The Springfield Union-News
Friday, July 26, 2002
Swift tax veto defeated
by Dan Ring
BOSTON - With a final vote of the Senate yesterday, state
residents were committed to paying $1 billion more in taxes this year.
The state Senate voted 28-9 to override acting Gov. Jane M.
Swift's veto of $1.14 billion in new taxes. The House of Representatives on Tuesday voted 122-29 to override the veto.
Senate Minority Leader Brian P. Lees, R-East Longmeadow,
made a spirited defense of the acting governor's veto, but Lees and other Republicans were outnumbered by the
Democrats. Three Democrats, none from Western Massachusetts, joined the
chamber's six Republicans in voting to sustain the veto.
Lees said he was embarrassed to be a member of the Senate.
"I've seen some stupid things happen in this Legislature,
but nothing can be ... dumber than raising taxes ... during an economic downturn," Lees said. "It's foolhardy.
Lees said the new taxes will discourage companies from
expanding in Massachusetts and may drive some out of the state.
The vote came in the wake of a report by the National
Conference of State Legislatures in Denver that found Massachusetts taxpayers are receiving the third-largest overall
tax increase in the country this year and the highest increase in personal income taxes.
Senate Majority Leader Linda J. Melconian, who presided
during the override, said the new taxes are needed to help close an estimated $2.5 billion shortfall in the $22.9 billion
state budget for the fiscal year that began July 1. The budget already contains deep cuts in human
services, health care, education and local aid, but the reductions would be even more
severe without the tax increases, she said.
"We had no alternative," Melconian, a Springfield Democrat,
said after the vote. "We had no choice."
Melconian said the new taxes come after $4.5 billion in tax
cuts approved by lawmakers during the past decade.
The tax package means a typical family of four will pay an
additional $324 a year, according to the state Department of Revenue. The law freezes the state's income tax at 5.3 percent
instead of allowing it to drop to 5 percent in January as scheduled under a law approved by
voters in November 2000.
It also includes taxing at 5.3 percent any profits on
capital gains from the sale of stock and other investment properties sold after May 1. The new capital gains tax replaces
a rate that sought to encourage long-term investments by dropping a percentage point for every year an
asset was held until it reached zero after six years.
It also abolishes a deduction on donations to charities,
another law approved by voters in 2000, and lowers the personal exemptions by 25 percent.
The package raises the state's cigarette tax by 75 cents to
$1.51 a pack, the highest in the country by a penny over the New York tax. People who smoke a pack a day will pay an
additional $287 a year, said Timothy J. Connolly, spokesman for the revenue department.
The cigarette tax takes effect immediately, Connolly said.
The freeze in the income tax, the lowering of personal exemptions and repeal of the charity deduction are all
retroactive to Jan. 1.
Melconian warned that lawmakers will again need to examine
more tax hikes early next year for the fiscal 2004 budget that begins next July 1. She said she supports increasing the
income tax to 5.6 percent and considering other measures such as legalizing casino gambling
and limiting lottery prize payouts to generate revenues for the state.
"The worst is yet to come," Melconian said. "Next year, we
will be back. Everything will be on the table."
New revenues will be needed next year because lawmakers over
the past year drained all but $170 million from the state's "rainy day" fund, Melconian said. Lawmakers used about
$900 million to balance the state budget.
Acting Gov. Jane M. Swift is scheduled to sign the state
budget Monday and issue vetoes that could total about $300 million.
Sen. Michael R. Knapik, R-Westfield, joined Lees yesterday
in voting against the override of the acting governor's veto. In the House on Tuesday, Reps. Cheryl A. Rivera, D-Springfield;
Anne M. Gobi, D-Spencer; Mary S. Rogeness, R-Longmeadow; Reed V. Hillman,
R-Sturbridge; Shaun P. Kelly, R-Dalton, and Cele Hahn, R-Westfield, all voted against the
override.
Other Western Massachusetts lawmakers voted in favor of the
override.
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The Boston Herald
Saturday, July 27, 2002
A Boston Herald editorial
Taxachusetts sees an untimely return
Whatever the politicians think, Massachusetts voters ought
to find very sobering the news that the state's deficit was the fifth worst in the country and tax increases the third largest.
Just bad luck, you think? Beware - Taxachusetts, which we had hoped had been buried at the
crossroads with a stake through its heart, is coming back to life to stalk John Q.
The National Conference of State Legislatures found that the
$1.14 billion tax package approved by the Legislature amounted to increasing the previous year's take by 5.6 percent,
trailing only Tennessee and Indiana. And the hole that had to be plugged
by some combination of taxes, fees, reserves and spending cuts amounted to 15 percent, trailing only
California, Alaska, Kentucky and New Jersey.
