CLT Update
Saturday, September 29, 2001

"Hands off the tax cuts"

Counting several mid-year spending bills, the state spent $22.35 billion in fiscal 2001. If the state can stick to the new $22.63 billion spending figure for fiscal 2002, a challenge that will sorely test a group of lawmakers accustomed to major spending growth, that would be a mere 1.8 percent increase in spending.

State House News Service
Sep. 28, 2001

In a meeting with Acting Governor Jane M. Swift and Senate President Thomas F. Birmingham Monday, Finneran suggested postponing a further reduction called for in the tax cut overwhelmingly approved by voters last year.

The Boston Globe
Sep. 26, 2001
[See last CLT Update]

September 26, 2001

For Immediate Release

Re: Reports of Finneran's plan to ignore Question 4, just overwhelmingly passed by the voters in November.

First Tom Finneran denied "the Promise" that the 1989 tax hike was temporary. He was proven wrong.

Then he fought the promised tax cut anyway. He lost.

Now he tries to use the terrorist attack on America as an excuse to keep the higher tax rate.

Tom Finneran -- no honor, no credibility, no shame.


The Boston Herald
Friday, September 28, 2001

Hands off the tax cuts
A Boston Herald editorial

In political circles the so-called progressives are beginning to mutter that Massachusetts' lagging revenues require suspension of scheduled reductions in the state's income tax rate. Not so fast, folks.

Rate reductions so far have had only a minor effect. The rate fell from 5.85 percent to 5.6 percent on Jan. 1. For the 12 months ended June 30, the state had a $579 million surplus. Since then, collections (of all taxes) through Sept. 17 have run $100 million less than projections. The Executive Office of Administration and Finance estimates that $40 million more would have flowed into the till had the old rate been in effect.

In other words, the greater part of the shortfall is due to the economic slowdown.

A slowdown, it must be added, that is rapidly turning into a recession. There is nothing like a recession for throwing the issue of comparative overall state tax burdens into sharp relief in boardrooms. The last thing our high-cost state ought to be doing is adding to tax burdens in a recession.

In addition, there's the little matter of good faith. The Legislature wouldn't admit that the tax rate increases of a decade previously were meant to be temporary, so a savvy governor mobilized the voters. They rolled back the rate themselves. Any change in that decision would be defensible only if this state were on the edge of bankruptcy.

The first resort must be spending restraint. The governor and legislative leaders already have announced lower targets for the current fiscal year, something we applauded in an editorial on Wednesday. Before anybody considers tax increases -- and a suspension of the scheduled reductions to 5.3 percent next year and 5 percent in 2003 definitely would count as an increase -- another dose of restraint should be administered.

House Speaker Tom Finneran has been quoted as saying that suspension of the cuts is "entirely premature," and that one big mistake of the 1988-1992 fiscal crisis was the attempt to raise taxes before expenditures were cut. We couldn't agree more.

And then there's that $579 million. Added to the $1.7 billion in the rainy-day fund, that gives the state a reserve of about $2.3 billion. Much of that would have to be used before tax increases could be justified. With wise policies in Washington, the state may not have to face such a decision.

State House News Service
Friday, September 28, 2001

Crosby: Tax receipts continue to slide,
reserves will likely be tapped

By Michael P. Norton

STATE HOUSE, BOSTON, SEPT. 28, 2001 ... For the third straight month, state tax collections continued to plummet in September, making it "highly likely" that state government will need to dip into its substantial fiscal reserves, a top aide to Acting Gov. Jane Swift said Friday afternoon.

State tax receipts in September were down 12.8 percent, or $223 million from last September. For the first quarter of the fiscal year, actual receipts are down $293 million, or 7.4 percent. Administration and Finance Secretary Stephen Crosby said the numbers only reflect some of the economic slowdown that occurred in the wake of September 11 terrorist attacks on the Pentagon and World Trade Center towers.

For the month, income tax collections were off 14 percent, sales and use tax receipts were down 12.1 percent and corporate tax collections slumped by 34 percent. All other tax receipts were up 10.6 percent.

Crosby said the sharp economic downturn requires new controls on spending growth but probably won't require cuts in state programs and services because the Commonwealth has $4.5 billion stockpiled in various reserve funds. "Nobody on the outside will feel any of this," said Crosby. "That may change."

The state budget, now three months late, will likely emerge from conference committee with a bottom line that is $240 million below the $22.9 billion spending plans approved in early summer by the House and Senate. There have been no signals that House and Senate leaders are on the verge of a breakthrough.

Counting several mid-year spending bills, the state spent $22.35 billion in fiscal 2001. If the state can stick to the new $22.63 billion spending figure for fiscal 2002, a challenge that will sorely test a group of lawmakers accustomed to major spending growth, that would be a mere 1.8 percent increase in spending.

And Crosby has proposed a preliminary 3 percent spending increase, to $23.3 billion, in fiscal 2003. For state agencies other than those involved with health care, education and security, a budget like that means no growth. "Let's be honest," Crosby said. "If you level fund somebody, you cut them."

In recent years, lawmakers have cut taxes, boosted spending by as much as 6 percent a year, and frequently ended fiscal years with giant surpluses, portions of which were both spent and saved. Just three months ago, the state ended a fiscal year with a $580 million surplus, which has been locked away.

Tax receipts are falling $204 million shy of the benchmark that must be hit to pay for proposed state programs and services this fiscal year. The administration will likely lower those benchmarks in October.

If the current trend in tax collections were to continue for the last three months of the fiscal year, state officials would be looking at an $800 million revenue shortfall in July. Crosby said the economists advising the administration currently believe the economy will begin to grow again in January. "Knock on wood, assuming there are no other terrible things happening," he added.

Crosby said Swift remains committed to fully funding the voter-approved public campaign financing law and will consider a new class of state police officers to cut down on large amounts of overtime being paid in the post-attack era. Crosby said spending on new security is costing about $2 million a month.

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