The Boston Globe
Tuesday, July 23, 2002
Despite boast, budget has a bulge
Analysis sees rise in state spending
By Rick Klein
Globe Staff
As legislative leaders passed the largest tax increase in
state history recently, they tried to reassure voters that Beacon Hill was doing its own belt-tightening: At press
conferences, they declared that state spending this year would actually decline from last year's spending, the
first time in more than a decade that the budget would contract.
"It's shrinking," Representative John H. Rogers, Democrat of
Norwood and chairman of the House Ways and Means Committee, said last week. "We've transcended from the age of tax
and spending to an age of tax and cutting."
The comments may have made the big tax increase easier to
swallow and, on paper, state spending appears to shrink this year by $100 million. But upon closer examination, some see
that total state spending is poised to rise by approximately 2.6 percent, or $600 million, aside
from expected vetos by the governor that will reduce the increase by $300 million. That
includes hundreds of millions of dollars in expenses that were shifted off the budget.
What's more, House and Senate leaders have also been citing
inflated spending figures from last year, making the budget for this year appear still smaller.
Their maneuvers appear to be an attempt to mask the fact
that overall spending will rise significantly this year, despite a precipitous decline in state revenues, said Michael
J. Widmer of the nonpartisan, business-backed Massachusetts Taxpayers Foundation.
"It certainly suggests that they're trying to keep a lower
bottom line," Widmer said. "It's disingenuous to have it not included as part of the bottom line of the budget."
The real bottom line of the fiscal 2003 spending plan
approved by the Legislature on Friday is about $23.4 billion, not the $22.9 billion quoted by House and Senate leaders, the
foundation's analysis shows. And while the books for fiscal 2002, which ended June 30,
won't be closed until October, the state Department of Revenue anticipates that total
spending for the year will total $22.8 billion after unspent money is returned to the state, not
the $23 billion legislative leaders have cited.
The Legislature created an off-budget account by moving $347
million in Medicaid expenses into a separate fund, the Health Care Quality Trust. Separately, lawmakers also moved $42
million off the budget that will cover a shortfall that has developed in the fund for hospital
care for the uninsured, calling it a one-time expense.
That means that $390 million in expenses are essentially
being hidden from taxpayers by "smoke and mirrors," said Senate minority leader Brian P. Lees, Republican of
Longmeadow.
"The facts have been fast and loose," Lees said. "The whole
budget process is, 'Don't say anything, don't tell, and no one will know.'"
Legislative leaders denied yesterday that they are shifting
spending off the books to obscure increases in appropriations. They say they are trying to devise creative ways to meet the
increasing costs of nursing home care. Nursing home owners say Medicaid is not covering
the costs.
The new off-budget fund for Medicaid was set up to ensure
quick payment of federal funds to Massachusetts, legislative leaders said. Under the arrangement, the state withdraws $181
million from a tobacco settlement trust fund and spends it on Medicaid costs, including
nursing home reimbursements and Medicaid fraud investigations.
That state spending triggers quick release of federal
matching funds for Medicaid. The state will then channel revenue from newly imposed fees on nursing home residents and
pharmacies back into the tobacco trust fund to replenish the original $181 million.
Senator Mark C. Montigny, Democrat of New Bedford and the
chairman of the Senate Ways and Means Committee, said that creating the account makes it easier to track the fees
and federal money and ensures that the funding mechanism operates properly. The concept
requires federal approval, which the state has not yet received, and Montigny said
maintaining it off the budget will keep the state from commiting itself to the
increased spending if the federal government rejects the idea, he said.
All other Medicaid spending, which totals $5.75 billion and
is the largest part of the budget, is made under the general budget.
"If Mass. Taxpayers is suggesting any kind of conspiracy,
they're wrong," Montigny said. "We wanted to make sure that it gets federal approval, and we don't want funds to start
funneling through the general fund until we get that federal approval."
Rogers said that because the Health Care Quality Trust has
its own revenue stream, the nursing home and pharmacy fees, it doesn't have to be included with other state spending. He
likened it to funding for the Massachusetts Bay Transportation Authority, which since 1999
has been considered an off-budget item, even though it receives tax dollars.
