The Boston Globe
Friday, July 26, 2002
Senate approves $1.14b tax hike; Swift readies vetoes
By Rick Klein
Globe Staff
The state Senate yesterday gave final passage to $1.14
billion in tax increases, with Senate leaders saying that voters have shown a willingness to accept new taxes because
they believe Beacon Hill is also tightening its belt.
"It's safe to say that the majority of our constituents, in
poll after poll, suggested in a sense that we use a blended approach," said Senate Ways and Means Chairman Mark C.
Montigny, a New Bedford Democrat. "I'm not embarrassed that we took a very difficult
challenge and did our best to send a balanced budget to the governor's desk."
However, while legislative leaders said they have made deep
cuts in spending, the budget that they delivered to Acting Governor Jane Swift did not touch a $600 per year handout to
retired state workers who are over 65.
Swift plans to veto that money, which was originally used to
reimburse retired state workers for payments they made to sign up for expanded Medicare health benefits. Since 1991, that
coverage is automatic - and free - but the checks are still provided each year. Swift plans to
veto the $23 million for the program in the budget.
"We can't afford sacred cows in this budget," said Kevin
Sullivan, Swift's secretary of administration and finance, who said state retirees have previously protested elimination of
the checks.
Under the budget approved by the Legislature for fiscal
2003, which began July 1, state spending is slated to increase by $600 million this year, to $23.4 billion, with expansions
coming in Medicaid spending and K-12 education. On Monday, Swift will unveil the full
package of budget vetoes, and is planning to bring down spending by as much as $400
million.
Swift will recommend saving $39 million by forcing higher-paid state workers to contribute
more to their health insurance, Sullivan said. All state employees now pay 15
percent of their health insurance, while the state picks up the rest, but Swift believes those workers who can
afford it should have to pay more, he said.
She will call for a tiered system in which state workers
making more than $50,000 would pay 25 percent, and those making between $35,000 and $50,000 would pay for 20 percent,
Sullivan said. Employees making less than $35,000 would be unaffected,
he said.
"Health care costs are such an expensive item, and what we
want to do is provide a level of fairness to people who don't get paid a lot of money," Sullivan said.
Though the budget relies on the $1.14 billion in taxes, the
taxes were approved through separate legislation, which Swift vetoed earlier this week. Yesterday the Senate voted 28-9
to override the veto, giving final passage to the tax increases. That vote followed the House's
120-29 override on Tuesday. Republicans argued unsuccessfully that new taxes would hurt a
stumbling economy.
"It is mind-boggling," said Senate Republican Leader Brian
P. Lees of East Longmeadow.
The tax package freezes the income tax at 5.3 percent -
instead of letting it drop to 5 percent Jan. 1 as scheduled - eliminates the deduction for charitable contributions and
reduces by 25 percent the amount of income not subject to state taxation. It also taxes long-term capital
gains such as regular income and tacks on 75 cents to the tax on cigarettes, meaning
that Massachusetts smokers will pay $1.51 per pack to the state.
The average nonsmoking resident will be hit with an
additional tax bill of $317 next year, according to the state Department of Revenue. For a pack-a-day smoker, the increases
will total $592.
Democrats have portrayed several of the tax increases as
temporary, since they inserted language that will ensure that when the economy rebounds, the income tax will drop, the
charitable contribution deduction will be restored, and the personal exemption will increase.
But Republicans have countered that the "temporary" label is a ruse to take the bite
out of an enormous tax hike.
In order for the income tax to drop to 5 percent, for
example, revenues have to grow by 2.5 percent every year for six years.
"It's unbelievable the arrogance of some of the members of
this chamber," Lees said.
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The Telegram & Gazette
Worcester, Mass.
Friday, July 26, 2002
Tax veto overridden
By Richard Nangle
Telegram & Gazette Staff
BOSTON-- State senators overrode Gov. Jane M. Swift's veto of
$1.1 billion in tax hikes yesterday by a 28-9 vote. The tax increase, one of the largest in state history, helps fund the
$22.9 billion budget for fiscal 2003.
