and the
Citizens Economic Research Foundation


Tuesday, January 22, 2002

So-called Mass. Taxpayers Foundation:
How accurate is it ... this time?

CLT challenges MTF:
Put last two decades of revenue projections on your website

Item: In May of 1989, MTF brought House attempts to avoid a fiscal crisis to an abrupt halt by telling the Senate Ways & Means Committee that House FY’90 revenue estimates were too low. MTF predicted that revenues would be $9.45 billion. So the Senate increased the House budget, actual revenues were $8.45 billion, and the state hit the fiscal wall and hiked the income tax.

Item: In March of 1995, as CLT began lobbying to roll back that tax hike, MTF stated, according to the State House News Service, that "the rate of growth is clearly declining." In 1996 and 1997, MTF again warned of "slowed revenue growth." In fact, the rate of growth clearly increased. State revenues, which had grown 5.6% in FY’95, grew 6.5% in FY’97, 9.2% in FY’98, and 10% in FY 2000.

When revenues were declining, MTF predicted growth, enabling legislators to create the 1990 fiscal crisis. When we were heading into an historic economic boom, MTF predicted an imminent slowdown, discouraging an income tax cut.

Even a broken clock is right twice a day, and economic cycles do happen. Eventually MTF predictions came true, after the damage from their original inaccuracies was done.

MTF may be right this time too, or it may be wrong. Just as investors have learned not to count on Arthur Anderson for safe investments, the commonwealth should be aware of MTF's record of predictions before investing in political decisions based on them.

MTF should publish its past 20 years of revenue predictions on its website. Actual revenue growth data are available from the Department of Revenue.

- 30 -

Some past MTF projections

State House News Service
Revenues -
May 11, 1989

A leading taxpayer advocacy group today told the Senate Ways and Means Committee that revenues for fiscal year 1989 will be below projections but that the Dukakis administration's predictions are close to the mark for fiscal 1990.

In a conclusion that astonished chairwoman Patricia McGovern (D-Lawrence), economist Edward Moscovitch predicted that revenues in fiscal 1990 will be about $9.45 billion, slightly below the administration's prediction of $9.5 billion. Moscovitch predicted that total revenues for fiscal year 1989 would be $8.7 billion.

Moscovitch had been hired by the Massachusetts Taxpayers Foundation to do a computer research program for today's presentation to the committee, which had invited several economists to give their estimates of future revenue intake.

"You're projecting an enormous amount of growth for this year," McGovern said. "You're saying you agree with the governor, which absolutely amazes me." Commenting on differing estimates given to the committee McGovern complained about the difficulty of making revenue forecasts, saying, "We're always wrong" and "we've all been too high."

In an interview, Barbara Anderson, director of Citizens for Limited Taxation (CLT), blasted the hearing as an exercise to get the committee off the hook for the state's fiscal plight by convincing the public of the difficulty of doing revenue projections. "These people have never known. That doesn't mean you can't know. It means these people don't. They're the same invited guests who've been doing the wrong revenue estimates for years."

Anderson said former Gov. Edward King always came within 10 percent of his revenue projections, and blamed Gov. Michael S. Dukakis for the "politicization of revenue estimates. Suddenly, Dukakis comes in and can't estimate revenues anymore."

State House News Service
Revenue Hearing ...
March 14, 1995

A string of economists generally agreed with Adams' take on the short-term future of the economy. "Our economy is clearly not falling through the floor," said Massachusetts Taxpayers Foundation President Michael Widmer. "But the rate of growth is clearly declining."

State House News Service
Advances - Week of
January 1, 1996

Massachusetts Taxpayers Foundation President Michael Widmer discusses his recently-released report, "State Budget '96: The Quiet Before the Storm," on "News Four Sunday" (8 am, Channel 4) with John Henning. In the report Widmer warns of possible budget crunches in the face of slowed revenue growth, possible federal cuts, and hefty spending commitments.

State House News Service
Revenue Hearing ...
March 14, 1996

Given the choice, [Massachusetts Taxpayers Foundation President Michael] Widmer said he would start with a tax break for mutual fund companies because that sector is exploding and important to the economy.

"We see, as everyone else has, a growth in the economy, probably trailing national growth slightly. Our rate of growth is declining but we are still growing," Widmer told lawmakers.

State House News Service
Some Observers: Policy Shapers React to Weld FY '98 Budget

January 22, 1997 ... Here are quick reads on the reaction of some observers to Gov. Weld's budget proposal:

Barbara Anderson, Executive Director of Citizens for Limited Taxation and Government

"You just can't help noticing how different it is from 1991," Anderson said. She said the governor went about writing his budget the right way, by taking available revenues, reducing them with tax cuts, and then matching spending to fit the remainder. "You start out with the people who really matter - the taxpayers who provide the revenue," Anderson said. "As far as I can tell, the governor has taken care of all the truly needy." Anderson said this is the final budget in which the deficit bonds of the early '90s are repaid, and after the administration makes those final debt-service payments, "They're going to be rolling in money."

Michael Widmer, President, Massachusetts Taxpayers Foundation

"The combination of conservative revenue estimates, reasonable increases in spending, and selective priorities - education, local schools, cities and towns - those are the right combination of economic and social priorities." But Widmer warned of a "growing appetite" for spending among interest groups of all kinds. "This is one of those moments where you can see a contradiction between the growing appetite on one hand and slowing revenue growth on the other."

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