The Boston Globe
Monday, November 4, 2002
State's new leader to face more tight times
By Rick Klein
Globe Staff
The greatest dreams of the gubernatorial candidates are
predicated on an economic recovery.
That rebound at times is treated as almost a foregone
conclusion on the campaign trail, with candidates promising to roll back taxes and expand social programs when it arrives.
But interviews with a range of economists and fiscal
specialists suggest that the next governor will serve a four-year term defined by budget limitations. Digging out from
the current revenue plunge - the state's worst in more than 50 years - will take years of making do with
less, and several years of sustained economic recovery could be needed just to
get the state back to the fiscal health it enjoyed through the late 1990s.
"It will absolutely engulf and torment the next administration," said Michael J.
Widmer, president of the non-partisan, business-backed Massachusetts Taxpayers
Foundation.
Unlike the last budget crunch of the late 1980s and early
1990s, which was closely linked to a moribund economy and high unemployment, this fiscal downturn is worse than the
surrounding economic conditions. What really threw the state into this rut was the dramatic
decline in capital gains and income tax revenues in 2001, after the stock market slide.
It's not that lawmakers recklessly spent all the overflowing
revenues during the good times. But, rather than put all of that money away, they began to build some of it into the state
operating budget, expanding government services such as health care and education.
When those revenues disappeared, the state was left
scrambling to balance the budget and was forced to shrink services, and lawmakers chose to replace revenues with new
taxes. But none of those efforts has been sufficient, and it is likely to take years for the state economy to
grow enough to replace the money that's been lost, said Alan Clayton-Matthews,
a professor of public policy at the University of Massachusetts at Boston.
"The whole state system got used to a budget that was
increasing by 5.8 percent per year, and revenues that increased at 6 percent a year," Clayton-Matthews said. "That builds into
the budgetary process a certain momentum. The needs of state government spending have
certainly expanded. That makes this fiscal crisis very difficult to cope with. We won't be out
of the woods for a while."
It is precisely because the mid-to-late-1990s were so good
that the current crisis seems so bad. Back then, Massachusetts politicians could do it all: dramatically expand spending on
education and health care, cut taxes by $4 billion, even stash away $2.3 billion in the bank
for a rainy day. Even with new tax cuts taking effect, state revenues grew 6.6 percent in
fiscal 2001, which ended June 30 of that year. In the following 12 months, revenues dropped 14.6
percent - a swing that led to a quick gobbling up of most of the rainy day fund, four rounds
of budget cuts, and a $1.2 billion tax hike.
"It's the largest collapse of revenues in state history, and
at the same time, we've had to fight 10 years of high expectations," said Kevin J. Sullivan, Acting Governor Jane
Swift's secretary for administration and finance. "This is something that is real. It's not an aberration."
The budget crunch, now 18 months old, has forced a sudden
reordering of priorities on Beacon Hill. Talk that not long ago was of new programs and massive tax cuts has turned to
service reductions and tax increases, with the state facing a budget gap of between $1 billion
and $2 billion in the next fiscal year and a projected deficit of $100 million remaining in this
year's $23 billion budget.
While the gubernatorial candidates have offered broad-brush
plans to close the budget gap, none of them seem to grasp the enormity of the situation, Widmer said.
Indeed, it may be tempting for the next governor to brush
aside the bad fiscal news - not just for political expediency, but because the economy seems to be offering reasons for
optimism. To be sure, the Massachusetts economy has been hit hard, but this recession is not nearly as
bad as the last one in the Bay State, economists say.
In the late 1980s, the state's economy was battered from
several directions: the demand for minicomputers - a major product from the region - fell, defense spending plummeted, and
the real estate market crashed. Unemployment edged up toward double digits; now, by contrast,
the unemployment rate seems to have flattened out at around 5 percent.
"It's a whole lot better [economically] this time around,
despite all the talk of the gloom and doom," said Wayne Ayers, chief economist for Fleet Boston Financial. "There's no
resemblance to what we went through a dozen years ago, when New England led the
recession, and it lasted 4½ years."
But the state's fiscal downturn - that is, the impact on
state revenues - has turned out to be demonstrably worse than a decade ago. The worst year-to-year revenue swing of the last
downturn was 9 percentage points, compared to the 21-point swing the state saw between
fiscal 2001 and fiscal 2002.
