Thanks to a recent surge in tax revenues, Massachusetts is
suddenly awash in about $200 million in unexpected cash, a development that has caught Beacon Hill budget makers by
surprise and could set up a partisan debate over what to do with the money.
As the books for the fiscal year closed Friday, Governor
Paul Cellucci's fiscal aides calculated that, with strong tax collections in May and June, the state will have a $700 million
budget surplus.
Earlier this year, in an effort to find money to close the
Big Dig deficit, Cellucci and Democratic legislative leaders agreed to devote the entire surplus - then projected to be $500
million -- to reduce debt and allow the state to issue new bonds to pay for the massive
highway project.
The larger surplus will set up a tug of war between the
Republican Cellucci, who is calling for fiscal restraint, and the Democratic Legislature, which is seeking more money for
social programs, education, and capital projects.
"This goes to the heart of the fiscal and philosophical
differences," said Cellucci's administration and finance secretary, Steve Crosby.
But just as important, the figures have landed in the middle
of tense budget negotiations between House and Senate leaders, who are working overtime to complete a legislative
spending plan to present to Cellucci. The lawmakers are ironing out differences over low-cost
housing, a prescription drug plan for seniors, and capital spending.
"It can't go unnoticed," said Michael Widmer, president of
the Massachusetts Taxpayers Foundation, referring to the timing of the new surplus numbers.
"Whenever there is extra money, it builds spending pressures. The fact there is a
larger-than-expected surplus certainly could well have an impact on the ongoing budget
negotiations," he said.
The state has piled up large surpluses in recent years,
including $500 million last year. The higher-than-expected surplus this year, however, surprised some officials, because
it follows a cool-down in the stock market.
Although surpluses create a sense of wealth, they ratchet up
the political pressure on Beacon Hill. The situation this year is already tense, as leaders try to negotiate a budget document
for next year that is likely to total about $21.6 billion.
House Speaker Thomas M. Finneran wants a gradual rollback of
the state income tax to 5 percent, conditioned on a strong economy. Senate President Thomas F. Birmingham opposes
the rollback and would prefer to spend the windfall on programs such as the Senate plan for
senior drug benefits.
Widmer said lawmakers have shown restraint in recent years
by treating surplus cash as a "one-time event" and by not approving vast new programs that would set up "ongoing
spending obligations." They have paid for smaller capital projects, such
as the construction of libraries and municipal buildings, and used surpluses to add to the state's emergency or "rainy
day" fund.
This year, Widmer said, even more caution is advised.
Legislators face not just Cellucci's $1.1 billion tax-cut initiative, which is on the November ballot, but a ballot
question that would give Massachusetts Turnpike toll payers tax rebates that could cost the state $500
million annually.
Another question on the ballot calls for deductions for
charitable giving. If voters approve all three, the state could lose as much as $2 billion in potential annual revenues.
Still, Crosby contended that the surging revenues and the
surplus are strong arguments for the governor's initiative. He said 38 tax cuts have been enacted by former governor William
F. Weld, Cellucci, and the Democratic Legislature since 1991, resulting in robust economic
growth. Those cuts eliminated $2.7 billion in annual revenues from the tax base.
"It makes the case very strongly that the tax cuts have been
strong stimulus for the economic growth we are having," Crosby said.
Crosby argued that Cellucci is "orchestrating a delicate
balancing act of fiscal discipline" to avoid the sort of crises that developed when the state economy slumped in the late
1980s.
"His strategy is to strike the proper balance between
depressing the rate of the growth in core state spending, while meeting the demands of the key programs and avoid any fiscal
crises which threaten our long-term economic health," Crosby said.
The Telegram & Gazette
Worcester, Mass.
Monday, July 3, 2000
State's surplus surges $200M
Extra cash to fuel spending debates
By Richard Duckett
Telegram & Gazette Staff
Fiscal 2001 -- a state budget odyssey.
The newest plot twist is a $200 million added surplus for
lawmakers to ponder, thanks to a surge in tax payments announced yesterday.
That further fattens the $500 million surplus projected
earlier this year, which Gov. Cellucci and Democratic lawmakers agreed to use for debt reduction and new bonds to pay for the
Big Dig overruns.
Now a debate can be expected over use of the added $200
million.
"A surplus is always a great plus," state Rep. John P.