Three Democrats voted against the tax package, including Guy
W. Glodis, D-Auburn. The House overrode the governor's veto on Tuesday.
"Taxes should be the absolute last choice," Mr. Glodis said.
"Unfortunately, it was the first choice of the Legislature."
The package includes a $755 million increase in personal
income taxes, which the National Conference of State Legislatures says is the largest in the country this year.
Lawmakers froze the income tax at 5.3 percent, rather than
lowering it to 5 percent as required by a voter-approved 2000 referendum question.
The package also reduces the personal exemption and
postpones a charitable giving deduction. Its backers said it was necessary to prevent deeper spending cuts in health care,
human services, transportation and the courts.
Senate Minority Leader Brian P. Lees called the series of
tax hikes an embarrassment and said other states will rebound more quickly from the current economic downturn because
they have not followed suit.
However, Ways and Means Chairman Mark C. Montigny, D-New
Bedford, speaking for the majority Democrats, said other states will be forced to raise taxes next year.
Mr. Lees, a Republican from East Longmeadow, said businesses
will not have any incentive to move into Massachusetts because of high taxes levied by legislators, whom he called
"thieves who do not understand economic policy."
"This is one of the stupidest things we have ever done," he
said. "I am embarrassed to be a member of this body."
Mr. Montigny said legislators cut $2 billion before
considering tax hikes, and pointed to polls that showed Massachusetts residents want a blended approach to the state's
budget woes.
"We have consolidated and destroyed programs. We have made
painful choices," he said. "I would be more embarrassed to cut another $1 billion from services or approve an
unbalanced budget. We cannot sell the soul of our financial future by borrowing. I haven't
seen the cutting by the GOP. I see the Democrats doing the job here."
Mr. Lees said other choices were available and suggested
combining the Massachusetts Highway Department and the Metropolitan District Commission. He also called for gaming,
revenue bonding and reforming of state contracts. He said project labor agreements, which
call for union contractors on state jobs, are too costly to maintain.
Ms. Swift has said lawmakers could take more money from the
state lottery by reducing prize amounts.
Mr. Glodis said he agreed with pulling more money from the
lottery and said tobacco settlement money could have been used to help balance the budget.
"I will not go along to get along, especially when it comes
to tax increases," he said.
Mr. Glodis was the only senator in Central Massachusetts to
oppose the tax increase....
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The Providence (RI) Journal
Friday, July 26, 2002
Editorial
Taxachusetts redux
In dollars it is the largest tax increase in Massachusetts
history -- $1.14 billion. Politically, it constitutes a series of broken promises by the legislature, including: the 1989
promise to return the income tax to 5 percent when that era's recession ended; the 1994 promise to
phase out the capital gains tax in exchange for a legislative pay increase; and the
2000 implied promise to honor the will of the people, who that year insisted in a referendum vote
on finally honoring the 1989 promise! Those higher taxes will further weaken the state's --
and, hence, the region's -- economy.
Moreover, State House veterans describe the process as the
worst they have ever seen. Standing committees have all but ceased to exist, deals get done in secret by a handful of
leaders and lobbyists, and the legislative "rank and file" are simply rank. They go along
without knowing the details of what they are voting for.
Nor are these tax increases -- which have taken effect now
that the Senate has overridden Gov. Jane Swift's vetoes -- the end of it. To close the yawning fiscal 2003 gap, the state will
spend all but $170 million of a stabilization fund that a year ago held $2.3 billion. That will
leave little to ease next year's deficit, which, in a flat economy, is sure to be another
large one.
It's easy to decry failed leadership and to demand that the
lot of them be gone. Unfortunately, since few incumbent legislators face opposition in 2002, most of the true
begetters of this year's debacle will be back.
Could all of this have been avoided? Of course, in two ways:
● Foresighted budget planning that kept the growth in the
cost of state government aligned with inflation could have prevented the underlying problem. Doing that wouldn't have
precluded new initiatives, but funding these would have required a word not heard since the
early 1990s: reform. Initiatives exceeding inflation would be funded through the
reduction or elimination of other obsolete or redundant initiatives -- of which there are many.