"When you have a boom like that, the falloff or the
correction can be pretty steep," he said.
State leaders had a flawed implicit assumption: that a big
chunk of revenues from capital gains and stock options would continue to roll in in perpetuity, said Roger
Brinner, chief economist with the Parthenon Group in Boston. "We were in a
hyper-growth mode," Brinner said. "There's a tremendous amount of fluff in the stock market boom."
There is some good news. Legislators did not allow state
spending in the 1990s to grow at the levels of the mid-1980s - 12.3 percent, 14.3 percent, and 12.0 percent in successive
years - and the state wisely built up reserves to help with the downfall.
Moreover, political will coalesced quickly this time around
the need to cope with the problems, prompting budget cuts and a major tax increase. That's in sharp contrast to 1988
and early 1989, when the state's political leaders repeatedly denied that
any budget shortfalls even existed.
But the state's rainy day fund is just about tapped out now,
with just $300 million remaining. And despite the size of the income tax increase passed this year, budget writers now say it
is not sufficient to close the gap, prompting discussion of another round of new taxes next year.
In any case, hundreds of millions of dollars in spending will have to be trimmed next
year and the year after, Widmer said.
In some ways, it's not an appealing period for the new
governor to take over. But it could provide the impetus for serious reform of government services. Already, the state has
moved to reexamine Medicaid expansions, since the program accounts for one-fourth of the state
budget and is increasing at 10 percent each year.
"We need to curtail the expense side of government, and it's
going to be painful," Sullivan said. "But it's a great opportunity to change the culture on Beacon Hill."
Still, if history is any guide, when things do turn around,
years of belt-tightening could turn into years of excess all over again, Brinner said. That could give the next governor
unprecedented opportunity - something that will be sorely lacking in the short term.
"Politicians tend to think life is a trend, and it's a
cycle," Brinner said, offering a slightly more optimistic forecast. "In the good times, they really don't have an
appreciation of how much fluff there is. And in the bad times, they don't realize how fast things can turn around. In two
to three years, the state's fiscal health is going to be very strong."
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To: Rick Klein, Boston Globe
From: Chip Ford. Dir. of Operations, CLT
Re: "State's new leader to face more tight times," (Nov. 4)
Date: Monday, November 4, 2002
Good report, Rick, but one further observation would have
been welcomed and useful:
Bailing out the state from its current "fiscal crisis" is
built on the backs of taxpayers who were forced to bail out the mismanaged state from its last fiscal crisis, when the income
tax rate was "temporarily" increased from 5 percent to 5.75 percent in 1989, then again hiked to
6.25 percent the following year.
When the 1989-90 fiscal crisis "emergency bonds" were
finally paid off in the mid-90s, the income tax rate by all rights should have been returned to 5 percent. The Legislature
refused to honor its promise to taxpayers when it hiked the rate, and instead kept spending the tax
overpayments often at the rate of a billion additional dollars every year, doubling
the state budget in a dozen years. This, of course, was not sustainable when the next cyclical
economic slowdown arrived.
Now that it has inevitably arrived and revenues cannot
sustain the increased budget nor meet na‹ve growth expectations, tax increases again are the Legislature's
fallback position to keep the ball rolling. But this time the increase is built on top of an income tax base rate of 5.3
percent -- not 5 percent where it last was in 1989 before the "temporary" increase became
the usual "solution" to address a fiscal/mismanagement crisis.
Had the rate been restored to 5 percent once the "emergency"
bonds were paid off, first; spending would have been limited, thus this
spending crisis would have been minimized, and second; any increase in the income tax rate today -- if even
necessary -- would have started at the historic 5 percent, not the inflated 5.3 percent rate that should not still be in
effect more than a decade after the last "fiscal" crisis taxpayer bailout.
Beacon Hill legislators live from crisis to crisis but,
among other things, haven't learned even to recover from the last before confronting the next. We're slipping backward,
losing ground!
During the interim period between crises, they set us up for
an even bigger one. They've successfully dug the hole they're burying us in deeper this time than last -- all simply because
over the last 13 years they adamantly refused to keep their end of their contract with
taxpayers.
