CLT Update
Wednesday, July 18, 2001

CLT Memo to the Massachusetts House of Representatives
Keep the Promise yourselves

To:  Members of the Massachusetts House
        July 18, 2001
Re:  Keep the Promise yourselves

We are not saying that Speaker Finneran is deliberately breaking another promise to the taxpayers.

Perhaps back in 1986, when Rep. Richard Voke (D-Chelsea), his predecessor as chairman of the Ways & Means Committee, created the Stabilization ("rainy day") Fund and its connected Tax Reduction Fund, Rep. Finneran wasn't paying attention. Perhaps as chairman of another committee, he simply did that leadership thing and voted as he was told.

Nevertheless, taxpayers were promised that when the Stabilization Fund was full, the additional surplus would flow into the Tax Reduction Fund from which, when enough money had accumulated, it would result in a one-time increase in the personal exemption.

When the "rainy day fund" was full, this actually began to happen. So the Weld Administration, House and Senate colluded in denying taxpayers their promised tax break by changing the formula and raising the cap on the "rainy day fund" so it wouldn't happen again.

Whenever taxpayers cross the 20-yard line into the red zone, the majority on Beacon Hill keep pushing the goal line back to avoid a tax reduction touchdown.

Every time the cap is raised, surplus funds remain in the growing Stabilization Fund instead of overflowing into the Tax Reduction Fund; so the personal exemption doesn't get raised for even one year. Yet the federal government, under President Reagan, indexed its personal exemption to inflation. This would be a nice, "progressive" tax cut for Massachusetts and would, like any tax cut, address the Speaker's concerns about legislative overspending that will eventually trigger a fiscal crisis as it did in 1989.

If you won't do that, we hope you will at least keep the promise that some of the surplus (i.e., overpayment of taxpayers' money) will be returned to the taxpayers. By all means accept the Speaker's proposal to make the Stabilization Fund harder to raid with a two-thirds vote, but don't raise the cap and keep the working people's overpayment again.

[- End of Memo -]

The Boston Herald
Wednesday, July 18, 2001
A Boston Herald editorial
Rainy-day fund: Big enough already

House Speaker Tom Finneran says the trauma of having to borrow to cover 10 percent of the budget in the 1991 recession put him through a crucible. So that's the right size for the rainy-day fund, 10 percent of the budget, he claims -- an increase of one-third.

The speaker will have do better than that!

The fund has been enlarged twice since Finneran became speaker, and we don't recall him pressing for a 10 percent limit either time. This is simply another way to avoid giving taxpayers back money from the state's surpluses, not just this year but in the future.

On the other hand, the speaker's proposal to require a two-thirds vote of each house to use the fund is a good one.

The surplus for the fiscal year ended June 30 surprised everybody. It could be $550 million, about $100 million more than expected less than a month ago.

Sixty percent of whatever has not been used by Sept. 1 is supposed to go to the rainy-day fund. If that fills up the fund, the rest of that 60 percent is supposed to go to increase the personal exemption (now $4,400) on state income taxes. The rainy-day fund is less than $100 million from hitting its "completely full," target of $1.8 billion.

Our rainy-day fund is already one of the largest in the country. Raising its cap is a little like insuring your house against falling meteors.

When the surplus was expected to be $450 million, acting Gov. Jane Swift proposed $150 million in tax reductions for people at the bottom of the income scale, roughly the same amount for capital projects and the same amount again for catching up on deferred maintenance and helping regional transit authorities.

Giving back a large fraction of the surplus to the taxpayers one way or another ought to be the first priority. It's a good idea to tackle the maintenance backlog too. Instead of financing a hodge-podge of capital projects, the remainder of the surplus ought to be saved outside the regular rainy-day fund for possible use in the next year, when health care will be making heavy and hard-to-predict demands on the regular budget.

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