Ratcheting up the rhetoric over taxes, Acting Governor Jane
Swift plans to sharply criticize business leaders for their stance on taxes this week at a high-profile meeting of top
executives in downtown Boston.
Swift plans to call members of the business community
"cynical" for seeking taxes that she says would harm working families while resisting tax increases that would primarily
affect big corporations. She says no new taxes are necessary, and that levies disproportionately
affecting low- and middle-income residents are especially ill advised.
"They've made a bad decision to conclude we're at a point in the debate where tax increases
are the only option," Swift said in an interview with the Globe on Friday. "It's distressing to
me that they would turn to the two increases that have the biggest impact on families."
Swift is scheduled to speak before about 100 business
leaders at tomorrow's annual meeting of the Massachusetts Taxpayers Foundation, a Beacon Hill budget analysis group that
is backed by business interests. The foundation has called for $700 million in new taxes, either
by increasing the income tax to 5.6 percent or freezing it at 5.3 percent and halving the
personal exemption, which was doubled in 1998.
Other Bay State business leaders have also come out in
support of delaying the voter-approved income tax cut in recent months. The state is facing a budget shortfall of $2
billion or more in the fiscal year that starts July 1.
Swift's criticism appears designed to gain her some traction
on the tax issue, which is quickly emerging as the central theme of her administration and her reelection bid. She has
intensified her focus on the issue as Mitt Romney, organizer of the Winter Olympics in Salt Lake City,
has edged closer to a primary challenge.
Criticizing business leaders allows her to trumpet a
populist theme, a high-ranking Swift aide said. She's looking to go "into the mouth of the lion" by taking on big business
leaders, who are traditionally allied with Republicans.
Michael J. Widmer, Mass. Taxpayers Foundation president,
defended the group's position on taxes, saying that spending cuts must be blended with tax increases to deal with the fiscal
crisis. He said the income tax and the personal exemption were targeted simply because they
are among the few taxes that can bring the state close to closing the budget gap.
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The Boston Globe
Monday, March 18, 2002
The right choice on the budget
By Christopher R. Anderson
The current fiscal crunch in Massachusetts, while made more
severe by a national recession, is the second time in 25 years that we have seen the ill effects of overspending by state
government.
The first came after the 1988 presidential campaign. State
government leaders raised taxes by nearly $2 billion to cover consecutive budget deficits in years immediately following "the
Massachusetts Miracle."
Since 1991 and our recovery from that debacle, state
spending, riding a wave of revenues from a booming economy in the last decade, has nearly doubled from a low of $12 billion
to nearly $23 billion. However, in the midst of plummeting tax revenues - the result of another
national recession - it would be a mistake to solve the problem created by such an increase
in spending by adopting a series of tax hikes except as a last resort.
Since 1991 there have been many positive changes to the
Massachusetts economic landscape, with significant tax cuts and incentives, reforms of inefficient state programs, and
measurable accountability in the classroom. There have also been important state
investments, including increased funding for infrastructure, education, and health care. But
those gains will be short lived if the state's fiscal situation is not
addressed properly to sustain our diverse technology economy and its related jobs.
Last week Acting Governor Swift unveiled a four-year budget
plan to address the current fiscal situation and beyond. The plan is a rational, balanced attempt to close the budget gap
by exploring alternative revenue sources and controlling state spending. Fortunately, Swift has
held firm in her continued opposition to raising taxes, including the halting of the
income tax rollback approved by nearly 60 percent of voters 16 months ago.
When businesses and families see a sharp reduction in
revenues, as many have for the last year or so, they are forced to prioritize, make painful decisions, and cut back. What
happens when state government's revenues slow? Too often, spending isn't reduced enough and taxes
are increased too much. That's passing the buck with Tom Brady-like efficiency at the
expense of Massachusetts families and the economy.
In addition to reducing state programmatic spending growth,
Swift has proposed some worthwhile alternatives to closing the budget gap. But those ideas have been met with
rejection in the Legislature. None of Swift's new fiscal recovery plans (minor
reductions of the lottery payout, changing the state pension schedule, using more tobacco funds) has shown
any evidence of harming the economy. On the other hand, tax increases have
proved to be destructive to commerce and job growth. The prolonged and deep recession in
Massachusetts of the late '80s was exacerbated by two tax hikes, as our families and
businesses continued to suffer long after the rest of the nation was experiencing economic
recovery.
And what about the existing $1.5 billion "rainy day fund"
and other reserves? When would be a better time to use these funds, which were created by unspent revenue from taxpayers? It
is important to prudently use the rainy day funds, but they should be exhausted before tax
increases are even considered.
No one should take seriously any budget solution that calls
for tapping reserves or raising taxes without first addressing the underlying problem of excessive state spending growth.
Behind every budget line item is a constituency that is pushing for more money and that will
label every reduction in spending growth as a cut. But many of those special interests have
enjoyed budget growth of well over 100 percent in the past decade. Few businesses and
families have experienced that eye-popping growth in their own balance sheets.
The $4 billion in tax cuts since 1991 have helped us expand
our diverse technology economy and shed the dreaded Taxachusetts reputation. We are finally back in position to
compete. But that could change in a hurry. Despite those tax cuts, our state spending has doubled, and
Massachusetts still has among the highest tax burdens in the nation. What's the
next rotation on the wheel? If it's back to the high cost '80s, then many business owners will finally give up
and flee the Commonwealth for friendlier economic climates.