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The Boston Herald
Sunday, November 10, 2002
So the legislative leadership says Mitt Romney has to come
up with $2 billion in budget cuts - or else. And we all know what "or else" means - new taxes.
So let's start cutting, beginning with the tax-fattened
hyenas in the Legislature. First we slash their pay. Whenever there's a budget "crisis," their first thought is to cut our
pay. This time, why don't we all tighten our belts together?
After all, it's for the children, to coin a phrase. It's for
the working families. It's an investment in the future.
The solons' base pay is close to $50,000. Let's cut it to
$100 a year. It works for New Hampshire, and they have neither income nor sales taxes.
Next, we stop paying the solons for coming to work. Some of
these bums draw a per diem of $110 a day, just for showing up. Excuse me, for claiming to show up.
Another long-overdue reform: no former elected official must
ever be allowed to hold another state job. If this law had been on the books in 1996, it would have spared us the
nightmare of Jane Swift. Say goodbye to Billy Bulger, Big Daddy Dave Constantine, Tom
Norton, all hack judges, all hack court clerks, the sergeant-at-arms ...
Immediately eliminate all double-dipping pensions. If the
taxpayers had approved of that pig-out, they'd have elected Kid Double-dip - Shannon O'Brien, the tattooed lady.
Send Jane Swift a bill for the helicopter.
Send Jane Swift a bill for the babysitters.
Fire Fat Matt Amorello - you have plenty of just cause after
this latest $450,000 bridge fiasco - and tell him to take his $60,000-a-year ice-cream boy with him.
Next, take on the union boondoggles, which are traditionally
sacred cows. But it's a funny thing about sacred cows this year - despite squandering millions of their members' dues, the
pinky-ring bosses couldn't win a single statewide Democratic primary, let alone the general
election.
The Pacheco law, the Quinn bill, police details - everything
must go. Nothing personal, guys, we're doing it for the children.
The prevailing-wage law is another outrageous sop to thugs
who can't elect a dogcatcher anymore. Give the contracts to the low bidders, period. Why do you think it takes five years
to repave 100 feet of road around here? Because the trade unions' motto is "Don't kill the
job."
No more free rides on the MBTA - for anybody.
Alcohol is no longer a reimbursable expense.
Get in a firing mood, Mitt. Start by examining all state
payrolls and identifying everyone with a diminutive in their title - assistant, associate, deputy, etc. Fire them all.
Take no advice from the Massachusetts Taxpayers Foundation.
They are not your friends, or ours. Don't worry about El Globo either. Their hit-Mitt campaign totally tanked, just like their
rabid attempts last year to lynch Lynch. The bow-tied bumkissers have lost their clout - just
ask Gov. O'Brien, Lt. Gov. Slattery, Treasurer Seigel and U.S. Rep. Jacques.
On Tuesday, 1,311,212 citizens voted for English immersion
in the schools. But why stop there? Get rid of all public interpreters - in the courts, the emergency rooms, the welfare
offices.
Freeze all judicial appointments. We already have too many
judges and clerks. Where is it written in the state constitution that everyone who passes the bar exam is entitled
to a part-time job that pays $112,000 a year with an 80 percent pension that vests in 10 years?
Sell the naming rights to the new Bunker Hill bridge. We
should have already collected at least $75 million. (Bob Kraft got more than $100 million from Gillette for the Foxboro
stadium rights.) But someone wanted to do a favor for Bernard Cardinal Law, and I'd like to
know why.
Tax the Archdiocese of Boston, and Harvard and BU, too. It's
easy to be for higher taxes when you're tax-exempt. Let's see how much they like tax hikes when they're paying through
the nose like the rest of us.
These are just a few suggestions, Mitt. You're already the
best governor of the 21st century, and you won't even be sworn in for another seven weeks. And if Tommy Taxes or Trav or
any "advocate" objects to your cuts, you know what to tell them. You're doing it for the
children, for the working families....
Howie Carr's radio show can be heard every weekday afternoon on
WRKO-AM 680, WHYN-AM 560, WGAN-AM 560, WEIM-AM 1280, WXTK-FM 95.1 or online at
howiecarr.org.
