CLT Update
Saturday, November 10, 2001

Legislators delivering fiscal crisis to taxpayers

In the News Today:

Don't freeze the tax cut

Birmingham's budget solution: Keep spending

The Legislature schemes to ignore the voters -- again

House: Cash for towns a 'sacred cow' 
Representatives challenge Senate president's
threat to cut local aid

Budget impasse could give purse strings to Swift

Deficit may lead to deep state cuts
Recession, delays widen $1.4b gap

Unless they're looking for an excuse to kill our tax rollback, most legislators on Beacon Hill seem oblivious to the growing fiscal crisis they've created and are exacerbating by the day with their inaction.

"We don't have a final state spending plan five months into the year in the middle of a recession, and we're spending at a rate of hundreds of millions of dollar per year more than we can fund," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, according to today's AP report. "Continued inaction will shortly propel us into a full-blown fiscal crisis."

The Legislature continues to diddle away $1.6 million a day -- funds that aren't available -- the Boston Globe reported last week, as the overdue FY 2002 state budget goes into its fifth month.

The looming fiscal crisis is of the Legislature's own making, again -- just as it was in the late-80s. And as they did back then, the Beacon Hill pols will wait until there's "no alternative" to their tax increase.

As usual when they want more of our money, they threaten budget cuts not in lard but in areas that most taxpayers agree are essential: local aid, public safety, etc.

And some say they don't know what they're doing? They know exactly what they're doing; they've done it before.

Chip Ford

MetroWest Daily News
Friday, November 9, 2001

Don't freeze the tax cut

A year ago, when Massachusetts voters gave themselves an income tax break, the state treasury was awash in surpluses.

Proponents of Question 4, most prominently Gov. Paul Cellucci and then-Lt. Gov. Jane Swift, promised there would be no loss in state services should the referendum be adopted. That was then.

This is now: Massachusetts lawmakers, already four months late adopting a state budget, are trying to cope with a deficit pegged at $1.4 billion and growing. In typical fashion, the legislative leadership is crafting the budget in secret. Democrats caucused in secret meetings Wednesday, with most of them leaving those meetings in peak hand-wringing mode.

There will be budget cuts, they all say, generally described, as with all budget cuts, as "painful." How painful? They aren't saying. What will be cut? Apparently that's none of the public's business.

What Senate President Tom Birmingham and House Speaker Tom Finneran have been willing to make public is the prospect that the phased income tax cuts approved by the voters may have to be frozen to avoid all these unspecified painful cuts.

On paper, they can perhaps make that case. But this is more than a matter of dollars and cents. The overriding issue is whether the Legislature has any respect for the electorate. The House has already thumbed its nose at the voters by attempting to kill the Clean Elections Law adopted by a lopsided margin in 1998. For the politicians to use a revenue shortfall as an excuse to overturn a tax cut measure enacted by the voters a year ago raises the Legislature's notorious arrogance to a new level.

Freezing the next phase of the income tax cut will only raise $200 million, a small part of the growing deficit. Fortunately, during the fat years now ending, the state set aside about $2.3 billion in various "rainy day funds." Here's that rainy day. The state should tap those accounts, spend the tobacco suit settlement fund on health care  needs and cut spending where possible, but keep its hands off the tax cut.

After years of budget expansion, a year of contraction ought to be something the state can handle. If the Legislature believes deficits will be a continuing problem, let it stand up and vote for more taxes. If lawmakers want to freeze income tax cuts, let them put their proposal on next year's ballot and convince the voters to change their minds.

A Legislature that can't finish its work on time, that makes its most important decisions in secret and that is in the process of strangling campaign finance reform in order to save comfortable incumbents from the inconvenience of having to face a challenge is in no position to substitute its will for the will of the voters.

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The Brockton Enterprise
Friday, November 9, 2001

Birmingham's budget solution: Keep spending

If Senate President Thomas Birmingham is serious about wanting to be governor of Massachusetts, he may want to adjust his thinking to be more in line with the taxpayers of the state.

Birmingham said this week he wanted to halt the income tax reduction voters overwhelmingly approved last year. He said the state's economy has taken a turn for the worse and that tax money is needed so $200 million in state programs don't have to be cut.