Fresolo, D-Worcester, said yesterday. "When they come to conference committee with certain figures, that allows us to
spend a little more money. Any surplus we have, you know we'll spend, because there are so many programs that need funding."
The extra surplus "should make it easier, not harder," to
deal with the budget, said state Rep. Harriette L. Chandler, D-Worcester.
But state Rep. John J. Binienda Sr., D-Worcester, cautioned,
"A surplus is excellent to have, but it's kind of like a misnomer, too," if the money goes to projects such as the Big
Dig.
The new fiscal year for Massachusetts began Saturday with no
state budget in place. Instead, legislators are opting for a 1/.256th solution -- approving two weeks' worth of money to
hold the state over until the real budget is approved.
But when will that be?
In 1999, Massachusetts was the last state in the nation to
pass a budget, as matters dragged on for more than four months past the July 1 beginning of the fiscal year.
Will we see the same sort of odyssey this year?
Perhaps not.
"Everything I've heard is that we will have a budget in
front of us in the month of July," said Fresolo.
"Nothing is set in stone," he added yesterday. "But that is
what we're hearing. Maybe in the next week or two."
As was the case last year, the House and Senate have been in
a standoff over the state budget. For example, House Speaker Thomas M. Finneran has said he wants a reduction of the state
income tax to 5 percent, conditioned on a strong economy. Senate President Thomas F. Birmingham opposes the
reduction, and has said he would prefer that budget surpluses go to programs such as the Senate's plan to
expand senior prescription drug benefits.
A conference committee made up of six lawmakers -- three
from the Senate and three from the House -- has been meeting at the Statehouse nearly every day to plan to spend more than $21
billion. The two chambers must reconcile their spending proposals in a version to be sent to Gov. Paul
Cellucci. Legislators will have a straight up-down vote on the budget, with no amendments.
But as he has in the past, Gov. Cellucci is expected to veto
large parts of the budget. It would be up to the Legislature then to override his vetoes.
Compounding the situation is the fact that the legislative
session formally concludes at the end of this month. And unlike last year, 2000 is an election year.
Last week, Gov. Paul Cellucci commented: "Here we are, July 1
is on Saturday, and it looks like we won't have a budget again. I just hope they'll do a little better than last year."
"I'm certainly hoping that we don't go into November like we
did last year (without a budget)," Mr. Binienda, said yesterday. "It's my hope the conference committee will come to
terms real, real quick."
Similarly, Ms. Chandler said, "I hope not," when asked if
there was any likelihood of the state operating for weeks without a full, formalized budged, as it did last year.
"I'm anxious to see it go through," she said. "The same
people working on budget are working on the managed care bill (managed care reform), and can't work on the managed care bill
until the budget is completed. If they stay out, it will cut away at anything we can pass this year."
Another issue that has divided leaders in the House and
Senate is special education. The House approved the federal standard of "free and appropriate public education" for special
education students, while the Senate voted to maintain the state's current "maximum feasible benefit" standard. Supporters
of the federal standard say the current state standard costs too much, at the expense of students not in special education.
Critics say the measure will reduce the care given to special education students.
Ms. Chandler, who is running for the Senate seat held by
state Sen. Robert A. Bernstein, D-Worcester, who is retiring, said she finds herself more sympathetic to the Senate position.
"Maximum feasible seems to make more sense," she said.
Generally speaking, she said, "I think there's some philosophical difference (between the House and
Senate) and that's where they got stuck last time. Clearly, I'm anxious to
see it put on the governor's desk, since we only have 28 more days."
Mr. Binienda said the Legislature, which will be in session
today, will soon have to start passing 1/12th budgets to pay the state's bills one month at a time.
Gov. Cellucci's administration and finance secretary, Steve
Crosby, said of the new surplus that the governor must perform a "delicate balancing act" of spending and restraint.
As legislators ponder these and other matters concerning the
budget, they will be looking at the calendar with an increasing sense of urgency, Mr. Binienda said.
"This is an election year," he said. "A lot of state reps
and state senators want to get out and pound the pavements because they want to get re-elected."
If budget deliberations tie up legislators in Boston, back
in their districts opponents can have a free run at meeting the local voters, he said.
Mr. Binienda, who is running unopposed for his seat, noted,
"Even though you're in Boston fighting to get your job done, the average person sees that Joe Small is out there
campaigning, and the state rep is not out there."
