The Boston Globe
Saturday, October 19, 2002
THE AGENDA
Fifth in a series of articles on issues facing the next governor.
Tough budget challenges awaiting the next governor
By Rick Klein
Globe Staff
Less than a month into the next administration, the new
governor will bundle all of his or her spending priorities into a thick pile of papers topped with a glossy cover and propose a
state spending plan.
Putting together a budget will be especially onerous next
year, when the state's continuing fiscal free fall will leave a $1 billion to $2 billion hole in the budget.
Massachusetts' budget problems have proved maddeningly
difficult to cope with, despite a year-and-a-half of trying. Four rounds of spending cuts have forced hundreds of state
layoffs and deep cuts to health and human service programs, yet even a $1.24 billion tax and fee
hike wasn't enough to keep the state's books in the black this year.
"A lot of people think this has been bad, but this was the
warm-up, this was just spring training," said House Speaker Thomas M. Finneran, a Mattapan Democrat. "There's no
glimmer of economic optimism or light or confidence out there. The next
governor, whoever it is, is going to have to address this aggressively."
Budget analysts are predicting that in the next fiscal year,
which begins in July, revenues will fall far short of what would be necessary just to maintain current levels of state
services. Lawmakers have already spent $2 billion of the $2.3 billion rainy-day fund, leaving the state
with virtually no cushion to protect against further economic downturns or
unexpected cost increases. That means Massachusetts will need a huge infusion of cash from somewhere or
will have to shred spending programs.
"There's no silver bullet here, because there's no one
proposal that begins to cover the gap," said Michael J. Widmer, president of the nonpartisan, business-backed
Massachusetts Taxpayers
Foundation.
The budget proposal represents the governor's most powerful
tool to advance his or her agenda and the next governor will have to devote the first few weeks in office to budget
discussions and decisions, with few attractive options on the table. Those initial moves could
determine the state's fiscal health in the short and long term, and whether the governor
will maintain a credible role in the Legislature's budget discussions in the months and years to
come.
Some fiscal challenges the next governor will face:
Choosing where to cut. Slashing spending is never easy, and
the next governor's task will be made more difficult by the fact that spending levels have already been drastically
reduced. Tens of millions of dollars have already been saved in administrative streamlining, and entire
programs have been gutted: food stamps for immigrants, the state's once-vaunted
antismoking efforts, and health coverage for 50,000 long-term unemployed adults.
Still, the budget gap facing the state next year will
require significantly more cuts. Virtually all of the cost-cutting proposals floated by the gubernatorial candidates
will require legislative approval, and that's an uncertain prospect. Lawmakers have been fiercely protective of
spending by the courts, for example, even though independent groups have
derided some of that spending as pure patronage.
The real challenge for the next governor will be how much he
or she chooses to battle legislative leaders over politically treasured spending: Quinn Bill police education benefits, for
example. Other ideas - such as eliminating entire departments, forcing state workers to
contribute more to their health insurance plans, or revamping the Pacheco Law, which makes
privatization of state services extremely difficult - could provoke battles royal with
lawmakers.
Winning such fights would help balance the budget, but they
would also jeopardize the governor's relationship with the Legislature for the rest of the four-year term. "Those are all
politically difficult, even if they seem like things we should be doing," Widmer said.
Handling taxes. Taxes are the most reliable source of state
revenue, but they're also the most difficult politically - and for good reason. No governor wants to come into office calling
for taxes, and any new taxes would have to be sold to a public that's just starting to feel the
impact of $1.24 billion increase passed this year. And there's deep skepticism about
how much more of a tax burden should be imposed on people and companies in a stumbling
economy.
"What's the taxing capacity that's left?" Finneran said.
"Even if there was the disposition to do more taxes among the House, the Senate, and the governor - from an economic point of
view, how wise is it to take more money out of people's pockets?"
Still, as the scope of the budget crisis widens, quiet talk
has begun for a fresh round of tax increases next year. The income tax could be pushed back from 5.3 percent to 5.6
percent, the sales tax could be ratcheted up from 5 percent, and suggestions have been made to
increase taxes on alcohol and gasoline as well. Some on Beacon Hill have also called for the
repeal of the hundreds of millions of dollars in tax breaks handed out to companies like
Fidelity and Raytheon during the 1990s, though the business community is bitterly opposing
such moves. This year's tax increase was passed by the Legislature with relative ease, even
over a gubernatorial veto; the question for the next governor could be whether to use that
veto pen next year, or to make tax increases easier for House and Senate members and
share the political backlash.
Beyond taxes, the next governor will have to devise some new
method of raising money, or decide whether to pursue money-generating plans, such as capping Lottery prizes,
allowing casino gambling, or floating bonds against long-term tobacco settlement money. Without a
rainy-day fund to fall back on, the budget will have little room for the games and gimmicks
- inflating revenue projections or calling for legislation with no prayer of being enacted - that
can help make ends meet during good times, Widmer said.
