
"fiscal crisis out of nowhere"
|
If
Proposition 2½ overrides were a country, they would be North
Korea.
If Proposition 2½ overrides were a disease,
they would be the Ebola virus.
If Proposition 2½ overrides were a ballot
referendum question, they would be, well, Proposition 2½
overrides.
That’s how popular Proposition 2½ overrides
have been around here in recent years.
Within the last month or so, the towns of
Rehoboth and Norton have both seen different kinds of
exceptions to the state’s property tax-limiting law go down
to defeat at local elections....
What voters seem to be saying — and which
town officials seem to remain deaf to — is that they don’t
trust their elected officials with more money, even for
basic and essential expenses.
After having their economic security shaken
by years of recession, an anemic recovery and political
turmoil, they are leery of any new demand on their limited
resources from government.
And not just from far off, professional
politicians on Beacon Hill or in Washington.
That skepticism extends even to their
neighbors and friends, operating what is supposed to be the
most responsive level of government.
So how do local leaders regain the trust of
taxpayers and voters? ...
[Photo] - Opposed to Norton Proposition 2½
override
CLT member Ralph Stefanelli, left, and Dean Zwicker, right.
The Sun Chronicle
Sunday, April 30, 2017
A distaste for overrides
By Craig Borges
House "budget week" - once as sure a rite of
spring as Patriots Day and the marathon - became something
altogether different this year, a slow evolution from a
colorful and messy, sugar- and caffeine-fueled test of wills
and endurance into something far more antiseptic.
And yet, the House achieved a notable
milestone this week that had nothing to do with its
pace-setting debate.
For the first time in the state's history, a
branch of the Legislature approved an annual budget north of
$40 billion in spending, and with near unanimity to boot.
The fact that it took just two days to accomplish such a
feat only makes it more remarkable....
From the time the budget was introduced on
Monday to the moment when the applause for Speaker Robert
DeLeo and Dempsey subsided and the House called it quits on
Tuesday evening, representatives spent a total of 1,283
minutes in session.
That averages out to a little more than a
minute spent on each of the 1,210 amendments filed, with tax
dollars being appropriated at a rate of $31.5 million per
minute. And all of that was done while taking just 30
recorded roll call votes, some of which were simply to take
attendance....
Liberal Somerville Democrat Rep. Denise
Provost sparked a min-debate over freezing the income tax
rate at 5.1 percent, rather than allow it to possibly tick
down in January, but withdrew her amendment rather than spot
her colleagues by forcing a recorded vote that might become
election fodder in 2018.
On the other side of the aisle, Rep. James
Lyons rolled out a multi-pronged plan to reform MassHealth,
a program whose size and growth is making many other
investments impossible. Lyons couldn't even get his GOP
compatriots to help him force a roll call on a measure that
included a control board for MassHealth.
"We really need to understand what we're
voting on, and we don't," Lyons lamented, a issue bemoaned
from time to time by members of both parties....
Just north of $75 million was added to the
bottom line during deliberations, most of it in the form of
local earmarks. Those funding carveouts can be a reward to
the rank-and-file for fealty, if they can make it past the
governor's veto pen and somehow find their way into a
constrained capital budget.
There were of course a few flareups, and its
little surprise that GOP Rep. Shaunna O'Connell was at the
center of one. O'Connell proposed to require public housing
applicants to submit Social Security numbers to prevent
those in the country illegally from being given preference
over citizens and those with legal status.
Before it was defeated, Rep. Marjorie Decker
of Cambridge called it a "mean-spirited" proposal that would
"pile on the vulnerability and the hardship many immigrants
already face." And that's what passed as an immigration
debate this year.
In the end, only Lyons would vote no on the
budget....
Now it's the Senate's turn.
Senate President Stanley Rosenberg kept
tight-lipped when asked this week if he had any plans to
reach for additional revenue through a new tax or two.
State House News Service
Friday, April 28, 2017
Recap and analysis of the week in state government
By Matt Murphy
It’s the witching hour for the $40 billion
state budget as Beacon Hill anxiously awaits how much income
tax revenue rolls in through the end of the all-important
month of April.
Last spring, lawmakers were spooked by a
bigger-than-expected shortfall that grew to about $484
million in the fiscal year that ended in June. This year was
supposed to be different. Fearing tax revenue could be
volatile again, Beacon Hill preemptively built in more
modest growth projections, even revising them down two times
to 3.1 percent.
That number could still be off the mark.
Revenue has grown year-over-year only 1.7 percent through
March, or $220 million below the benchmark. If trends don’t
improve, the state will once again face harsh spending
cuts....
This recovery has been strange. The stock
market has reached new highs, the real estate market is hot,
yet people feel left behind.
As it relates to the state budget,
Massachusetts tax revenue growth has fared better than in
previous recoveries, but personal income growth has lagged,
according to the Fed....
I’ve got to think lawmakers are as
frustrated as I am about the constant battle to balance the
budget. At some point, we’ve got to acknowledge we’ve hit a
new normal where the revenues won’t be as robust and
spending cuts will take us only so far. Living in
Massachusetts has to be more than just keeping our heads
above water.
Even more worrisome, if this is what it is
like in good times, what will the bad times feel like?
The Boston Globe
Friday, April 28, 2017
It’s the witching hour for state’s $40b
budget
By Shirley Leung
The growing issue of spending outpacing
revenues and the lack of desire among the governor and House
leaders to generate tax revenue to pay for it could also
force legislators to reconsider the foundation used to build
next year's budget just a week after the House approved a
$40.4 billion spending plan.
Revenue Commissioner Michael Heffernan
published the latest revenue report on Wednesday showing
that collections of $2.86 billion in April - the largest
single revenue month of the year - fell $241 million short
of projections. Tax revenues were down $83 million, or 2.8
percent compared to April 2016....
The latest data marks a continuation of a
long-running pattern in which Beacon Hill officials have
overestimated the amount of tax revenue they can expect from
taxpayers....