Yes, we know, the economic slowdown probably hit Massachusetts harder than other states
because of our concentration of firms supplying the telecommunications
industry, but there really has to be more to the story. If we hadn't been spending so much - spending throughout
the 1990s rose at roughly twice the rate of inflation - the hole in the
fiscal fence would have been a lot smaller.
The new budget enacts, for the first time, a mechanism that
prevents the Legislature from using all of any future windfall revenue increases for ordinary programs. It limits annual
spending increases to 2 percent plus inflation, with excess revenue devoted to a few special
purposes, mostly the rainy-day fund and debt reduction.
When this passed the House, there were only three such
purposes, the third being a return to taxpayers of 25 percent of the excess. But when it got to the governor's desk, Presto!
A new special use had been created, an "open space acquisition fund," to get 15 percent of the
excess. The taxpayer share had been cut to 10 percent.
If this isn't attaching jumper cables to the corpse of
Taxachusetts, we yield to anyone who can come up with a better description.
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The Telegram & Gazette
Friday, July 26, 2002
A Telegram & Gazette editorial
We're No. 1!
A report comparing the ways state legislatures have been
coping with the economic slump of the past 18 months indicates the Bay State is well on its way to regaining its
"Taxachusetts" title.
In a survey by the National Conference of State Legislatures, Massachusetts' $755 million
increase in personal income taxes -- enacted over Gov. Jane M. Swift's veto -- has
the dubious distinction of being by far the largest increase in the nation. In fact, it was seven times
as large as the second biggest increase -- a $108 million tax package in Oregon.
It also shows that Massachusetts is one of just 16 states to
raise personal income taxes by 1 percent or more -- and one of only five states to increase them by more than 5 percent.
There are probably as many alibis on Beacon Hill as there
are lawmakers who voted for the $1.2 billion package of new taxes and fees. Some blame it on the slump in capital gains
revenue resulting from the bull market on Wall Street. Lawmakers' counterproductive
response is doubling the gains tax rate to 12 percent -- retroactive to May 1 -- raising the
specter of an artificially induced revenue dip as investors sit on their securities until next year.
Mark C. Montigny, Senate Ways and Means chair, blames the
biggest-in-the-nation tax hike on the tax cuts of the past decade. That is disingenuous. Although the cuts reduced the
growth in tax collections by an estimated $3.6 billion, collections overall grew by leaps and
bounds -- thanks, at least in part, to the private-sector economic activity
stimulated by the cuts.
The Legislature achieved a precarious budget balance this
year by raising taxes and draining reserve funds. But it has shown little inclination to make the structural changes
employed by other states to achieve long-term stability: reining in Medicaid and other entitlement
programs, eliminating obsolete and poorly performing programs, reducing duplication,
privatizing services where appropriate, providing public employees incentives for
money-saving ideas, and more.
The consequence can be seen in the Conference of Legislatures report: While 11 states
managed to reduce personal income taxes this year, Massachusetts is lapsing into its old
tax-and-spend ways.
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The Salem Evening News
Thursday, July 25, 2002
Tax package
The [tax] package and the $23 billion state budget will
include [among other tax increases]:
● Adding a $2 fee to the purchase of all non-Medicaid
prescription drugs.
● Creating a $3,300 "user fee" for nursing home residents
who pay for their own care.
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The Boston Herald
Thursday, July 25, 2002
Budget taxes elderly for peers
by Jennifer Heldt Powell
Barbara Levings plans to pay her own way if she moves into a
nursing home. Under the just-approved state budget, she may have to pay extra to cover the costs of those who can't.
The budget includes a tax on nursing homes based on the
number of occupants who pay their own way or who are covered by Medicaid. It is up to nursing-home operators to decide
how much, if any, of the tax they will pass on to residents.
The tax is intended to generate money that will be matched
by the federal government. The added payments would boost the reimbursments nursing homes get for taking care of
Medicaid recipients.
Opponents figure the change will mean a cost of up to $1,000
a person each year. The tax will be borne mostly by those who cover their costs themselves or through private insurance.
"It's unfair that we'll be the only ones taxed," Levings
said. "Many of us are on fixed incomes."
Levings has lived at North Hill, a continuing-care retirement center in Needham, for two
years. It has a nursing home as well as assisted-living housing.
North Hill is a nonprofit center, so the added tax will be
passed on to residents, she said.
