The Salem Evening News
Thursday, February 28, 2002
Mayors push for income tax hike
By Jon Chesto
Ottaway News Service
BOSTON -- A coalition of Massachusetts mayors urged legislative
leaders to support an income tax hike that would help the state fill a growing budget gap.
The Massachusetts Mayors' Association voted yesterday
morning to endorse a legislative agenda that includes a return to the 5.95 percent income tax rate that the state had for much
of the 1990s.
Many of the city leaders, including Beverly Mayor Thomas
Crean and Lynn Mayor Chip Clancy, held a press conference yesterday afternoon at the Statehouse to announce their
stance after meeting with House Speaker Tom Finneran and Senate President Tom
Birmingham.
State legislators have been told to expect cuts in local aid
that could be as high as 10 percent. The mayors fear those cuts will force cities to adopt higher real estate tax rates and
cut services at a time when many cities are strapped for cash and making cuts.
The proposed income tax hike would represent a dramatic
switch from the tax cut approved through a ballot initiative in 2000. The income tax, currently at 5.3 percent, is slated to
drop to 5 percent next January because of the voter-approved rollback.
The mayors said reversing direction to 5.95 percent could
raise as much as $1.2 billion for the state in the next fiscal year. They said the rollback could resume once the state's
economy recovers.
The mayors said voters know the state's fiscal health has
changed dramatically since they approved the rollback.
"Based on what's happening with the economy and the problems
after Sept. 11, I would hope they would understand," Crean said. "We just don't feel, at this point, that it's fiscally
responsible to give a tax cut."
Clancy, a former state senator, admits it could be tough to
expect the Legislature to approve such a large tax increase, especially in an election year. Tax revenues, however, need to
increase at the state level and not locally, he said.
Crean noted Beverly faces a tax hike during this fiscal
year, and will likely experience budget cuts in the next fiscal year.
"As each day passes, the need to do something becomes more
critical," Clancy said.
There is a significant amount of support in the House and
the Senate to freeze the income tax at 5.3 percent, or possibly even return it to 5.6 percent. It's not clear, however, whether
there's enough support to override a certain veto by acting Gov. Jane Swift, who has said the
tax cut is important to the state's economy.
When Finneran met with reporters yesterday, he hinted that
bringing back the 5.95 percent income tax rate might be too ambitious.
"I'm not sure that the members will rush to embrace that,"
Finneran said.
Still, Finneran and his leadership team continue to make it
clear that tax increases should be on the table as possible ways to deal with the state's budget gap, which could easily
exceed $2 billion for the fiscal year beginning on July 1.
Birmingham also seems to be open to an income tax increase,
or at least a freeze at the current rate of 5.3 percent.
"A freeze in the scheduled income tax rollback is the
minimum we must do to respond to the state's $2 to $3 billion deficit," Birmingham said in a prepared statement. "Gov.
Swift's straitjacketed insistence on tax cuts threatens vital services. Our schools, police and fire
departments are more important than her rigid ideology."
The mayors' unified stance drew criticism from anti-tax
advocate Barbara Anderson.
"It's a cheap and easy request," said Anderson, a Marblehead
resident and executive director of Citizens for Limited Taxation. "They've been slurping up local aid all through the
'90s and apparently spending it as if there was no tomorrow. Now, they have to live within
their means."
- A CLT BLAST FROM THE PAST -
Associated Press
Friday, December 25, 1998
Cities and towns reporting high levels of
free cash
By Martin Finucane
BOSTON (AP) - With a booming economy and increased aid from the
state, Massachusetts cities and towns are in better financial shape than they have been in years, local budget
statistics suggest.
The strong finances are reflected in a record amount of
"free cash" being reported by municipal governments to the state Revenue Department.
"The overall fiscal climate for cities and towns is sound.
And that's good news," said Geoff Beckwith, executive director of the Massachusetts Municipal Association.
But Beckwith also said there continue to be "giant needs"
locally for money to fix up everything from roads and bridges to town halls, libraries and sewer treatment plants.
As of the end of fiscal 1997, cities and towns that report to the department - not all do - said
they had $397.9 million in free cash.
That was a record high, said Joseph Chessey, deputy
commissioner of the Division of Local Services for the Revenue Department.
As recently as the end of fiscal 1992, when the state was
just emerging from a recession, the cities and towns declared only $79.3 million in free cash. But that number has been
rising ever since.
By the end of fiscal 1996, free cash had risen to $355.3
million.
Not all communities have reported yet for the end of fiscal
1998, but it looks as if fiscal 1998 figures will again show an increase, said Chessey, who served 10 years as mayor of
Chicopee.
"Times are, I think, in the commonwealth, fantastic,"
Chessey said. "Just looking at the bottom lines we have here, free cash has gone up consistently over the last five years."
Chessey said communities can use their free cash as a
reserve for unexpected expenses, citing his own experience as a mayor who was glad to be able to tap into $200,000 in free
cash when a boiler blew up in a school building.
Chessey said that, as a rule of thumb, a financially healthy
community should have 5 percent of its budget in free cash.
Cambridge City Manager Bob Healy reported having $32 million
in free cash at the end of fiscal 1997. That number had dipped to about $10 million at the end of fiscal 1993.
He said there are always people who have good ideas for
spending the surplus - and Cambridge has used some of its free cash recently for affordable housing and open-space
acquisition.
There's a temptation to "be a hero and go out and blow all
the dough," he said. But he also said: "Any good business always has a reserve and that's really what the free cash is.
... The good times we're in don't last forever."
Beckwith, whose organization represents cities and towns
around the state, said the reasons for the rise in free cash included increases in state aid to local schools under the
state's education reform law.
The state also has gradually been returning a greater share
of revenues from the state lottery to cities and towns. A portion of the lottery revenues was funneled into the state's
budget to help out during the state's fiscal crisis in the early 1990s.
State officials announced in August that the state was
sending out about $4.2 billion in local aid this fiscal year, an increase from about $2.5 billion in fiscal 1993. Education
aid alone accounted for much of the increase. It was up to about $2.6 billion this year from about $1.3
billion in fiscal 1993.
Beckwith said that, with Proposition 2½, the state's
property-tax-limiting law, in place, it remains difficult for communities to invest in needed - but expensive -
infrastructure projects.
But he said, "It's a much stronger platform than we were on
seven or eight years ago."
Beckwith noted that the state's education reform plan, which
mandated funding increases to make sure kids all over the state got an adequate education, runs out in the next budget year.
What happens next will be crucial to the 351 cities and
towns, he said.
"We're heading towards a crossroads, and we just need to be
able to anticipate that," he said. "We just need to be sure it's navigated without any collisions."
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