The administration and legislative leaders
were hoping to see a rebound in April....
Instead, the revenue gap for the year more
than doubled to $462 million, from $220 million through
March....
The Senate for months has been prodding the
House and Baker to considering higher taxes to boost state
revenues and pay for programs and services that senators say
have long been underfunded. To date, the House has largely
sided with Baker and kept significant tax increases off the
negotiating table.
Gov. Baker has on multiple occasions
suggested that while residents are working and paying taxes,
their wages are not growing fast enough to generate
substantial growth in the tax base. Rosenberg has floated
the idea of revisiting the idea of a sales tax on services
to better capture what is happening in the economy, but that
idea is deeply unpopular in the business community....
[Finance Secretary Kristen] Lepore called
the April numbers "part of a long recovery period of modest
revenue growth that the entire nation is experiencing." Her
office also produced a list of cost-saving measures the
governor proposed in his fiscal 2018 budget proposal that
have yet to gain traction in the Legislature, including
changes to the way welfare benefits are calculated and caps
on sick leave payouts for retirees....
Just last week, the House passed a $40.4
billion budget plan for fiscal 2018, and the Senate is
planning to debate its budget proposal later this month.
"The Committee is reviewing the recently
released tax collection numbers for April. We will be
assessing their impact and the need for any additional
legislative action," said Chris Bennett, a spokesman for the
House Ways and Means Committee.
State House News Service
Wednesday, May 3, 2017
April tax slide forcing state to revisit budgets
House Democrats remain flummoxed by tax
collections that have failed to meet their growth
expectations, but tapping into the state's reserves to close
a $462 million revenue gap would likely not be an option on
the table, according to one of Speaker Robert DeLeo's top
lieutenants.
“It's hard for us to really figure out
what's happening because our unemployment rate is low, the
economy is very well in Massachusetts, the jobs are there.
We're sitting back saying what is stymieing our benchmark
figures?” Rep. Paul Donato, second assistant House majority
leader, told the News Service....
Donato said House Ways and Means Chairman
Brian Dempsey is “delving into the problems,” and will try
to assess what is happening in the economy that has caused
legislators and economists to badly overestimate revenue
growth....
[House Speaker Robert] DeLeo said tapping
into the state's rainy day fund to balance the budget is
"off the table" because reducing the state's reserves could
alter its bond rating and make borrowing more expensive. The
state began fiscal 2017 with a balance of roughly $1.29
billion in the rainy day fund, according to financial
disclosures.
State House News Service
Thursday, May 4, 2017
Reps bewildered by sluggish tax growth
Each year, the budget is built on an
informed guess in January of how much money will come into
state coffers from July through June of the next year. The
Legislature and governor take testimony from expert
economists and agree on a revenue number. But the reality
doesn’t always match the estimate.
In the fiscal year that ended in June of
2016, state tax revenue grew by just under 2 percent. Still,
policy makers were optimistic and predicted that state tax
revenue would grow by 4.3 percent this fiscal year.
After some bad fiscal news, they downgraded
that number to 3.8 percent. And then, in late 2016, Baker
made emergency cuts that presumed a growth rate of 3.1
percent. But through April, year-to-date tax revenues are up
just 1.1 percent....
Administration officials emphasized that
after the Legislature passed the current budget, Baker, a
Republican, vetoed about $265 million in spending.
Democratic lawmakers restored $231 million of those vetoes.
And then, in December 2016, Baker used his unilateral
budget-cutting power to slice $95 million in executive
branch spending.
Cuts early in the fiscal year are easier to
make because they are spread out over many months. But
making cuts this close to the end of the fiscal year, on
June 30, is much harder.
Eileen McAnneny, president of the
business-backed Massachusetts Taxpayers Foundation, said
closing the gap “will be incredibly difficult to do with so
little time left in the fiscal year” and given that policy
makers have put tapping the state’s emergency, or rainy day,
fund effectively off limits.
She said the implications for the next
fiscal year are equally problematic. That budget assumes an
almost 4 percent growth in revenue, “an assumption that now
appears increasingly unrealistic and makes it likely that
lawmakers will once again need to strip hundreds of millions
of dollars from the budget during negotiations.”
The Boston Globe
Thursday, May 4, 2017
State falls short on tax revenue. Way short. Again.
With more bad news about lagging tax revenue
this week, folks on Beacon Hill are re-learning some painful
lessons about putting together the annual budget. Or at
least, we hope they are.
Lesson one: When economists convene in that
annual revenue hearing at the State House — the one the
House, Senate and governor use to decide how much tax
revenue to anticipate in the following year — it’s always
best to be conservative.
Sure, developing the “consensus revenue”
figure is a complicated process. But historically there has
been pressure to go with the rosiest revenue scenario. That
just doesn’t amount to responsible budgeting.
Lesson two is equally important: When the
governor vetoes nearly $300 million in spending out of the
final budget — citing credible data to suggest the higher
spending figure would leave the taxpayers dangerously
exposed — restoring all of that spending in a
lightning-round of override votes is also
irresponsible....
Baker, DeLeo and Senate President Stan
Rosenberg now need to agree on a responsible course of
action that restores balance to this year’s budget — while
revisiting the assumptions being used to build next year’s
budget. With just two months remaining in the fiscal year
this task is made even more difficult. What’s clear now is
that crossing fingers and hoping revenues outperform
projections is never a sound strategy.
A Boston Herald editorial
Friday, May 5, 2017
More budget blues
Two Salem lawmakers have proposed a new
diaper subsidy for low-income people who have trouble paying
for the infant essentials. Why not take it a step further
and have the state start a diaper delivery service? Then
Beacon Hill could micromanage government support for poor
families and create new jobs!
No, you won’t be surprised to hear that
Massachusetts would be the first state in the nation to
provide taxpayer-funded diapers to families, if legislation
filed by Sen. Joan Lovely and Rep. Paul Tucker, both Salem
Democrats, becomes law and a mandated study supports it.