It apparently never occurred to Birmingham that when the state has less income, it might want to consider spending less. That is the way things work in the real world. Most people, when they run out of money, stop spending. The irresponsible ones do what the state does -- they run up their credit cards and take out loans they can't repay without a heavy burden.

But the Legislature -- especially in Massachusetts -- has no clue about the real world. It is a national embarrassment that this is the only state in the country without a budget in place. The fiscal year ended more than four months ago and Massachusetts has been limping along on temporary budgets because Birmingham and House Speaker Thomas Finneran can't come to an agreement.

If Birmingham had proven himself to be a budgetary savant, we might put more stock in his schemes. But he, as much as anyone, is responsible for the nearly annual late budget, and now he wants taxpayers to fund his projects instead of actually having to take the difficult step of reducing funding.

We warned this would happen. We and others said the tax cut voters approved should be implemented, no matter what, and if revenues dropped, it would finally force politicians to make tough choices in crafting a budget.

For the past decade, the Legislature has not had to make any tough choices; there was enough money to go around for everyone and everything. The party had to end sooner or later, but Birmingham is not willing to face reality. His solution to an economic slowdown? Keep taxes high and spending high.

Is this really the kind of "leader" we want as the next governor of the commonwealth?

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The MetroWest Daily News
Thursday, November 8, 2001

The Legislature schemes to ignore the voters -- again
By John Gregg

Does the Massachusetts Legislature think we are chumps or nitwits?

First, they croak the voter-approved Clean Elections Law through a lengthy stall game.

Then House and Senate leaders run more than four months past their deadline to agree on a state budget.

Now, there is talk on Beacon Hill to "delay" the voter-approved income-tax rollback because the slowing economy has affected state revenues.

Senate President Thomas Birmingham met with the Senate Democratic caucus for more than three hours yesterday, and House Democrats also met. Many of them argue that delaying the tax cut would avoid $200 million in budget "cuts."

Never mind that $600 million could be cut from the $22.8 billion state budget and no one in real, dire need would be affected. The state's rainy-day fund, and other reserves, are also filled to the brim.

The point is that voters -- especially out here in MetroWest and the Milford-Franklin region -- last fall overwhelmingly supported the tax-cut, which would roll back the state income tax over to 5 percent by 2003.

That's where it stood until 1989, when Beacon Hill Democrats raised taxes in a real fiscal crisis but said then it would only be temporary.

Question 4, as it was known on the ballot last fall, passed by a 59-41 percent margin statewide. But it passed by a much bigger margin, 65-35, here in MetroWest. To remind our local legislators, here's some of the vote tallies:

In heavily Democratic Framingham, 63 percent of voters favored the tax cut. In Ashland, 67 percent; Natick, 62 percent. In Marlborough, 66 percent of voters, many of them Democrats, supported the measure.

In Milford, it was 64 percent; Hopkinton, 71 percent; Franklin, 65 percent; and Sudbury, 69 percent. See a pattern?

Barbara Anderson, the suburban tax-fighter who led the Question 4 battle with then-Gov. Paul Cellucci, said lawmakers would be slapping voters in the face if they delay the rollback.

"If they do, they're going back to their district and saying, 'You were really smart when you elected me, but didn't have any idea what you were doing when you voted for Question 4, so I'm going to repeal it, dummy.'"

State Sen. David Magnani, D-Framingham, in recent months has assailed the wisdom of the tax rollback, and says the state now faces up to a $1.4 billion deficit. Yesterday, he said he is reluctant to ignore the voters but also wants to see what budget cuts would be required.

"I don't think anybody wanted to make a commitment until they saw what the choices were," Magnani said.

Many opponents of the tax cut say times have changed dramatically since last November, and the state needs the revenue that otherwise will stay in taxpayers' pockets.

But Anderson says that line of argument is also unmerited.

"Their argument would be voters don't recognize the possibility of economic cycles, and again they are saying 'Dumb voters,'" Anderson said. "The Legislature has absolutely no credibility on anything at the moment, so nobody wants to hear from them."

And, in fact, MetroWest voters proved they are aware of budget demands in their votes last year.

Despite being the prime focus of the Free the Pike campaign, many MetroWest communities that strongly supported the income-tax rollback rejected or barely approved a ballot question which offered tax credits for tolls.

In other words, voters recognized that cutting the state income tax made sense, but easing the toll burden wasn't as sound fiscal policy. That's sophisticated thinking at the polls.