"I'm concerned that this is going to hit people who are
living very much on the edge and push them off the precipice and onto Medicaid rolls," said Harriett Wittenborg, another
North Hill resident. "If you're pushing people onto the Medicaid rolls, then the tax is doing more harm
than good."
Lawmakers approved the budget last week, and it is in the
hands of acting Gov. Jane Swift.
Many nursing-home operators support the tax as a way to make
up the loss they take on Medicaid residents. The state pays an average of $136 a day - $15 short of the actual cost.
The low reimbursement rate has driven many nursing homes
into bankruptcy or out of business, say industry leaders. Since 1999, 88 homes - with 53,000 beds - have closed in
Massachusetts alone.
"The problem we have is providing adequate care for 50,000
frail elderly and disabled residents given the inadequate reimbursement that we have had to operate on for the last
decade," said Ernie Corrigan, spokesman for the Extended Care Federation.
The tax would generate $145 million from nursing homes. Some
of the money would be used to fund neighborhood health centers and programs to attract long-term care workers.
But most of the cash would be put into the Medicaid program,
which is matched dollar for dollar by the federal government. As a result, the total increase would be $261.1 million,
which would mean an average of $8 a day for each patient, according to industry estimates.
"We support the concept (of the tax) as a means of beginning
to address the crisis of care many have seen in nursing homes," Corrigan said. "It doesn't solve all of our problems, but it
begins to address the issue of funding and of staffing."
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Associated Press
Friday, July 26, 2002
Budget raises the ire of CVS:
Drug chain may drop Medicaid
BOSTON - Massachusetts' largest pharmacy chain is threatening
to withdraw from the state's Medicaid program, close stores, and reduce hours because of the legislature's
decision to reduce reimbursement for prescriptions.
The president of CVS sent a letter to acting Gov. Jane Swift
yesterday, saying these consequences are unavoidable unless she vetoes a portion of the recently approved state
budget that reduces Medicaid payments to pharmacies by 11 percent.
"We are disappointed that we have to contemplate this
action," CVS president and chief executive officer Thomas Ryan wrote. "However, the current budget offers us no alternative."
CVS, which opened its first store in Lowell in 1963, has
13,000 employees working in 325 Massachusetts branches. About one of every three Medicaid prescriptions dispensed in
Massachusetts is dispensed by a CVS pharmacist, according to the Division of Medical
Assistance.
Ryan said that the proposed reimbursement rate, which would
save the state an estimated $60 million, is lower than those paid in any of the other 32 states where they operate and is
not "economically rational."
The state's independent pharmacies have also lobbied
vigorously against the cut, arguing that it would cause them to lose money on prescriptions for the elderly, poor and
handicapped Medicaid patients.
The end result, they argue, would be fewer pharmacies
providing Medicaid services and fewer medical services for the state's neediest citizens.
"This would be a huge disruption to the patients," said
Carmelo Cinqueonce, vice president of the Massachusetts Pharmacists Association. "But I think they (CVS) have no choice
with the drastic reduction that has been proposed. I don't think the legislature was aware of the
impact this would have."
Swift spokeswoman Sarah Magazine said that no veto decisions
have been made but that the reduction in Medicaid reimbursement was of "particular concern."
"The Legislature has given us a terribly difficult decision
to make," Magazine said.
The budget deliberations are now in Swift's hands, as she
reviews the spare $22.9 billion spending plan sent to her last week by the Legislature.
Confronting a $2.4 billion decrease in the state's tax base,
the Legislature made spending cuts in nearly every agency, including deep cuts in the medical assistance program.
Swift is expected to carve hundreds of millions more from
the budget to address the ongoing decline in state revenues and reduce the amount of money the state needs to withdraw from
its so-called "Rainy Day" fund.
Swift has 10 days to review the budget and she has said she
plans to use all of that time.
In addition to calling for the veto, Ryan of CVS asked Swift
to call for a public hearing on the cuts before they take effect to determine whether they "represent sound public
policy."
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The Boston Globe
Saturday, July 27, 2002
Walgreen fights rate cut
By Globe Staff and Wires
A day after CVS Corp. said it would stop filling Medicaid
prescriptions in Massachusetts if a proposal to cut pharmacy reimbursement rates is not vetoed by Acting Governor Jane
Swift, archrival Walgreen Co. vowed to take similar action at its 90 pharmacies in the state. "Our
Massachusetts stores can't fill prescriptions below our costs and continue to operate,"
said Illinois-based Walgreen. If the proposal takes effect, Massachusetts will have the lowest
pharmacy reimbursement rate among the 43 states in which Walgreen operates, the company
said.
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