An example: The reasonably efficient Department of Environmental Management performs
many of the same functions as the notoriously incompetent Metropolitan District
Commission. Putting the latter down and transferring its functions to the
former would effect great savings.
● Even granting poor planning for several years, at least
some of the $1.14 billion in this year's new taxes could have been avoided by one-time measures -- for example, reducing
state lottery pay-outs and selling a future portion of the tobacco lawsuit settlement (ineptly
called "securitization") for an up-front payment.
Look for these and other tricks to be used to defray the
fiscal 2004 deficit. Look for overspending to continue, instead of being addressed, as long as state legislators are not
chosen through competitive elections, and listen more to party leaders
and special interests than to voters.
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The Lawrence Eagle-Tribune
Thursday, July 25, 2002
Impact of state tax bite is on you
By David Olson
Eagle-Tribune Writer
BOSTON -- How will the largest tax increase in state history
affect you? The answer depends on whether you smoke, rely on income from stocks, bonds and the sale of property
or give a lot of money to charity.
All taxpayers will shell out more than they expected to pay
because the Legislature's $1.14 billion tax hike enacted today makes two significant changes in the state's personal income
tax:
● Freezes the flat rate of taxation at 5.3 percent,
overturning a voter-approved rollback to 5 percent that was due to take effect this year.
● Reduces personal exemptions to $3,300 from $4,400 for
single taxpayers and to $6,600 from $8,800 for couples filing a joint return.
But the rest of the tax-hike package has selective rather
than across-the-board impact on taxpayers.
Smokers, for example, will pay 75 cents more per package for
cigarettes. People who claim capital gains income from stocks, bonds and the sale of property will pay a 12 percent tax on
those gains the first year, and 5.3 percent thereafter.
And, in another reversal of voter sentiment, the Legislature
indefinitely postponed a scheduled tax deduction for charitable giving in Massachusetts....
To make matters worse, Rep. John Rogers of Norwood, the
Democratic chief of the House Budget Committee, suggested more tax increases might be needed next year if economic
conditions worsen.
That evoked immediate cries of concern.
"We're not just getting back to the term 'Taxachusetts,'
we're there," said Sen. Brian Lees, R-East Longmeadow. "It is ridiculous." ...
The large-scale tax changes are expected to bring in more
than $800 million next year. But there are several smaller changes that reach into every corner of daily life: There's a
$2-per-drug prescription fee to help fund Medicaid. Anyone going to the emergency room
for an ailment that turns out not to be an emergency will have to pay the state $3. Fees at the
Registry of Motor Vehicles will go up about $5 per transaction.
And nursing home residents who pay for their own care will
have to come up with about $3,300 in "user fees" to help pay for residents receiving Medicaid.
"I fail to see how that could be considered a user fee,"
said Barbara Anderson, a Marblehead resident and director of Citizens for Limited Taxation and
Government. "You're not getting any extra service for your money. That's a tax." ...
Experts cautioned taxpayers not to expect tax cuts if the
economy returns to the boom days of the late 1990s.
"It's a slow process that will happen over many years," said
Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed watchdog group.
Widmer said that even if the economy did rebound next year
-- still an uncertain proposition -- it would be another 10 years before the tax rate and exemptions returned to their
current rate.
That's too slow for Swift.
"As written, the earliest the tax rate will reach the
voter-approved 5 percent is in 2013," she said. "The earliest the charitable deduction may be restored will be in 2014."
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State House News Service
Wednesday, July 25, 2002
Lawmakers drop spending cap, adopt other major changes
House and Senate budget negotiators opted not to adopt a
proposed annual spending cap that had been advocated by Acting Gov. Jane Swift and House Speaker Thomas
Finneran. But the budget conferees did agree to other changes that will have
major implications for the budget when the economy turns around.