Widmer said the mechanism appears to be a wise strategy to
trigger federal funds, but said there's no reason why it can't be done within the budget, making it obvious to taxpayers.
And budget specialists say that other states, including
Rhode Island, have instituted nursing home and pharmacy fees to pay for Medicaid, but kept the spending under the general state
budget and have been able to secure federal matching funds.
The Legislature expects to complete its action on the fiscal
2003 budget in the coming days. Acting Governor Jane Swift yesterday vetoed the $1.14 billion tax package that passed the
Legislature last week, saying that state leaders should cut more spending. But the vast
Democratic majorities in the House and Senate mean that her veto will be quickly nullified
this week.
Swift is also expected to veto at least $300 million in
spending, and the Legislature is expected to override few of her vetoes. But even with that reduction, state spending would
increase $300 million this year.
"I never thought for a minute that they were cutting
spending," said Barbara Anderson, executive director of Citizens for Limited Taxation and
Government. "If you can't be fiscally responsible, you have two routes you can take: You can
fudge the numbers, or you can raise taxes. ... The Legislature is doing both of them."
Swift will take the off-budget spending into account when
she prepares her vetoes this week, said Kevin J. Sullivan, her secretary for administration and finance.
"We realize that these off-budget items need to be counted
in the equation," Sullivan said. "That's why the veto pen becomes more necessary in terms of curtailing spending."
Rogers maintained that even though overall state spending
will rise by several hundred million dollars this year, the budget has still been cut significantly. Because of inflation,
rising costs in health care, and already-guaranteed union salary increases, the state would have to spend an
additional $1 billion in fiscal 2003 just to offer the same services it
offered in fiscal 2002, he said.
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The Boston Herald
Tuesday, July 23, 2002
Swift vetoes $1.2B in new taxes
by Steve Marantz
In the face of a certain override, acting Gov. Jane M. Swift
yesterday vetoed $1.2 billion in new taxes - but declined to appear publicly to make her case to state lawmakers.
On her first day at the State House after a two-week
vacation, Swift wrote in her veto message to lawmakers that "Raising taxes while business and workers are struggling to
gain the confidence needed to create prosperity is the wrong thing to do economically.
"Tax revenues provide for public safety, education, roads,
and the needs of the most vulnerable.... In a crisis like the current one, however, we must reduce spending by setting
priorities. Raising taxes should be a last, and not a first, resort," she wrote.
House and Senate members are expected to easily muster the
two-thirds vote needed for an override today.
The tax hikes passed 116-26 in the House and 30-9 in the
Senate.
"I expect the votes will stay - a very high number voted for
it in the first instance," said House Speaker Thomas M. Finneran (D-Mattapan).
The House minority leader, Rep. Francis L. Marini (R-Hanson), characterized the chances of
blocking an override as a "joke."
"They have more than they need - no doubt about it," said
Marini, bemoaning the tax hike at a time when taxpayers are reeling from stock market losses.
Swift's message was generally non-combative in tone.
But she hammered home her contention that lower taxes during
the past 10 years helped Massachusetts weather the recession better than the last one in the early 1990s.
Swift claimed the typical family will pay $324 in additional
state income tax, and the personal exemption forces a heavier burden on low-income taxpayers. She claimed Bay State
residents pay twice the national average in state income tax, and the highest per capita
income tax.
She wrote that the increased cigarette tax will cost each
smoker an additional $287 and gives Massachusetts the highest tobacco tax in the country.
She commended lawmakers for delaying the schedule for fully
funding the state pension system, but expressed disappointment they chose not to reduce the payout of lottery prizes.
"A slight reduction in lottery payout is better than a large
increase in the tax burden," Swift wrote.
Senate President Thomas F. Birmingham said, "The position of
this administration throughout was irresponsible and based on the intellectually dishonest belief that you could remove $1.2
(billion) from the budget and it wouldn't affect anyone - that's nonsensical."
Both Birmingham and Finneran cited $2 billion in budget cuts
over the past two years and said that lawmakers had no choice but to raise taxes.