Birmingham yesterday was trying to line up votes to override a probable veto from acting Gov. Jane Swift, who supports the tax cut.

Only about 29 communities statewide voted against the income-tax rollback last fall including Boston, Cambridge, Somerville, Brookline and "Happy Valley" towns around Northampton. None was in MetroWest.

The senators who represent this area include Magnani and state Sens. Pamela Resor, D-Acton; Susan Fargo, D-Lincoln; Cheryl Jacques, D-Needham; and Richard Moore, D-Uxbridge.

Moore, to his credit, said yesterday he would "be reluctant to vote for (delaying) the rollback at this stage, certainly, because I think we need to make some cuts in the budget first ... I'm just not convinced we're at the point that voters would feel they want to slow down on that."

Some lawmakers, however, clearly are arguing that "delaying" the tax cut is the fiscally responsible thing to do.

Taxpayers might argue back that thwarting the will of the voters, yet again, is contemptible arrogance.

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The Lowell Sun
Friday, November 9, 2001

House: Cash for towns a 'sacred cow' 
Representatives challenge Senate president's
threat to cut local aid

By Jennifer Fenn and Jason Lefferts
Sun Staff

BOSTON -- While municipal leaders and hospital executives braced for state budget cuts, House members tried to give assurances yesterday that local aid and Medicaid would be saved from the chopping block.

A day after Senate President Thomas Birmingham said local aid would be cut unless lawmakers freeze the income-tax rollback, local House members said they have no plans to reduce funding to cities and towns this year under any scenario.

But some said they are leaning toward a freeze in the voter-approved rollback as the state tries to make up revenue during the current economic downturn.

"We in the House have a totally different viewpoint than the Senate," said Rep. Kevin Murphy, a Lowell Democrat. "Education and local aid are our top priorities. They are sacred cows under the House view."

In a House meeting Wednesday, Murphy said Speaker Thomas Finneran, a Mattapan Democrat, described local aid, Chapter 70 education aid, the pension fund and Medicaid reimbursements as the "sacred cows." Birmingham, a Chelsea Democrat, said only Chapter 70 education aid is safe.

Rep. Robert Hargraves responded angrily to the Senate's warning, saying local aid is not at risk and criticizing Birmingham for playing games with cities and towns. The Groton Republican does not support a freeze in the rollback because he says it goes against the will of the voters.

"I suspect that the Senate's bluffing," Hargraves said. "I would find it hard to believe they're going to cut local aid. That coming from them is smoke in mirrors."

Despite the assurances from House members, local officials are still concerned. They say any reductions in local aid would mean cuts in local services.

Lowell City Manager John Cox said the city put together its budget using the lowest local-aid figures among three proposals. He hopes any cuts would not go below that lowest figure -- $154.2 million of this year's $268 million city budget -- but he also understands the state's dilemma.

"We're hopeful that (making cuts) will not be the case," said Cox, a former representative. "I still think they will probably not cut local aid, but they have a problem and they have to do something to solve it."

Tewksbury Town Manager David Cressman said the town used higher House numbers in its budget calculations. If the amount of aid were to decrease, it would "possibly cause us to make budget revisions."

Cressman said Tewksbury expected roughly $11.5 million in state aid this year for a $70 million budget, and said while cuts would hurt in areas like education and general expenses, smaller reductions in some areas like library aid would be easier to swallow.

Rep. Colleen Garry, a Dracut Democrat, said it's not fair to take money away from cities and towns so late in the fiscal year; the state budget is now five months overdue.

"I don't think we should be cutting any local aid," Garry said. "It should be off the table, and the House is doing the right thing."

Chelmsford Town Manager Bernie Lynch said he finds it frustrating that the state requires communities to set property-tax rates by the end of the year, but chronically ignores its own deadlines for the state budget. He said if the state cuts local aid, Chelmsford would likely be forced to follow with cuts of its own.

"I think all of us would have to be in the position of calling special town meetings and cutting budgets if local aid is reduced," Lynch said. "It's unfortunate that local aid would be seen as one of the first places to make reductions, but that is always the way it seems to work. When the state is in trouble, they look at the cities and the towns."

The financial crisis could also hit hospitals, which receive money from the state to pay for Medicaid patients. The state has been criticized for underpaying hospitals, and the Senate included new funding for hospitals in its budget, which may now be in the jeopardy.

