Remember, "The Largest Tax Cut in State History" is LESS THAN HALF of the Largest Tax Increase in State History -- the 1989-90 ($2 billion) hikes in the income tax rate that was promised by the Legislature to be only "temporary."

Chip Ford --

Commonwealth of Massachusetts
MASSACHUSETTS SENATE
State House, Boston 02133-1503

SENATOR ROBERT L. HEDLUND
Plymouth And Norfolk District
FOR IMMEDIATE RELEASE
July 15, 1998
Contact: Senator Hedlund - (617) 722-1646

BOSTON - State Senator Robert Hedlund (R-Weymouth) today came out in opposition to the so-called tax cutting proposal crafted by the leaders of the Senate and House of Representatives and expressed serious concern over how taxpayer money will be utilized under the proposal. Hedlund specifically cited increasing the stabilization, or rainy day, fund by $475 million, thus negating the savings each tax filer will realize on their state taxes. "Expanding the rainy day fund amounts to a tax increase," stated Hedlund. "It is unconscionable this item has been included in what has been billed as a tax cut proposal," Hedlund continued. This move will make Massachusetts second only to Alaska in terms of the largest stabilization fund in the country, the difference being that Alaska finances its stabilization fund through oil revenues, not taxpayer money.

Current law states that once the rainy day fund reaches its capacity, surplus revenues will be returned to taxpayers through an increased exemption on state taxes. The current limit is set at $950 million, a figure projected to be reached this year. "Taxpayers should get all unexpected surplus revenue back once the rainy day fund is full," said Hedlund. "But that will never happen if the bar continues to be raised." Hedlund reminds taxpayers that this item was increased just last year by $410 million, an amount that would have been returned to taxpayers as an automatic tax refund if the increase hadn't been made."The leadership is schizophrenic on this issue, if they felt more was required in the rainy day fund why wasn't that pursued last year?" Hedlund questioned. "The answer is simple, money is coming in faster than expected and leadership wants to stash it rather than returning it to the rightful owner -- taxpayers.

Hedlund points out that the Massachusetts Stabilization Fund amounts to little more than a savings account used to hold money until legislators can figure out how to spend it. Unlike most other states, Massachusetts has no safeguards elaborating how and under what circumstances this fund can be tapped. "Unless changes are made regulating how this fund can be accessed it really amounts to little more than a $1.425 billion slush fund," commented Hedlund. "If the leadership is truly committed to using this fund only for protection against fiscal misfortune, there should be no disagreement about instituting some spending controls like a required 2/3 vote or a Declaration of Need issued by the Governor." Massachusetts is only one of 10 states that allows the Legislature to withdraw from such a fund by simple majority.

Hedlund has vowed to strenuously fight this provision of the tax cut proposal. "It is unfair to call something a tax cut proposal when $475 million that should be returned through an increased personal exemption is taken off the table and only $443 million is put back in through the same mechanism," declared Hedlund. "Some other parts of this bill are good and I will work hard to eliminate this unwarranted increase to the rainy day fund so that we can bring real relief to taxpayers," concluded Hedlund. A comparative chart listing the states with the largest stabilization funds is attached for your convenience.

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STATES WITH LARGEST RAINY DAY FUND BALANCES
(Data Utilized from the Last Complete survey
of the States Fiscal Year 1997)