It should be the best of times on Beacon Hill - if you measure good times by the torrent
of tax dollars surging into state coffers, that is.
But in the governor's office, Paul
Cellucci's aides are busy piling up the sandbags against the bedlam they fear that flood
will bring.
So far, the fiscal freshet is Beacon
Hill's best-kept secret, unexpected after a year of huge tax cuts and unremarked upon by
anxious budget makers intent on damping down budgetary expectations.
But the fact is, the state's tax
collections for the first six months of the fiscal year are running far above predictions,
conjuring up memories - and fears - of the boom and bust of the Massachusetts Miracle in
the 1980s.
In fact, tax income is more than double
what it was for the same period last year, when the state ended up with a record $900
million budget surplus.
Already Beacon Hill policymakers are
privately confronting the question of what to do with the embarrassment of riches.
In the private council he holds each
week with top legislative leaders, Cellucci has seized on the state's strong fiscal
performance to argue that, even after last year's tax cuts, Massachusetts can still afford
to cut the income tax back from 5.95 percent to 5 percent.
But Senate President Thomas F.
Birmingham, who has progressive plans of his own, and House Speaker Thomas M. Finneran,
who husbands the state's resources with the caution of a Depression-era banker, have other
ideas. "They just laugh at him," said one source familiar with the sessions.
Undaunted, Cellucci is building such a
tax cut, in phased-in fashion, into his next budget. Keenly sensitive to how the Dukakis
administration was swept from its moorings in the last fiscal flood, Cellucci thinks the
best way to avoid a repeat is to reduce the flow.
For now, there's good reason that
Cellucci's fiscal aides are hoping to downplay the situation. Having been through the
wrangling that last year's budget surplus created, they know the political struggles and
bureaucratic pressures that a bulging treasury creates on Beacon Hill.
Surpluses spur every interest group in
the state to seek more funding for pet projects and programs. The bigger the surplus, the
greater the expectations - and the harder it is for the Beacon Hill budget writers to keep
spending under control.
There's also a special political issue
at stake for the governor.
A major theme in his campaign against
Democrat Scott Harshbarger was that only he could control the state budget and prepare
Massachusetts for a downturn.
Still, as the rush of riches becomes
known, Cellucci will be hard pressed to explain why the state can't spend more on issues
that he supports, such as lowering tuition at state colleges, paying for increased health
insurance, funding early-childhood programs, and adding funding to education reform.
And then there will be an inevitable
push to provide funds for a slew of local projects, such as harbor dredgings, new ice
rinks, libraries, and weed-control programs. Last summer, eyeing the largesse, lawmakers
cobbled together $400 million in one-time projects. Cellucci vetoed half of those,
convinced that doing so would bolster his campaign image as a fiscal disciplinarian.
But those vetoes created outrage from
Cape Cod to the Berkshires. This year, the pressure will be great for the governor to OK
more one-time spending. And he may well do so, deeming that spending is preferable to
letting the surplus grow.
Secretary of Administration and Finance
Fred Laskey, who is writing the administration's budget plan for fiscal year 2000, is the
man on the front lines, trying to quash any notion that Massachusetts should let the good
times roll.
It's Laskey's job to be a pessimist, and
the laconic revenue chief is turning in an Oscar-worthy performance, with dire talk of
economic slowdowns, revenue tail-offs, and the like. He contends that the second half of
the fiscal year, which ends June 30, could be a bust. Even zero growth, perhaps.
Laskey notes that some of the major tax
cuts approved this year won't kick in until this winter and spring. Employers, he points
out, are still using the old withholding schedules, which means far larger refunds will be
due in April.
"I know you think we are crying
wolf, but our single biggest problem is our models are showing slower growth, but no one
wants to believe it," he said. "It would be catastrophic to repeat the mistakes
made in the mid- and late-'80s, when the base of government spending was allowed to grow
unchecked. It was devastating when the revenues dropped."
But others are skeptical. Any downturn
will be offset by a big uptick in the capital gains tax revenue, robust corporate tax
payments, and a $98 million down payment from the tobacco settlement that is expected in
March, they say.
Laskey's warnings are falling on deaf
ears even within the administration. Take, for example, the directive that Cellucci
budgeteers, as part of their search for savings and efficiencies, sent to the human
services bureaucracies: Submit a proposal detailing how they could pare $54 million from
what would otherwise be a maintenance budget for next year.
That may seem like a lot, but it comes
on a base of $8 billion yearly. What that request really translates to is a budget that
would hold this year's growth to $350 million rather than $400 million.
And what happened? Human services came
back with a proposal that would be a $50 million increase over and above inflation - and a
declaration that this was the absolute tightest they could cinch the belt.
That's a perfect portent for the trouble
Cellucci faces. An epidemic of surplus fever will surely follow the fiscal overflow. Pity
poor Fred Laskey, the man trying to administer the quinine.
Time is short - and the revenues are
rising.