Their effort was first reported by the Salem News.
A Boston Herald editorial
Tuesday, May 2, 2017
State on diaper duty?
With dozens of boxes of donated diapers
stacked behind them, lawmakers and advocates on Thursday
touted legislation that would end a welfare cap they said
can keep families from meeting basic needs.
The bill (S 34, H 85) would do away with
what its supporters call the "family cap" or "cap on kids"
— a limit on cash welfare
benefits for children conceived while the mother is on
welfare. When a child is conceived while a family is
receiving welfare, the family does not receive the $100
supplement usually provided for an additional family member.
State House News Service
Thursday, May 4, 2017
Diapers displayed to pitch lifting of welfare "cap on kids"
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Chip Ford's CLT
Commentary
Omigod, another "fiscal crisis" has descended upon the state
seemingly out of nowhere — the
demand for "more revenue!" cannot be far behind.
The $40.4 billion House budget for the upcoming fiscal year
beginning July 1 is now in the hands of the state Senate,
where spending will only be increased. You can depend
on a thundering hue and cry to soon resound through the
halls of the State House for more "revenue"
— taxes, to the rest of
us — to "fill the gap."This
scam is getting old — and so
darned predictable.
In my commentary for the CLT Update of March 14, 2017 ("Stop
the false 'expectations' game") I wrote:
Here
we go again into another spring with the usual state
budget dance. Can we at least stop playing this
false "expectations" game?
 During
this ritual a coterie of self-anointed economic
experts gather annually at the State House to
participate in the game of "Revenue Projections."
Each year they place their best bets on which among
them can guess closest on how much of our money the
state will rake in over the coming fiscal year.
Beacon Hill pols then base their next budget on
these divinations. More often than not they are
wrong, but this annual rite of passage always
provides cover for more state spending, usually an
additional billion taxpayer dollars every year added
to the previous year's budget.
The
adjustments come later, in revisions (cuts in the
budget) and more commonly, supplemental budgets when
more needs to be spent....
All
this starts with those gossamer "revenue estimates,"
the fig leaf for adding a billion dollars to state
budget spending every year. Often those "revenue
estimates" don't materialize. Inevitably, spending
that exceeds revenue ends with tax hikes....
State revenue year over year increases — with or
without tax hikes. The problem we have is that
spending increases faster than revenues, based on
false "expectations." When the pols run out of money
they come at us for more. Nothing has happened to
change my mind since I announced my own
"expectation" above, and my expectation is
grounded in painful experience.
The Legislature simply can't keep adding at least a
billion dollars more to the state budget every year and
not expect to run out of our money sooner or later.
I'm not the only one who realizes this. If a majority
of legislators didn't want to hike taxes they
wouldn't spend a billion dollars more every year.
If they didn't want spending to exceed revenues
they wouldn't depend on unrealistic revenue "expectations,"
and they wouldn't spend every cent of whatever the
"expectations."
This endless cycle has gone on for decades, always with
the same result: Higher taxes. Nobody is
so stupid as to not see by now the inevitable results of
such profligate overspending, so it must be intentional.
I noted in my above commentary:
A decade ago — a
mere ten
years ago — the
state budget was $25.7 billion. On Beacon Hill they
are now talking of a budget for the next fiscal year
that for the first time will exceed $40 billion — a
spending increase of over $14 billion in just ten
years.
In our April 23 memo
to members of the House of Representatives ("No
more tax hikes: Just keep your promise") we pointed out:
Since the $12
billion FY1990 budget annual state spending has more
than tripled to a proposed $40.3 billion. Adjusted
for inflation, that’s still a spending
increase of $17 billion.
While the state's
alleged best-and-brightest are "wrestling" with this latest
self-imposed "fiscal crisis," others among them are blindly
racing forward to further burden taxpayers with even more
foolish spending.
Sen. Joan Lovely and Rep. Paul Tucker, both Salem Democrats,
want to
provide diaper subsidies for low-income people
— a first in the nation.
Not to be outdone, Rep Marjorie Decker (D-Cambridge)
wants to reward mothers on welfare with additional cash
assistance to encourage having more taxpayer-supported kids.
Honestly, you cannot make this stuff up. It's
beyond incredible
—
far beyond. And it only gets nuttier by the day.
Is it any wonder why
Massachusetts taxpayers must work twelve days more this
year than the national average to finally pay off the tax
burden imposed upon us?
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Chip Ford
Executive Director |
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The Sun Chronicle
Sunday, April 30, 2017
A distaste for overrides
By Craig Borges
If Proposition 2½ overrides were a country, they
would be North Korea.
If Proposition 2½ overrides were a disease, they
would be the Ebola virus.
If Proposition 2½ overrides were a ballot
referendum question, they would be, well,
Proposition 2½ overrides.
That’s how popular Proposition 2½ overrides have
been around here in recent years.
Within the last month or so, the towns of
Rehoboth and Norton have both seen different
kinds of exceptions to the state’s property
tax-limiting law go down to defeat at local
elections.
These were not, by the way, frivolous requests
for taxpayers to fund extravagant expenses. No
one was asking for extra money for gold-plated
bumpers on fire engines or fine Corinthian
leather seats for the selectmen’s office.
In Rehoboth, a debt exclusion request — which
would not have raised taxes permanently — would
have gone toward the construction of new town
offices.
Rehoboth’s existing town hall is the former
headquarters building of a long-since
deactivated former Army missile base. It is
literally military surplus. And, officials say,
is actually toxic for town employees.
In Norton, an override, which would have allowed
the town to raise taxes more than the 2.5
percent allowed by law, would have raised $2.2
million to be split evenly between the schools
and local government, providing $1.1 million for
full-day kindergarten without tuition, school
busing, sports and pay for several jobs and
another $1.1 million to reopen the Chartley fire
station, fund police, the library and other
departments.