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The Worcester Telegram & Gazette
Friday, November 8, 2002
Editorial
Voters' message
Massachusetts voters generally absolved their local
lawmakers of blame for the Beacon Hill mess, but incumbents who interpret that as approval of the direction state government
has been taking do so at their peril.
That the electorate is fed up with business as usual was
plain to see in the outcome of statewide referendum questions on the ballot.
The Libertarian Party's ballot question to end the state
income tax fell short, but it was hardly a victory for lawmakers, public employee unions and other interests who
opposed Question 1. Fully 45 percent of the electorate set aside misgivings about the negative impact on state
and municipal budgets and voted "yes."
The broad support for such a radical proposal reflects the
desperation -- and rising anger at a Legislature that has frozen the income tax rollback, imposed the largest tax
increase in state history and, now, is hinting at additional tax hikes next year.
The message to tax-and-spenders: Don't even think about it.
Voter discontent with the Legislature also was evident in
the overwhelming approval of Question 2.
The supported English immersion system specified on the
ballot has flaws. A flexible "menu" approach, minus the option of retaining the "transitional bilingual education" method,
might have prevailed.
However, voters were not convinced that the current law
would produce real benefits for non-English-speaking pupils. Consequently, they opted for change, sending a message of no
confidence in legislative claims for the bilingual "reform" they hastily enacted last June.
Voters seemed to side with the Legislature in voting "no" on
Question 3, which asked whether they favored taxpayer funding of political campaigns. With public anxiety about the
state budget crisis at a fever peak, that outcome was expected.
However, the pocketbook vote was in no way a vindication of
four years of shameful maneuvers used by the Legislature to nullify the Clean Elections Law. After the Legislature
fought, delayed and then refused to fund the law -- defying the Supreme
Judicial Court and forcing the state to sell valuable real estate at fire-sale prices -- voters apparently gave up
hope for positive change in a Legislature that will stop at nothing to hold onto the advantages
of incumbency.
An unfair assessment? Here's the test:
After voters passed the Clean Elections Law in 1998,
lawmakers doubled their per-diem and office stipends purportedly to balance an allegedly unfair advantage public
funding would give to challengers. If lawmakers now scrap the Clean Elections Law, as expected, will they
also give back the increases in their stipends?
We'll believe it if we see it. But we're not holding our
breath.
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The Lawrence Eagle-Tribune
Saturday, November 2, 2002
State investigates lawmakers' N.H. buys
[Part 2 of a two-part series]
By O'Ryan Johnson
Staff Writer
BOSTON - The state Department of Revenue has launched an
investigation into the spending habits of local politicians after The Eagle-Tribune reported that several lawmakers
were behind in paying the state a sales tax for items they bought in New Hampshire.
Details of the investigation are confidential, but the
department confirmed it will target the tax records of past and present lawmakers and candidates identified by the newspaper
yesterday.
Tim Connolly, spokesman for the department, said politicians
will know they are under investigation when a letter from the department comes in the mail.
"How they react to our letter prompts how we would go from
there," he said.
The Sales and Use Tax law says state residents must pay a
tax on items bought sale-tax-free in New Hampshire.
Department of Campaign and Political Finance records show
that 19 of 37 incumbents and hopefuls who have run for office since 2000 spent $19,865 on campaign supplies in New
Hampshire. That adds up to a $993 tax bill. Ten current lawmakers who admitted they did
not pay said they were not aware the tax existed when they hopped across the border to
make the buys. Connolly said the law is widely ignored and unenforceable on
cash-and-carry purchases.
Barbara Anderson, executive director of Citizens for Limited
Taxation, said lawmakers who shopped in New Hampshire and raised taxes during the last legislative session should be
charged a "hypocrisy surcharge" when they pay the tax.
"For the politicians who would vote to raise taxes and
refuse to pay their fair share, this (investigation) is certain to put them in the Merrimack Valley Hall of Shame," she said.
"When you see a legislator express so much concern about the state budget and not having
enough money for programs, when they avoid paying their fair share you are the seeing the
worst of the Massachusetts Legislature."
But some area lawmakers are considering either changing the
law, or scrapping it all together.
State Rep. Arthur J. Broadhurst said the state should only
seek use taxes on purchases over $500, or kill the law. He said he's not worried about the investigation.