"It's a recognition of how quickly and dangerously our
finances destabilized," Finneran said.
Finneran said Swift is in an enviable position - she gets to
veto taxes and she also gets to spend the added revenues after lawmakers override her. "We take the heat for everything,"
Finneran said. "I ask legislators to do the right thing and don't worry about who gets credit or
blame."
Swift met with Republican leaders yesterday to discuss
potential cuts to the $22.93 billion budget passed Friday.
Lawmakers indicated she is eyeing $400 million in cuts, with
the bulk of them expected in health care.
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Veto Message of Governor Jane Swift
July 22, 2002
To the Honorable Senate and House of Representatives:
Pursuant to Part the Second, Chapter I, Section I, Article
II of the Constitution of the Commonwealth of Massachusetts, I am returning unsigned House Bill No. 5250, entitled "An
Act Enhancing State Revenues."
I commend the General Court for its attempts to grapple with
the results of this national recession. I also commend the General Court for its foresight over the last decade in working
with the administration to build reserves that totaled over $3.2 billion. Without those savings,
this crisis would have been much more severe.
Although I understand the difficulty of crafting a budget in
the face of declining revenues I believe that raising taxes by $1.2 billion is not only unnecessary; it is also unwise.
Increasing the tax burden on a typical family by up to $600 as they struggle to rise above a stagnant
state and national economy is the very opposite of fiscal responsibility. The
General Court has worked to set money aside over the past decade, but it has also overridden $1.174
billion in Gubernatorial vetoes, almost the exact amount as its proposed
tax increase.
We have made substantial progress in reducing the tax burden
on our citizens but we still have a long way to go. Our citizens pay twice the national average in state income tax. As
a percent of personal income, our income tax was the second highest in the nation last year.
Massachusetts has the highest per capita personal income tax in the nation.
By lowering our taxes over the last 10 years we have created
a diverse economy that has weathered the current recession far better than it did in the late 80's and early 90's. Raising
taxes to the extent proposed by the General Court reverses that trend and sends a message
to entrepreneurs and workers that Massachusetts is slipping back to its old tax and spend
ways. Raising taxes while business and workers are struggling to gain the confidence needed
to create prosperity is the wrong thing to do economically.
That there are strong economic reasons for not raising taxes
cannot be doubted but there are other compelling reasons as well.
● This tax increase not only raises taxes without voter
approval, it raises taxes in the face of explicit voter disapproval. By ignoring the initiative votes that sought to
roll back the income tax rate to 5% and to provide a deduction for charitable giving, the General Court is ignoring
the will of the people and endangering the integrity of the initiative
process. Even though elected officials may not agree with ballot initiative results, they still have a duty to implement
those votes.
● The General Court bows in the direction of rolling the
income tax back to 5% but the text of the legislation suggests otherwise. As written, the earliest the tax rate will reach the
voter approved 5% is in 2013. The earliest the charitable deduction may be restored will be in
2014.
The language of economic analysis, while useful for policy
makers, often obscures the actual cost to average citizens. This legislation casts a wide net in the search for revenue. If
passed this legislation will cost taxpayers the following:
● The typical family will pay $324 in additional state
income tax. This increase comes from freezing the roll-back, reducing the personal exemption, and eliminating the charitable
deduction. Reducing the personal exemption also makes our income tax more regressive,
forcing a heavier burden on those who can least afford to pay. Eliminating the deduction for
charitable giving at a time when the economy already makes it difficult for citizens and
businesses to donate will further reduce this important source of social capital.
● If that typical family has one smoker, their tax burden
will increase by another $287 for a total increased burden of $611 per year. Massachusetts will have the dubious distinction
of having the highest tobacco tax in the nation, a tax that has become increasingly regressive in
recent years.
These are compelling economic, democratic, and social
reasons to reject this enormous tax increase. There are other options. I commend the General Court for enacting changes to
our pension schedule but I am disappointed that the General Court has not considered reducing
our lottery prize payout. Simply reducing our payout ratio so it ranks second in the
nation among traditional lotteries that do not operate video lottery terminals will generate
$274,000,000 in revenue. A slight reduction in lottery payout is better than a large
increase in the tax burden.