Nevertheless, and in spite of active campaigns
by supporters, voters soundly rejected both
requests, resulting in hard feelings on both
sides. (Rehoboth selectmen briefly considered
taking another shot at a debt exclusion in the
immediate future, but quickly dropped the idea.)
Now comes the town of North Attleboro where
officials and citizen activists have been
floating the idea of a general override — a
little over two years after a similar attempt
was shot down in the polls. (That in itself, by
the way, was the second unsuccessful override
attempt in two years’ time.)
What voters seem to be saying — and which town
officials seem to remain deaf to — is that they
don’t trust their elected officials with more
money, even for basic and essential expenses.
After having their economic security shaken by
years of recession, an anemic recovery and
political turmoil, they are leery of any new
demand on their limited resources from
government.
And not just from far off, professional
politicians on Beacon Hill or in Washington.
That skepticism extends even to their neighbors
and friends, operating what is supposed to be
the most responsive level of government.
So how do local leaders regain the trust of
taxpayers and voters?
It seems to us that general overrides and big
ticket debt exclusion items are doomed to
failure, at least in the short term. Rather,
officials should consider less breathtaking —
and more relatable — requests for specific,
targeted needs. A sum for the schools. Or for
the library.
This kind of “small ball” may not be as much of
a game changer as swinging for the fences every
time on an override.
But there’s less chance of striking out.
And, to switch metaphors again, may be more
popular than Ebola.
Craig Borges is the managing editor of The
Sun Chronicle.
State House News Service
Friday, April 28, 2017
Weekly Roundup - Act II in Two
By Matt Murphy
House "budget week" - once as sure a rite of
spring as Patriots Day and the marathon - became
something altogether different this year, a slow
evolution from a colorful and messy, sugar- and
caffeine-fueled test of wills and endurance into
something far more antiseptic.
And yet, the House achieved a notable milestone
this week that had nothing to do with its
pace-setting debate.
For the first time in the state's history, a
branch of the Legislature approved an annual
budget north of $40 billion in spending, and
with near unanimity to boot. The fact that it
took just two days to accomplish such a feat
only makes it more remarkable.
Rep. Brian Dempsey, the Rooseveltian wizard of
Room 348 who oversees the behind-the-scenes
blending that allowed the House to dispatch
1,210 amendments in nine bulk amendments and a
scattering of individual votes, shepherded his
seventh budget to completion.
Seldom seen or heard, the Ways and Means
chairman's style has become one that emphasizes
ruthless efficiency.
Budgets, politicians like to say, are value
statements and a series of choices about where
to allocate finite resources to achieve a goal,
or many. But they're also about basic math -
making sure the revenue coming in matches the
spending going out, and using whatever tricks of
the trade are necessary to make that math work.
From the time the budget was introduced on
Monday to the moment when the applause for
Speaker Robert DeLeo and Dempsey subsided and
the House called it quits on Tuesday evening,
representatives spent a total of 1,283 minutes
in session.
That averages out to a little more than a minute
spent on each of the 1,210 amendments filed,
with tax dollars being appropriated at a rate of
$31.5 million per minute. And all of that was
done while taking just 30 recorded roll call
votes, some of which were simply to take
attendance.
Before the clock struck midnight Tuesday, the
aroma of celebratory cigars wafted through the
smoke-free halls of the State House marking the
conclusion to another year's budget week - which
is slowly losing its right to that designation.
There are lots of reasons why House leaders ran
out of reasons to try to extend debate for
optics' sake into Wednesday, when the process
has ended the past five years. As Dempsey has
honed his amendment-crunching process, members
of both parties have also seemed to lose their
lust for the fight.
Liberal Somerville Democrat Rep. Denise Provost
sparked a min-debate over freezing the income
tax rate at 5.1 percent, rather than allow it to
possibly tick down in January, but withdrew her
amendment rather than spot her colleagues by
forcing a recorded vote that might become
election fodder in 2018.
On the other side of the aisle, Rep. James Lyons
rolled out a multi-pronged plan to reform
MassHealth, a program whose size and growth is
making many other investments impossible. Lyons
couldn't even get his GOP compatriots to help
him force a roll call on a measure that included
a control board for MassHealth.
"We really need to understand what we're voting
on, and we don't," Lyons lamented, a issue
bemoaned from time to time by members of both
parties.
There's also the issue of money. After
increasing local aid and paying for MassHealth,
pensions and debt, there was precious little
discretionary money to spend. Just north of $75
million was added to the bottom line during
deliberations, most of it in the form of local
earmarks. Those funding carveouts can be a
reward to the rank-and-file for fealty, if they
can make it past the governor's veto pen and
somehow find their way into a constrained
capital budget.
There were of course a few flareups, and its
little surprise that GOP Rep. Shaunna O'Connell
was at the center of one. O'Connell proposed to
require public housing applicants to submit
Social Security numbers to prevent those in the
country illegally from being given preference
over citizens and those with legal status.
Before it was defeated, Rep. Marjorie Decker of
Cambridge called it a "mean-spirited" proposal
that would "pile on the vulnerability and the
hardship many immigrants already face." And
that's what passed as an immigration debate this
year.
In the end, only Lyons would vote no on the
budget.
The House went second in the annual budget
dance, and used lower caseload projections at
MassHealth than those used by Baker to put
together his budget. On paper at least, that
freed up some money to spend on local aid, early
educator salaries and more.
Now it's the Senate's turn.
Senate President Stanley Rosenberg kept
tight-lipped when asked this week if he had any
plans to reach for additional revenue through a
new tax or two. He also said his Ways and Means
Chairwoman Karen Spilka and Sen. Jamie Welch
were still working through options to deal with
MassHealth that may not be just a rubber stamp
of the governor's employer assessment.
So while the House waits to see how sticky
negotiations will become between their
colleagues down the hall, the big question for
DeLeo and his team becomes what's next?