Robert Donovan, chief executive officer at Lowell General Hospital, said the hospital lost $3 million on Medicaid patient treatment last year. He said the Senate budget had included $850,000 in new payments for LGH, but that is now in danger of being lost. The hospital lost $7 million in the last fiscal year.

"This is a major, major issue for Lowell General Hospital because we're losing money in total, and because of that, services to the community are threatened," Donovan said. "That $850,000 was going to go a long way to at least making it better."

By freezing the rollback, the state would save $200 million for programs, but taxpayers would not see any savings. The average family of four is supposed to save $175 in taxes this year if the rollback moves forward.

The ballot question directs the state to roll back the income-tax rate from 5.6 percent to 5.3 percent in 2002 and to 5 percent in 2003.

If lawmakers move forward with a freeze, Garry said the best approach is to attach economic indicators such as tax revenues and the unemployment rate; when the economy grew strong, the tax rate would roll back.

Murphy said he's inclined to support a tax freeze if it's linked to economic indicators.

If the Legislature approves a freeze, acting Gov. Jane Swift said she will veto the measure. The Legislature needs a two-thirds vote to override her veto.

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Associated Press
Saturday, November 10, 2001

Budget impasse could give purse strings to Swift 
By Leslie Miller

BOSTON (AP) It is less than two weeks before the end of the legislative session and state lawmakers have failed to produce a budget or accomplish any of their leaders' priorities.

They can suspend the rules and continue to haggle over the budget until Jan. 1 and beyond, but if their inaction on other legislation is any indication, the general fund could become acting Gov. Jane Swift's to spend as she sees fit.

"We don't have a final state spending plan five months into the year in the middle of a recession, and we're spending at a rate of hundreds of millions of dollar per year more than we can fund," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "Continued inaction will shortly propel us into a full-blown fiscal crisis."

Fears that the Legislature won't come up with a spending plan any time soon is prompting the Swift administration to consider unilateral cuts.

Swift's position is that lawmakers can continue to negotiate the budget after Jan. 1 when the session ends.

House Speaker Thomas Finneran takes the view that Swift can spend as she pleases if the Legislature doesn't come up with a budget by New Year's Day.

Then, "it's the governor's budget to spend the way she wants to," Finneran spokesman Charles Rasmussen said.

The Senate expects a budget by year's end and they're not examining any other options, said Alison Franklin, a spokeswoman for Senate President Thomas Birmingham.

As a practical matter, Swift will have to make unpopular cuts if the Legislature doesn't produce a budget in the next few weeks. But she won't be able to tap into the state's Rainy Day Fund or the tobacco settlement money without legislative approval.

"Our plan to address the shortfall is a combination of spending cuts and use of reserves and tobacco money," said Dominick Ianno, spokesman for the Executive Office of Administration and Finance. "If the Legislature doesn't act, instead of $600 million in cuts, it will be $1.1 billion, and those will fall squarely on legislative inactivity."

That inactivity extends beyond budget writing. Since the Legislature convened in January, it has passed 127 bills into law. Of those, 100 are minor, local measures such as authorizing land conveyances, granting liquor licenses, validating local elections or naming buildings, such as the Johnny Appleseed visitor center in Lancaster.

Left undone: welfare system changes; antiterrorism laws; new sentencing guidelines; $2.5 billion in bond authorizations; decreasing or freezing unemployment insurance rates; affordable housing bills; and funding the Clean Elections Law.

"We're only halfway through the session," Franklin said, noting the Legislature changed the rules to allow itself two years instead of one to pass laws.

So far, though, the Legislature's major accomplishments this year have been revising the Uniform Commercial Code, putting $600 million of surplus money into escrow and redistricting House, Senate and Governor's Council districts.

A bill to rescue the state's dog and horse race tracks is sitting on Swift's desk.

Lawmakers also managed to license home inspectors, allow crime victims to testify at parole board hearings and grant unemployment benefits to victims of domestic violence.

Lawmakers also exonerated five people executed during the Salem witch trials.

"It took them 350 years to exonerate the Salem witches, it may take them that long to come up with a budget," Ianno said.