Fiscal responsibility demands that we also look to reduce
the size of government. In better economic times we could afford to prudently put money into a stabilization account
while also funding many good and useful programs. State government has grown by 76% over the
last 10 years. In 1992 the budget stood at $12.656 billion and by fiscal year 2002 the
Commonwealth's General Appropriations Act was $22.213 billion. Despite the revenue
shortfall and the talk of a fiscal crisis, budget proposals under discussion for fiscal year 2003
propose spending $750 million more than the year before.
Government plays a critical role in a just and productive
society. Tax revenues provide for public safety, education, roads, and the needs of those most vulnerable. Massachusetts
leads the nation in many of these categories. Our education system is one of the finest in the nation
and our health care program among the most generous. In a crisis like the current
one, however, we must reduce spending by setting priorities. Raising taxes should be a last, and
not a first, resort. Accordingly, even though I understand the difficult situation
faced by the General Court, I have determined to return the bill unsigned.
Respectfully submitted,
Jane M. Swift
Governor
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The Salem Evening News
Monday, July 22, 2002
A sure loser in this year's gubernatorial race
-- whose message deserves to be heard
By Taylor Armerding
It's her third try for statewide office, and Libertarian
Carla Howell is still having trouble becoming a household name in Massachusetts.
She ran for auditor in 1998 and lost. She ran for U.S.
senator in 2000 and lost. And, if you have any doubts about it, let me be the first to break it to you: She will not be elected
governor in 2002.
One recent poll pegged her support at about 1 percent, well
below Democrat Steve Grossman, who dropped out of the race two weeks ago saying he "knew when to fold
'em."
So, whose fault is this?
You could argue that the blame simply lies with the
Libertarians themselves, who are in denial about being, shall we say, out of the mainstream.
This is, after all, Massachusetts, where calls for an end to
the war on drugs, the repeal of all gun laws and elimination of the state income tax may not exactly resonate with an electoral
majority that supports zero tolerance of drugs, gun control and ever-expanded public
services.
But Howell contends that when people get to hear her
message, it does resonate, and that at least some of the blame for lousy poll numbers lies with a big-city media "news
blackout."
Well, blackout might be a bit extreme. But coverage of
Howell and other Libertarian candidates is indeed scarce. And when Howell does get some attention, she is frequently
mocked for invoking her "end-the-income-tax-small-government-is-beautiful" mantra in
response to most questions.
I'm not sure how different that is from the rote "invest-in-education-expand-health-care-protect-senior-citizens" mantra that issues from the
mouths of some of the mainstream candidates, no matter what the question. When they
do it, they call it "staying on message."
But if Libertarians are extreme, out of touch and fanatical,
they still deserve more coverage, at least by the current standards in play. They are an officially sanctioned party in
Massachusetts, having pulled more than 3 percent of the vote in a statewide election. Their
enrollment, while tiny at around 19,000, is up by more than 50 percent since 1998. The
Libertarian-run Committee for Small Government's campaign to end the income tax not only
drew enough signatures to make the November ballot, it also got a 37 percent approval in a
recent poll.
Libertarians have candidates on the ballot for U.S. Senate
and state auditor, while Republicans don't.
Beyond all that, why should we in the media worry about
including them (or the Greens) in the marketplace of ideas? If they are that crazy, the candidates will sink along with their
wild ideas. Could that be why a big-government Democrat like Senate President Tom
Birmingham, who enjoys lavish coverage, is also sinking?
Libertarians are the only ones reminding us that even with
an end to the income tax, the state budget would be about $14 billion -- $4 billion more than the final budget of Democratic
Gov. Michael Dukakis. They note the obvious -- that state spending has doubled in the past
decade -- and then ask the question nobody else will: Are education, health care,
infrastructure and social services twice as good now as then? They contend that ending the
income tax will create jobs that will far offset layoffs in the public sector.
Those are issues that all deserve a free, open and well-covered debate.
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