To rebuild the state's reserves, the budget on Swift's desk
requires the state to automatically divert 1 percent of total revenues to its rainy day fund beginning in fiscal 2004. That's
about $150 million. The budget also imposes strict conditions, as part of a proposed tax growth
cap, on the use of future surplus revenues, defined as tax growth of 2 percent beyond
inflation.
In such cases, 40 percent of the remaining surplus would be
sent to the rainy day fund, 35 percent made available for capital expenditures, 15 percent for open space acquisition and
10 percent for tax reductions, according to E. Cameron Huff, senior research associate at
the Massachusetts Taxpayers Foundation.
The budget also allows the state to sock much more money
into reserve accounts. By raising the rainy day fund limit from 10 percent of revenues to 15 percent, the state could
eventually plow as much as $3.4 billion into reserves, up from the present limit of about $2.3 billion.
Budget negotiators dropped the proposed spending cap of 2
percent plus inflation, as well as a plan to limit the state's reliance on capital gains tax revenues, which have dropped from
more than $1 billion in fiscal 2001 to just over $200 million in the fiscal year that ended June
30.
If adopted, the proposal to send 1 percent of revenues to
the rainy day fund will have an immediate impact on next year's state budget.
The other proposals won't have an impact until the economy
fully recovers. "It's a positive step in the direction of rebuilding our fiscal stability as some point in the future,"
said Huff."
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State House News Service
Wednesday, July 25, 2002
When state government was swimming in surplus cash between
1997 and 2000, it agreed to pay for numerous capital and public workers projects with cash, rather than borrowing.
Now squeezed for cash, the state is reversing course.
Legislation on the move in the House would authorize $102 million in borrowing to complete projects that were supposed to
be funded with cash deposited into a pair of trust funds created between 1998 and 2000.
Under legislation filed in April by Acting Gov. Swift, the
balances in those trust funds would be returned to the state's General Fund. The House gave Swift's bill (H 5037) initial
approval Thursday after it emerged from the House Ways and Means Committee Wednesday
afternoon.
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The Boston Herald
Friday, July 26, 2002
Group's study finds ed reform wastes $$
by Ed Hayward
The state's Education Reform Law, which has poured billions
of additional dollars into the state's schools, has failed to boost test scores, according to an analysis by a conservative
Boston think tank.
The free-market oriented Beacon Hill Institute suggested
that money could be better spent in the form of vouchers to help students attend private schools or in more publicly funded
but privately run charter schools.
The study, titled Getting Less For More, radically contradicted other local and national
studies - most strikingly by concluding that raising teacher pay, hiring new teachers and
reducing class size either failed to improve or worsened test scores.
The findings by the Suffolk University institute sparked
fiery reaction by some key players in the state's education reform drive, which has pumped more than $7 billion into the
state's schools since 1993.
"His initial reaction is that the findings seem to be
nonsensical" said Heidi Perlman, a spokeswoman for Education Commissioner David P. Driscoll.
Catherine Boudreau, president of the state's largest teachers union, the Massachusetts
Teachers Association, said the findings contradict what is taking place in Bay State
classrooms.
"To every parent, every teacher and every student, common
sense and experience tells them this is anti-public school propaganda, which is contradicted by legitimate research,"
Boudreau said.
Similar to the institute's study, many other surveys have
found that socioeconomic factors are the most accurate predictor of student performance on the Massachusetts
Comprehensive Assessment System exam.
But yesterday's report was the first to suggest all the
state had to do was make the exam a graduation requirement at the 10th-grade level to boost student performance. The class of
2003 is the first that must pass the exam to graduate. When they took the test in the spring of
2001, they produced dramatically higher pass rates.
Beacon Hill Institute executive director David G. Tuerck
dismissed the criticism of the analysis, which used statistics from the state.
"As far as the MTA is concerned, we know they have a vested
interest in keeping facts like this from the public," Tuerck said. "They should be upset to learn about this because it
contradicts the public relations efforts they make to tell a story that's just not true."
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