Rep. Byron Rushing, a senior member of the
speaker's leadership team, knows what he'd like
to see happen, but he's also not in a huge rush.
Rushing led a press conference with other
members of the Black and Latino Caucus, the
Progressive Caucus, and others to implore his
colleagues to get on board with the idea of
comprehensive criminal justice reform.
The governor's bill, which is focused on
reducing recidivism and has been termed by DeLeo
a "great start," is fine and well, the
legislators said, but the odds are they're only
going to get one bite at this apple in the next
few years.
And if that's the political reality, the time is
ripe to tackle more than just the re-entry
system, but also sentencing reform, bail reform,
inmate mental health and substance abuse
treatment and more.
Rushing, ever the optimist, said it's too early
for him to be concerned by signals from DeLeo
that the speaker may be eyeing quick and clean
passage of Baker's bill, and taking more time
with the other subjects. He's playing the long
game: "If this happens on the last day of the
session, it's just like it happening on the
first day of the session. Don't worry about the
process. Worry about the end."
Rosenberg can be counted among those who
recognize an appetite, at least in the Senate,
to go further than the governor has proposed,
and he said he will be talking with DeLeo soon
about a process to get something done.
STORY OF THE WEEK: House budget "week" as Beacon
Hill knew it is gone.
The Boston Globe
Friday, April 28, 2017
It’s the witching hour for state’s $40b budget
By Shirley Leung
It’s the witching hour for the $40 billion state
budget as Beacon Hill anxiously awaits how much
income tax revenue rolls in through the end of
the all-important month of April.
Last spring, lawmakers were spooked by a
bigger-than-expected shortfall that grew to
about $484 million in the fiscal year that ended
in June. This year was supposed to be different.
Fearing tax revenue could be volatile again,
Beacon Hill preemptively built in more modest
growth projections, even revising them down two
times to 3.1 percent.
That number could still be off the mark. Revenue
has grown year-over-year only 1.7 percent
through March, or $220 million below the
benchmark. If trends don’t improve, the state
will once again face harsh spending cuts.
What gives? We are ranked as the best state in
the country by US News & World Report. Our
unemployment rate is 3.6 percent! This shouldn’t
be happening to us.
It’s a question that has been bouncing around
Beacon Hill so much that the Baker
administration asked the Boston Federal Reserve
Bank’s president, Eric Rosengren, to put his
crack team of economists on it.
What they concluded in a six-page analysis is
that while the economy is recovering and people
may be back to work, they are not working as
many hours or making as much money. With a state
budget that is close to 60 percent dependent on
individual tax income, that matters a lot.
“In sum, while employment growth has been fairly
robust, wage and hours growth have been on the
soft side of the historical averages,” according
to the Fed report. “The relative weakness in
labor income has meant that the growth in income
taxes has been relatively muted in the present
recovery.”
In other words, our incredibly low unemployment
rate has given us a false sense of security.
“What the data is saying, ‘Is the economy as
robust as everyone thinks it is?’ The reality
is, it’s not,” said Eileen McAnneny, president
of the Massachusetts Taxpayers Foundation, a
fiscal watchdog group.
This recovery has been strange. The stock market
has reached new highs, the real estate market is
hot, yet people feel left behind.
As it relates to the state budget, Massachusetts
tax revenue growth has fared better than in
previous recoveries, but personal income growth
has lagged, according to the Fed.
What the data also indicate is that a
disproportionate amount of employment growth has
happened in low-wage sectors, and not among the
high-income jobs this region is known for.
This is not a made-in-Massachusetts problem.
Other states are also grappling with
lower-than-expected tax revenues.
It’s particularly vexing here because we’ve
enjoyed a low unemployment rate — under 5
percent for close to two years — yet wages have
not risen significantly.
The low unemployment rate “makes a statement
about how easy it is to get a job, but not what
Mike Dukakis would say is a good job at good
wages,” said Alan Clayton-Matthews, an economics
professor at Northeastern University, referring
to the former governor’s famous presidential
campaign slogan.
Clayton-Matthews wonders if structural changes
in the labor market are underway, the kind
economists have been warning about.
A wave of baby boomer retirements is hitting
companies in Massachusetts, which already has an
older workforce than the rest of the nation.
What could be happening is that as baby boomers
leave, no one is being promoted to that job with
the same paycheck.
In other cases, employers simply can’t find
skilled workers to replace them. All of which
translates into lower income tax collections for
the state.
The Fed report didn’t even get into sales tax
collections — which represent a quarter of the
state budget. That pot is also growing slowly,
as more goods and services shift online.
April revenue numbers will be out next week, and
if the numbers are solid, Beacon Hill will let
out a sigh of relief. If not, there will be
another round of hand-wringing about what to cut
next. Already, the state has been trying to
unload maintenance costs for the Rose Fitzgerald
Kennedy Greenway onto the City of Boston.
On the other side of the ledger, spending has
been growing at a faster pace than revenue,
driven by ballooning costs in the state Medicaid
program, MassHealth. The fiscally conservative
Baker administration has been reining in
spending and has even proposed levying hefty new
fees on employers to help pay for MassHealth
bills.
I’ve got to think lawmakers are as frustrated as
I am about the constant battle to balance the
budget. At some point, we’ve got to acknowledge
we’ve hit a new normal where the revenues won’t
be as robust and spending cuts will take us only
so far. Living in Massachusetts has to be more
than just keeping our heads above water.
Even more worrisome, if this is what it is like
in good times, what will the bad times feel
like?
State House News Service
Wednesday, May 3, 2017
April tax slide forcing state to revisit budgets
By Matt Murphy
State budget problems worsened considerably
Wednesday after cratering April tax collections
widened the revenue gap in this year's budget
and called into question assumptions for next
year's spending, setting up a major test of Gov.