The future of Medicaid. Even with 50,000 people slated to be
thrown off the Medicaid rolls as of April 1, costs for the joint state-federal health program for the poor are rising by
nearly 10 percent this year. Medicaid now accounts for one-fourth of the entire state budget,
forcing spending to shrink elsewhere to accommodate legally required Medicaid
expenses.
"It's gobbling up other state programs, essentially," Widmer
said. "It's an absolutely huge problem, and it will be, even when tax collections begin to recover and grow again."
Medicaid benefits have already been scaled back in several
areas; adult recipients can no longer get teeth cleanings, hearing aids, or eyeglasses under the program. There could be
pressure to cut further, particularly by eliminating benefits for large groups, such as some
low-income adults. But it's hard to save large amounts of money in Medicaid, which is
ballooning along with other health-care costs.
Finding room for new programs. Whether it's paid family
leave for new parents or new investments in affordable housing, the next governor's spending priorities will be squeezed.
The state probably won't be able to afford even modest new spending programs for at least
three years, which means the new administration will have to get creative. To pay for social
programs, cash subsidies will be far less palatable than tax credits, and ideas whose costs are
balanced by fee increases or other new revenues will look the most attractive. Of course,
there's another way for the governor to pay for his or her agenda: wait for that elusive
economic recovery.
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State House News Service
Advances - Week of Oct. 20, 2002
STATE HOUSE, BOSTON ... In addition to making significant
budget-balancing moves, Acting Gov. Jane Swift has called on lawmakers to return to Beacon Hill to act on other
cost-trimming proposals that need legislative approval. The Legislature has previously
resisted those proposals - they hate the idea of shifting more health insurance costs to state
workers or upsetting the Lottery by cutting prizes.
But there's hall talk under the dome about the Legislature
returning for another purpose - to raise taxes again, this time in a lame-duck session.
Democrats had more than enough votes to render Swift's veto
of a $1.2 billion tax hike in August moot. They took hits on talk radio and from the state's tiny and shrinking band of
elected Republicans but it was nothing like the throw-the-bums out voter rage that followed a
similar tax hike in 1990.
If lawmakers do return - most seem to feel they won't at
this point - they're not likely to suddenly embrace all of Swift's budget proposals. At the very least, the situation will
make Beacon Hill worth watching closely over the holidays.
There are a few things to keep in mind. It was only two
months ago that some legislative leaders said they would have preferred to raise taxes even higher this year, but the votes
were not there. The Legislature has cut into spending about as deeply as it appears most
members are willing to.
It wasn't long ago that the more conservative House
overwhelmingly rejected a so-called austerity budget because members felt it cut too deeply into programs that voters
support. There's about $900 million left in the state's rainy day and tobacco settlement reserves, but
many believe much of that will be needed to balance this year's budget. And with a
projected spending-revenue gap of $1 billion to $2 billion in the fiscal year that begins July 1, there
have been precious few concrete proposals, much less consensus proposals, advanced
to close that chasm.
Raising taxes again, and during a lame-duck session, would
be a blockbuster move, and the idea remains a longshot at best. The thinking is: these lawmakers aren't that bold, are they?
But given the chance to, and working under rules designed to
prevent lame-duck sessions, both House Speaker Thomas Finneran and Senate President Thomas Birmingham declined
to rule out the possibility of returning after the election to conduct formal -
i.e. controversial business. And the Legislature has a long track record of not doing what Republican
governors want them to.
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State House News Service
Weekly Roundup - Week of Oct 14, 2002
By Craig Sandler
STATE HOUSE, BOSTON, OCT. 18, 2002 ... As candidates struck
poses on the campaign trail this week, the political community glimpsed where that trail ends: Thomas
Finneran's State House.
It has long been held to be Finneran's building, with the
House Speaker the most powerful person in the government. Events of the past week got some people in that building to
talking - will it stay that way after the election?
Both branches must agree on any legislation. So the
governor, the legislators and all special interests have always been obligated to frame their proposals in a way that's
acceptable to both the House and Senate....
Because [House Speaker Finneran] is unusually willing to
come out swinging, hold his ground, and inflict punishment on the disloyal, he has assumed the role of pack leader in state
government. In a business where success is measured in impact, you know you've made it
when there's an anti-you Web site (www.overthrowfinneran.org)....
Meanwhile, Mitt Romney said the Legislature should come back
into session to debate $100 million worth of budget-balancing strategies proposed by acting Gov. Swift. But it's not up to
Mitt Romney, nor would it be up to Gov. Romney, whether the Legislature acts. It's up to
Finneran. O'Brien said - after talking to Finneran - that she's willing to wait for October
revenue numbers for the Legislature to reconvene.
If elected, O'Brien would owe her job in part to Finneran's
support. If elected, Romney would face the same reality Republican governors have been facing for seven years. If he
wants to use his broom on Beacon Hill's "mess," he'll have to convince Finneran to hold the
dustpan. That's not too likely. It's hard to imagine Finneran suddenly falling into agreement
with ideas like an aggressive pruning of patronage jobs in the courts.
It's much easier to visualize a continuation of the status
quo, where the new governor needs Finneran's help more than Finneran needs to help the new governor....
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