"Fine with me, if I owe a tax I'll pay it," the Methuen
Democrat said yesterday "I think it's probably a law that's outdated and should be done away with."
State Sen. Steven A. Baddour, D-Methuen, the biggest spender
in New Hampshire, according to the records, said last week he hates taxes and wants to change the law because
it needlessly punishes his constituents.
"We shouldn't be penalizing people who live on the border
who go across to make small purchases," he said. "We shouldn't be prosecuting families or working class people because
they have to pick something up in a hurry. Maybe we should change that."
Anderson said since they pay the fourth-highest taxes in the
country, Massachusetts residents should not worry about tallying up their use tax bill.
"I don't think people feel guilty or bad about not paying
use taxes. In this state they pay their fair share," she said. "That's why DOR doesn't go after them, and really how could
they?"
State Rep. Brian S. Dempsey, D-Haverhill, said he wants to
talk with the Department of Revenue officials to see how they can enforce a law that nearly every local resident breaks.
"It doesn't make sense to keep a law on the book when
clearly there's been no effort to enforce it," he said. "I think most residents are in violation of this law. I think we need to
sit with DOR and see if it's worthwhile. It may not make sense at this point."
Local politicians who spent more than $1,000 in New
Hampshire, according to the Department of Campaign and Political Finance records, are Baddour, state Rep. Barry R.
Finegold, D-Andover, J. Alfonso Garcia, a Democrat who ran for the 16th Essex House
seat, Kathleen R. Sachs, a Republican candidate fot the 18th Essex District, state Rep. Jose
L. Santiago, D-Lawrence, state Rep. Paul E. Tirone, D-Amesbury, and former Haverhill
mayor James A. Rurak, once a Democrat candidate for the 3rd Essex Senate seat.
[Part 1 of the
series]
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The Lawrence Eagle Tribune
Saturday, November 2, 2002
Editorial
Ignored laws serve no purpose
OUR VIEW
It's time to end the use tax, which even local lawmakers ignore
You can see them every weekend, lined up in their cars to
cross the New Hampshire border.
They are Massachusetts residents heading to Salem and
Plaistow, N.H., for tax-free shopping. And it's likely every one of them is breaking the law.
The sales tax on goods sold in Massachusetts is 5 percent.
And according to the law implemented in 1966, Bay State residents are supposed to tally purchases made outside of
the state and each year write the Department of Revenue a check for the difference between
the tax paid to the other states and our 5 percent rate. For products bought in "tax-free"
New Hampshire, shoppers owe the state of Massachusetts the full 5 percent on every item
purchased.
It's called a "use tax" and is perhaps the most widely
ignored law on the books. Ignored even, as reporter O'Ryan Johnson found, by some of the very state representatives and
senators who demand we pay ever higher taxes.
Johnson found that 19 of 37 local lawmakers and candidates
purchased supplies for their campaigns in New Hampshire but failed to pay the use taxes owed. The amount involved is
piddling -- $993 in taxes on $19,865 in purchases by all 19. But it's the principle involved
that matters.
Ten of the legislators said they were unaware they were
obligated to pay any tax. That prompted the following gem from anti-tax crusader
Barbara Anderson: "They don't know about the state sales and use tax? I see. Well, it's good to know they're
incompetent as well as hypocritical."
Some legislators bristled at the suggestion they are doing
anything wrong. "You're getting a little Big Brother-ish with that," said state Rep. Paul E. Tirone, D-Amesbury. State Rep.
Arthur J. Broadhurst was equally dismissive: "Get a life," he said. "... I shop up in New
Hampshire every day, my friend, and I don't think I've ever paid a use tax."
Nor has, as Broadhurst noted, the majority of Massachusetts
residents who buy things in New Hampshire. But how's this for "Big Brother-ish": Several Massachusetts administrations
have sent tax agents or state troopers to New Hampshire to spy and record the license
numbers of Massachusetts residents avoiding the tax.
It's a prime example of an economic truth: People, even
politicians, seek any means to avoid taxation.
In penance for their law breaking, we suggest local
representatives next session campaign for the repeal of the use tax, thereby making law-abiding citizens of us all.
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