Charlie Baker's ability to manage through the
near-term dilemma without unilateral spending
cuts or tapping into reserves.
The growing issue of spending outpacing revenues
and the lack of desire among the governor and
House leaders to generate tax revenue to pay for
it could also force legislators to reconsider
the foundation used to build next year's budget
just a week after the House approved a $40.4
billion spending plan.
Revenue Commissioner Michael Heffernan published
the latest revenue report on Wednesday showing
that collections of $2.86 billion in April - the
largest single revenue month of the year - fell
$241 million short of projections. Tax revenues
were down $83 million, or 2.8 percent compared
to April 2016.
While the fiscal 2017 budget assumes revenue
growth of 3.1 percent for the year, so far
through April the state has experienced just 1.1
percent growth in taxes. Next year's budget is
being built on an assumption of 3.9 percent
growth.
"These results make it unlikely that the
Commonwealth will meet its FY17 revenue target
with less than 20 percent of expected
collections remaining in the final two months in
the fiscal year, and we will also need to take a
look at FY18 projections," Heffernan said in a
statement.
The latest data marks a continuation of a
long-running pattern in which Beacon Hill
officials have overestimated the amount of tax
revenue they can expect from taxpayers.
The administration and legislative leaders were
hoping to see a rebound in April. "I keep on
awaiting those months where I'm hoping that
we're going to see some uptick and it's been
quite a while since we've seen that, so I'm
waiting anxiously," DeLeo told the News Service
before the numbers were released.
Instead, the revenue gap for the year more than
doubled to $462 million, from $220 million
through March.
Tax returns with payments to the state in April
performed the weakest, falling $279 million
under benchmark, but the administration said at
least 70,000 paper returns and possibly more had
yet to be opened and would be processed within
the coming week.
A spokeswoman for the Department of Revenue said
the processing of paper returns has been slower
this year due to new systems, but could not
immediately put a number on the amount of
unopened returns that could include payments to
the state.
Despite the relative strength of the economy and
low unemployment, the rebound from the last
recession at the turn of the decade has not
translated into strong revenue growth under a
tax code that has not undergone major changes in
recent years.
In April, sales and corporate taxes as well as
estimated payments and payments with returns all
came in lower than expected.
Overly optimistic revenue estimates have forced
Gov. Baker and the Democrat-controlled
Legislature to frequently revisit their spending
plans and budgeting assumptions, and the
problems are compounded by a surge in spending
and enrollment in the state's largest program,
the MassHealth health insurance program.
The Senate for months has been prodding the
House and Baker to considering higher taxes to
boost state revenues and pay for programs and
services that senators say have long been
underfunded. To date, the House has largely
sided with Baker and kept significant tax
increases off the negotiating table.
Gov. Baker has on multiple occasions suggested
that while residents are working and paying
taxes, their wages are not growing fast enough
to generate substantial growth in the tax base.
Rosenberg has floated the idea of revisiting the
idea of a sales tax on services to better
capture what is happening in the economy, but
that idea is deeply unpopular in the business
community.
Two weeks ago, Baker said his administration was
drafting "reasonable and appropriate" plans to
deal with the possibility that the state would
finish the year with lower-than-expected
revenue, but had no intention of tapping the
state's "rainy day" fund.
Hinting that May and June receipts won't close
the gap, Heffernan on Wednesday all but
confirmed that tax collections will fall short
for the fiscal year, and the administration
reemphasized that it's exploring ways to respond
to the shortfall.
"We are carefully reviewing all options to
maintain the Commonwealth's fiscal stability,"
Administration and Finance Secretary Kristen
Lepore said in a statement.
Lepore called the April numbers "part of a long
recovery period of modest revenue growth that
the entire nation is experiencing." Her office
also produced a list of cost-saving measures the
governor proposed in his fiscal 2018 budget
proposal that have yet to gain traction in the
Legislature, including changes to the way
welfare benefits are calculated and caps on sick
leave payouts for retirees.
The focus on next year's budget and Heffernan's
warning that revenue projections for fiscal 2018
will need to be reviewed created a sense of deja
vu on Beacon Hill. Last year around this time,
Baker and legislative leaders began to realize
revenues were not holding up and they scrambled
for solutions after marking down their estimates
of available funds and quickly rearranging their
carefully crafted spending plans.
Just last week, the House passed a $40.4 billion
budget plan for fiscal 2018, and the Senate is
planning to debate its budget proposal later
this month.
"The Committee is reviewing the recently
released tax collection numbers for April. We
will be assessing their impact and the need for
any additional legislative action," said Chris
Bennett, a spokesman for the House Ways and
Means Committee.
Gov. Baker visited House Speaker Robert DeLeo's
office Wednesday morning for about 25 minutes,
exiting at around noon more than six hours
before his team released the tax revenue news
after the building had emptied for the evening.
It's unclear if the revenue report came up
during the meeting.
"Stuff. I can't go talk to my neighbor?" Baker
said, before offering a couple of reporters M&Ms
he had taken from the speaker's office.
Spokesmen for both the governor and the speaker
did not respond to follow-up inquiries.
Income tax collections of $2.07 billion were
11.7 percent shy of the benchmark in April,
while sales tax collections of $493 million
missed the state's target by $14 million, or 2.8
percent.
Corporate and business tax collections exceeded
projections by $49 million in a small month for
that type of tax payment with only $120 million
collected in total, and withholding payments of
$962 million beat the benchmark by 3.3 percent.
Department of Revenue News Release
State House News Service
Thursday, May 4, 2017
Reps bewildered by sluggish tax growth
By Michael P. Norton and Matt Murphy
House Democrats remain flummoxed by tax
collections that have failed to meet their
growth expectations, but tapping into the
state's reserves to close a $462 million revenue
gap would likely not be an option on the table,
according to one of Speaker Robert DeLeo's top
lieutenants.