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The Boston Globe
Saturday, November 10, 2001

Deficit may lead to deep state cuts
Recession, delays widen $1.4b gap

By Rick Klein
Globe Staff

The state's budget gap -- $1.4 billion and swelling by the day -- will force sharp spending cuts in popular programs, ranging from school construction to outreach workers for the mentally ill, and could prompt a halt in the voter-approved income tax rollback.

Moreover, the economic slowdown that worsened after the Sept. 11 terrorist attacks now affects numerous independent agencies, which rely in part on their own revenue streams. Many officials believe layoffs at the Massachusetts Port Authority and toll hikes on the Massachusetts Turnpike mark just the beginning of a long period of painful austerity measures.

As Beacon Hill leaders grappled this week with a proposal to delay the tax rollback approved by voters last year, a new reality was dawning on members influenced by the boom that began by the mid-1990s.

Even delaying the tax rollback -- which could force a typical family to pay $150 more in taxes next year -- would save only $200 million; lawmakers would still have to come up with a whopping $1.2 billion in savings.

Although the state has more options than it did 10 years ago, because of healthy reserve funds and other sources of money, the cutbacks, when they come, could strike Massachusetts residents with a force not seen since 1991.

"The pace and scope of the economic decline has eclipsed the most cautious and conservative projections," said House Speaker Thomas M. Finneran. "We are in for a very severe test."

Just four months ago, the state finished fiscal 2001 with a surplus of nearly $600 million. Now, unemployment is up, economic activity is down, and revenues have fallen every month since July. It has been by far the worst fiscal stretch in Massachusetts since the recession of the early 1990s.

Confidence in the ability of Beacon Hill leaders to tackle the crisis has been diminished by their performance so far this year. Massachusetts is the only state in the nation still operating without a budget, a frustrating fact for cities and towns and others who depend on government services.

None of the three major players -- Acting Governor Jane Swift, Finneran, and Senate President Thomas F. Birmingham -- seems eager to make the tough choices.

Swift aides say she will propose her own budget cuts next week if the Legislature can't come to a budget agreement, but so far she has not made any specific proposals.

House and Senate leaders are meeting over the weekend to come up with a way to balance the budget, which is more than four months late. Their negotiations are private, and no proposals have been disclosed publicly, but the menu of options is clear.

The easiest solution is the use of reserve funds. The state has built up $2.3 billion in "rainy day" accounts over the past decade, which is more than enough to cover the entire budget gap. But no one is seriously suggesting depleting that money in a single year, because there is no way of knowing how long the tough fiscal times will last. The budget crunch of the late 1980s and early '90s lasted almost five years.

Realistically, legislators and aides say, reserve funds will be tapped for no more than $800 million this year, and House leaders are pushing for a far lower number.

Finneran is also opposing major additional use of the state's tobacco settlement money, saying that less than half of the $290 million available should be spent on government operations. The speaker wants most of that money set aside for future health-care needs.

Another option is changing the tax structure to bring in more revenue. The income tax rate, which is scheduled to drop from 5.6 to 5.3 percent in January under the ballot initiative approved last fall, could be frozen at 5.6 percent to save the state $200 million.

But it's not yet clear how the Legislature will proceed. Neither branch wants to pursue the freeze unless two-thirds of members in both the House and the Senate are firmly on board, because Swift has said that she would veto it.

Finneran is floating a compromise proposal that would put the tax rate at 5.5 percent next year and peg future cuts to improvement in the economy, based on such indicators as the unemployment rate. That concept could lessen the political hit for members as they vote to undo the voters' will, but it would also take away $50 million from the revenue boost a tax freeze would mean.

Then comes the hard part: budget cuts. Even if all the other pieces are put in play, state leaders will still be forced to cut at least $400 million and perhaps as much as $800 million from the proposed $22.9 billion budget, which is $800 million more than what was spent last fiscal year.

The cuts will be concentrated in a few areas, notably human services and higher education, because huge areas of spending, such as Medicaid and K-12 education aid, won't be touched for a range of legal and political reasons.

"If you look at what's left, and what you can't cut, it leaves you with a net pool of cuts that's required to be much deeper," said Senator Mark C. Montigny, chairman of the Ways and Means Committee. "It's really a quagmire."

Cuts as large as those being discussed could eliminate after-school programs, slash aid for fire and police protection, and force struggling community hospitals to close.

Such politically unappealing choices, said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, help explain why state leaders are avoiding any mention of specific cuts.

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