To prevent that from happening, our state leaders need to
step up, make difficult political decisions, and employ a long-term fiscal plan that helps keep Massachusetts
economically competitive. The early indications, with a few exceptions, are not positive, but it is too
important to concede.
Christopher R. Anderson is president of the Massachusetts High
Technology Council.
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The Boston Herald
Monday, March 18, 2002
A Boston Herald editorial
Swift's new budget deserves a chance
Acting Gov. Jane Swift's revised - and lower - spending
proposals are not perfect; the perfect legislative proposal has not been seen yet in all of human history. But they are a lot
better thought out than anyone listening to House Speaker Tom Finneran's invective would
realize.
The governor's budget-writing staff obviously is trying to
avoid as much pain as possible and spread around what pain it believes can't be avoided. But Finneran seems to want the
governor to propose hair shirts for everybody right away.
These two officials should be cooperating to keep tax-loving
Senate President Tom Birmingham - and people who think like him on Finneran's side of the State House - from a
pre-emptive tax increase that wins them praise (and who knows, maybe campaign
help) from every special interest group around, yet shoves the state's economy back to the bad old days
of Taxachusetts.
One of those Birmingham wannabes is Rep. John Rogers
(D-Norwood), chairman of the House Ways and Means Committee, who has been waving around a list of 16 possible tax
increases. Before Finneran's call for deeper program cuts can be given
full attention, he has to sit on Rogers and make clear to all that the speaker means what he says when he says heavy
cuts must precede new taxes.
The governor knows what the public knows - that taxes are
the automatic, knee-jerk response of the Beacon Hill political culture to any revenue shortfall, "the first resort," as she
put it. It is not "sillier with each passing day," as Finneran claimed last week, for Swift to
stress the point - unless Finneran believes that Birmingham and his fellow tax-raisers
are a negligible force.
And she is proposing cuts, $700 million from the $23.5
billion budget she sent to Beacon Hill in January. She wants a federal waiver permitting higher deductibles and co-payments
from Medicaid recipients with family income above the federal minimum ($140 million). Among
other things, she would row back the increase in local school aid from $100 million to $68
million. She would use all the tobacco settlement money (gaining another $150 million)
instead of setting half or more aside to build an endowment fund for some future health
spending.
As we said, her proposal is not perfect. Like Finneran, we
would prefer to see less of the state's rainy-day funds used. If he'll support taking $500 million more out of local aid next
year (a reduction of 9.5 percent from the January proposal instead of the 3.8 percent Swift
called for) and leaving that much more in the reserve, we wouldn't be surprised if the
governor failed to protest much, though councilors, aldermen and selectmen surely would.
Swift is quite right to stick by her plan to delay the
elimination of the state's unfunded pension liability from 2018 to 2028 (the original schedule) to save $128 million next year.
It is simply bizarre to rob today's social programs for the sake of an accelerated timetable adopted in
1997 to avoid a tax cut.
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State House News Service
Advances - Week of March 17, 2002
HOUSE BUDGET PROCEEDINGS: The House Ways and Means Committee
has finished taking testimony on Swift's original $23.6 billion spending plan for the fiscal year that begins
July 1. Members and staffers there, already intent on downsizing that proposal,
are now inspecting the details of how Swift herself wants to shrink it to $22.8 billion and what
resources she would tap to balance the books during the next several years.
House leaders have appointed working groups to research
alternative ways to save or raise money and they've been instructed to make their recommendations by the end of March.
The working group studying local aid will make its presentation Wednesday during a private
caucus. Other working groups are exploring revenue options, the state's credit rating, and
Medicaid spending and benefits.
House budget chief John Rogers has indicated new or higher
taxes are a necessity for the fiscal 2003 budget, but somewhat mysteriously last week stated that taxes won't be part of
the budget House Ways and Means endorses in mid-April.
There's a reason for that. Rogers intends to release a
budget that does not incorporate any new taxes and reflects only minimal natural growth in tax revenues, which so far are
down 10 percent from actual fiscal 2001 revenues. "People will see the reality of the budget," said
Charles Rasmussen, a spokesman for House Speaker Finneran. "It's going to be stark."
After that budget is released, the House will debate changes
in tax policies the week of April 29. Interestingly, state revenue officials will release April revenue collections during
that revenue debate. Then, once revenue decisions are made, the House will debate its fiscal
2003 budget proposal the week of May 6.
STATE SPENDING: State government may be on the verge of doing
something rare - reducing annual state spending.
The feat was accomplished after Gov. William Weld took
office in 1991, when he faced a budget crisis similar to the current one.
Acting Gov. Swift last week said that with a fresh round of
$700 million in proposed across-the-board fiscal 2003 budget cuts, she is proposing that state government spend
$22.8 billion in the fiscal year that begins July 1.
According to comptroller Martin Benison, the state is on
track to spend $22.83 billion this fiscal year. In fiscal 2001, the state spent $22.1 billion.
In addition to the impact of cuts and significant layoffs
required to cut overall state spending, the possibility of an overall cut also raises questions about whether state
government can meet contractual obligations.
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