“It's hard for us to really figure out what's
happening because our unemployment rate is low,
the economy is very well in Massachusetts, the
jobs are there. We're sitting back saying what
is stymieing our benchmark figures?” Rep. Paul
Donato, second assistant House majority leader,
told the News Service.
The Department of Revenue on Wednesday evening
released the state's April revenue report that
showed a widening gap between anticipated tax
revenues and actual collections. Instead of
improving the budget picture as many officials
had hoped, April collections missed benchmarks
by $241 million, and growth for the year now
sits at just 1.1 percent.
“The fervent hope was by April, May and June
we'd at least be even. That's not going to
happen,” Donato said, echoing Revenue
Commissioner Michael Heffernan, who warned that
the slow growth would not only impact fiscal
2017, but should cause budget writers to
reconsider fiscal 2018 estimates.
Donato said House Ways and Means Chairman Brian
Dempsey is “delving into the problems,” and will
try to assess what is happening in the economy
that has caused legislators and economists to
badly overestimate revenue growth.
With just two months left in the fiscal year,
the options for Gov. Baker to pull back on
spending are limited, but both Baker and now
Donato have said that tapping the “rainy day”
fund is an undesirable solution.
“The hesitancy to use the rainy day funds has
always been because it has a major impact on our
bond rating and we're slowly trying to bring it
back to where it was, and I think that's the
goal of the speaker so I'm not sure that's one
of the options,” Donato said.
DeLeo said tapping into the state's rainy day
fund to balance the budget is "off the table"
because reducing the state's reserves could
alter its bond rating and make borrowing more
expensive. The state began fiscal 2017 with a
balance of roughly $1.29 billion in the rainy
day fund, according to financial disclosures.
"When you take a look at what we've heard
continuously from the bond rating agencies is
that if we were to do something like that you
could always risk changing your bond rating, so
I think for the sake of our fiscal stability of
Massachusetts, I would be opposed to that," the
speaker said after an event in South Boston on
Thursday.
The Boston Globe
Thursday, May 4, 2017
State falls short on tax revenue. Way short.
Again.
By Joshua Miller
Massachusetts tax revenue came in far below
expectations in April, destabilizing the already
precariously balanced $39 billion state budget
and raising the specter of additional cuts to
government services.
So far this fiscal year, the state has brought
in $462 million, or 2.2 percent, less tax money
than expected, according to figures released
Wednesday by the state Department of Revenue. In
other words, authorized spending is on track to
exceed actual revenue by almost half a billion
dollars.
And since the fiscal year runs from July through
June, Governor Charlie Baker could have a big
hole to fill in a short period of time to ensure
a balanced budget.
Baker budget officials said they will work with
state agencies to figure out a way to bridge the
gap. In past budget crunches, the administration
has moved money from different accounts and held
off on purchases, contracts, and bills due until
the next fiscal year.
But such a large gap could also portend
unilateral budget cuts, particularly if May and
June revenues also fail to meet expectations.
The poor revenue numbers are also likely to
ripple into the next fiscal year, constraining
spending.
The Department of Revenue reported that tax
revenue for April was 7.8 percent below what was
expected and is less than what the state brought
last April.
Revenue Commissioner Michael J. Heffernan said
in a statement that it is “unlikely” the state
will meet its yearly revenue target. April is
usually the biggest month for tax collections.
The state budget includes funding for services
ranging from health care for the poor and
disabled to pensions to law enforcement,
education, environmental protection, and aid for
cities and towns.
Each year, the budget is built on an informed
guess in January of how much money will come
into state coffers from July through June of the
next year. The Legislature and governor take
testimony from expert economists and agree on a
revenue number. But the reality doesn’t always
match the estimate.
In the fiscal year that ended in June of 2016,
state tax revenue grew by just under 2 percent.
Still, policy makers were optimistic and
predicted that state tax revenue would grow by
4.3 percent this fiscal year.
After some bad fiscal news, they downgraded that
number to 3.8 percent. And then, in late 2016,
Baker made emergency cuts that presumed a growth
rate of 3.1 percent. But through April,
year-to-date tax revenues are up just 1.1
percent.
Baker’s budget chief, Kristen Lepore, said in a
statement that “April’s revenues are part of a
long recovery period of modest revenue growth
that the entire nation is experiencing, and
while we are seeing positive revenue growth for
the year (1.1 percent), it is not the level of
growth that economists projected or upon which
we based our budget assumptions.”
Administration officials emphasized that after
the Legislature passed the current budget,
Baker, a Republican, vetoed about $265 million
in spending. Democratic lawmakers restored $231
million of those vetoes. And then, in December
2016, Baker used his unilateral budget-cutting
power to slice $95 million in executive branch
spending.
Cuts early in the fiscal year are easier to make
because they are spread out over many months.
But making cuts this close to the end of the
fiscal year, on June 30, is much harder.
Eileen McAnneny, president of the
business-backed Massachusetts Taxpayers
Foundation, said closing the gap “will be
incredibly difficult to do with so little time
left in the fiscal year” and given that policy
makers have put tapping the state’s emergency,
or rainy day, fund effectively off limits.
She said the implications for the next fiscal
year are equally problematic. That budget
assumes an almost 4 percent growth in revenue,
“an assumption that now appears increasingly
unrealistic and makes it likely that lawmakers
will once again need to strip hundreds of
millions of dollars from the budget during
negotiations.”
While many indicators show an economy humming
along — a buoyant stock market, cranes on the
Boston horizon, millions of people at work — the
revenue figures come on the heels of other
yellow flags. A report released last week found
the Massachusetts economy contracted “modestly”
in the first quarter of this year. And the state
has seen an uptick in the unemployment rate in
recent months.
Within the tax revenue data, signals for the
broader economy were mixed. Withholding taxes —
taken out of people’s paychecks — were on par
with expectations and, fiscal-year-to-date,
about 4 percent higher than this point in 2016,
a good sign.
But weaker-than-expected sales tax revenue could
be a bad sign.
Still, there may be other factors at play. Some
Massachusetts residents could be putting off
transactions that will incur a tax until next
year, when the Republican-controlled Congress
may have lowered rates.
“The April revenue numbers are troubling,” said
Noah Berger, who has followed the state budget
for years and is president of the
liberal-leaning Massachusetts Budget and Policy
Center.
“It is unclear, however, if they indicate a
trend or a temporary problem,” he continued.
“The income tax withholding numbers, which
reflect current income, are pretty good. Revenue
from 2016 tax returns, which reflects income
last year, is down significantly.”
There are other factors at play, too.
In an e-mail to state employees on April 25,
Baker outlined his take on “modest” revenue
growth.
“Despite the rise in employment, personal income
growth overall has been modest over the course
of the past few years. This is probably due to a
number of factors, but two seem pretty clear —
many people are not working as many hours as
they were before the recession of 2009-2010, and
wages overall have shown modest growth,” the
governor wrote.
In addition, Baker continued, the price of
taxable goods have remained, more or less, flat,
leading to little growth in sales tax revenue.
The Boston Herald
Friday, May 5, 2017
A Boston Herald editorial
More budget blues
With more bad news about lagging tax revenue
this week, folks on Beacon Hill are re-learning
some painful lessons about putting together the
annual budget. Or at least, we hope they
are.
Lesson one: When economists convene in that
annual revenue hearing at the State House — the
one the House, Senate and governor use to decide
how much tax revenue to anticipate in the
following year — it’s always best to be
conservative.
Sure, developing the “consensus revenue” figure
is a complicated process. But historically there
has been pressure to go with the rosiest revenue
scenario. That just doesn’t amount to
responsible budgeting.
Lesson two is equally important: When the
governor vetoes nearly $300 million in spending
out of the final budget — citing credible data
to suggest the higher spending figure would
leave the taxpayers dangerously exposed —
restoring all of that spending in a
lightning-round of override votes is also
irresponsible.
Last July, Gov. Charlie Baker vetoed $265
million in spending approved by the Legislature,
concerned that certain accounts were underfunded
and that revenue wouldn’t support the authorized
spending. Lawmakers voted to restore almost
every penny of it, including hundreds of porky
earmarks. The willingness of the House, in
particular, to go along with those overrides was
a blemish on Speaker Robert DeLeo’s otherwise
fiscally responsible record.
Even when revenue showed signs of slowing down
earlier this year and Baker made a round of
mid-year cuts, House and Senate leaders called
the action “premature” and talked about
reversing them. As it turns out, even that
action wasn’t enough.
Baker, DeLeo and Senate President Stan Rosenberg
now need to agree on a responsible course of
action that restores balance to this year’s
budget — while revisiting the assumptions being
used to build next year’s budget. With just two
months remaining in the fiscal year this task is
made even more difficult. What’s clear now is
that crossing fingers and hoping revenues
outperform projections is never a sound
strategy.
The Boston Herald
Tuesday, May 2, 2017
A Boston Herald editorial
State on diaper duty?
Two Salem lawmakers have proposed a new diaper
subsidy for low-income people who have trouble
paying for the infant essentials. Why not take
it a step further and have the state start a
diaper delivery service? Then Beacon Hill could
micromanage government support for poor families
and create new jobs!
No, you won’t be surprised to hear that
Massachusetts would be the first state in the
nation to provide taxpayer-funded diapers to
families, if legislation filed by Sen. Joan
Lovely and Rep. Paul Tucker, both Salem
Democrats, becomes law and a mandated study
supports it. Their effort was first reported by
the Salem News.
Lovely and Tucker raise a reasonable concern —
that many low-income families struggle to pay
for diapers, which are expensive and aren’t
eligible for purchase with food stamps or the
federal Women, Infants and Children nutrition
program.
Of course diapers aren’t food, so they shouldn’t
be covered under those programs. Families who
qualify for traditional welfare support can use
the money to purchase diapers, of course, but
the sponsors say too many families don’t
qualify.
Fair enough, but then why limit the subsidy to
diapers? There are other “public health”
essentials that are expensive. Should there be a
separate Children’s Tylenol benefit?
Lovely told the Salem News she’s worried that
families are washing and re-using diapers, which
can cause urinary tract infections and rashes.
“There are severe negative public health
consequences to not having a sufficient supply
of diapers,” she said.
So taxpayers now have a duty to prevent diaper
rash. Got it.
The criticism here isn’t meant to diminish the
challenge faced by poor families who struggle to
pay for expensive essentials. It is merely a
reminder that Beacon Hill Democrats have never
encountered a life challenge that doesn’t
immediately call for a taxpayer-funded solution.
If this proposal were to go through don’t be
surprised if the next bill mandates precisely
which diapers families can buy — and how they
may dispose of them.
State House News Service
Thursday, May 4, 2017
Diapers displayed to pitch lifting of welfare
"cap on kids"
By Katie Lannan
With dozens of boxes of donated diapers stacked
behind them, lawmakers and advocates on Thursday
touted legislation that would end a welfare cap
they said can keep families from meeting basic
needs.
The bill (S 34, H 85) would do away with what
its supporters call the "family cap" or "cap on
kids" — a limit on
cash welfare benefits for children conceived
while the mother is on welfare. When a child is
conceived while a family is receiving welfare,
the family does not receive the $100 supplement
usually provided for an additional family
member.
Rep. Marjorie Decker, the bill's main House
sponsor, said families can struggle to buy
basics like food and diapers without that
additional $100.
"We know that parents don't choose which child
to feed," she said. "We know they don't choose
which child to put diapers on. We also know that
there are many children, really babies, who are
in a lot of pain because those diaper rashes
burn, and they hurt, and let me just tell you,
diaper cream is not cheap, either."
More than 100 packages of diapers were collected
through the event and will be donated to
Horizons for Homeless Children, according to
organizers. |
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