Limited Taxation
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CLT Update
Monday, March 1, 1999

"'This didn't just come out of the sky,' said Margaret Kane, executive director of the American Lung Association of Rhode Island, referring to the settlement. 'It's a direct result of tobacco-related illness.'"

It might not have "just come out of the sky," but you'd sure think so by the way the politicians and special interests have all found ways to spend our reimbursement!

Former Attorney General Scott Harshbarger argued in court that the "tobacco settlement" was owed to Massachusetts "to recover the smoking-related costs to the Commonwealth, including, but not limited to, increased expenditures for ... medical assistance provided under Massachusetts' Medicaid program [and] the CommonHealth Program."


And in 1989, the "temporary" income tax rate increase was necessary in large part to "pay old Medicaid debts," according to the contemporaneous Boston Globe report, below:

The Boston Globe
July 4, 1989
By Bruce Mohl

"House leaders plan to push for the state to deal with the fiscal 1989 deficit and pay old Medicaid debts by temporarily increasing the state income tax from 5 percent to 5.75, sources said."

Those Medicaid bills were paid off years ago;

After twice raising the limit on the tax rebate automatic trigger, there is now over a billion dollars of our excess taxes stashed away in the "rainy day" slush fund;

Revenues from continued over-taxation are pouring in hand over fist beyond estimates, creating a bigger and bigger surplus;

The state budget has doubled to over $20 billion in a mere dozen years;

An additional $250-$350 million in revenue from the "tobacco settlement" is anticipated this year and for every year at least for the next twenty-five ...

Yet still -- still! -- the income tax rate is at 5.95 percent with no reason to believe it will ever be lowered by the pols to where it belongs, as promised when we were suckered in.

All the pols can do is excavate new "unmet needs," invent new ways to squander our hard-earned income, grow government bigger and bigger, more and more costly.

Simply because they've got it.

And we don't.

Chip Ford --

The Boston Sunday Globe
February 28, 1999

Windfall creates welcome problem
Many want piece of tobacco settlement

By Jill Zuckman
Globe Staff

JOHNSTON, R.I. -- More than $16 billion is about to flow into New England from the nation's tobacco companies, and the mayor of this debt-ridden, blue-collar community is hoping for a few dollars to shore up roads, build a new elementary school, and fix the sewers.

Mayor William R. Macera is just one of the many hundreds -- city leaders, citizens, champions of all kinds of pet projects -- who now look to their state capitols with great expectations.

For legislators already riding high on the booming economy, it would seem a bonanza: millions of new dollars to dispense without a dime of new taxes. But as lawmakers begin to compose their annual budgets, the newfound money has sparked a contentious debate over where the money will have the most impact, whether the money should be returned to taxpayers, and who should decide.

"It is the largest single windfall this region has seen in recent memory," said Darrell West, chairman of the political science department at Brown University. "It's real money."

The money comes from the November settlement of a lawsuit between the states and the tobacco industry, and will begin flowing once 80 percent of the states representing 80 percent of the settlement dollars receive their state courts' approval of the deal. The states argued that they had spent billions of dollars caring for sick smokers. The tobacco companies agreed to pay 46 participating states, including all of New England, a total of $206 billion over the next 25 years.

There are virtually no strings attached to the money. One unresolved issue remains, however: whether the federal government will try to recover some of the settlement money to cover its Medcaid expenses, and whether it will try to impose conditions on the state spending.

With so much cash on the horizon, lawmakers must decide whether to take their millions and create new health programs, provide tax cuts, or launch antismoking campaigns, among other ideas.

"When you have that kind of money coming in and have 150 legislators and a governor, you're going to get 151 proposals," said Paul S. Kelly, Rhode Island's Senate majority leader.

It is quite a different problem from the one lawmakers grappled with a decade ago. Then, New England was gripped by recession. In just four years, the region lost 766,000 jobs. Unemployment averaged about 8 percent, tax revenues were low, and states struggled to provide basic services.

Today the region is economically healthy, and all six states are running surpluses, not deficits. Unemployment has hit a stunning 3.2 percent, well below the national average of 4.3 percent.

"It's a wonderful feeling, fighting over where money's going to go, rather than how to generate it," said Representative Alfred A. Russo Jr., who hopes to send Rhode Island's portion to the cities and towns, including Johnston, his hometown.

In this suburb of Providence, dominated by modest, low-slung homes, strip malls, and the state dump, the mayor knows what he would do with some of the tobacco money. The rescue squad vehicle is expected to fail its upcoming inspection, and a replacement will cost $110,000. The battalion chief's car has been grounded, too. The school-age population has exploded and the town needs another elementary school.

And that doesn't take into account the aging sewers, the pothole-ridden roads, and this year's $18 million deficit.

"We're desperate here," he said.

Macera would like just a little bit of the $63.9 million expected to arrive in time for Rhode Island's budget in 2000.

"We need new fire stations, we need new schools. The sewers are overflowing. Any money that comes into the state and that comes to the town will be well spent," he said. "I can justify in five seconds what we need the money for."

Across the region, there are people just like Macera, all hoping and even lobbying for some of the funds.

In Boston, Mayor Thomas M. Menino has already been squabbling with Governor Paul Cellucci, pushing for money for Massachusetts' cities. Cellucci has rejected Menino's advances, telling him that the cities are running surpluses and don't need the extra dollars. While they bicker, $96.9 million awaits the Commonwealth in an escrow account.

And then there are the antismoking activists who look with dismay at Macera, Menino, and others for wanting to use the money for anything other than health care and tobacco control. Even though the states are legally free to spend the money as they wish, the American Cancer Society, the Heart Association, and the American Lung Association argue it should be used to help smokers quit and to prevent teenagers from taking up the habit.

"This didn't just come out of the sky," said Margaret Kane, executive director of the American Lung Association of Rhode Island, referring to the settlement. "It's a direct result of tobacco-related illness."

That's a familiar argument to Donna Sytek, the Republican speaker of the New Hampshire House.

"Health groups look at it and say, 'At last we'll be able to expand smoking-prevention programs,' or those of us trying to balance the budget say, 'Good, $43 million would be very helpful,"' Sytek said. "Any time there's free money forever, there's no limit to the imaginations of legislators."

Yet, the money is not forever. The payments stop after 25 years. There are ways to make it last longer, however. Both Cellucci and Rhode Island Lieutenant Governor Charles J. Fogarty have proposed putting the money in trust funds and using the interest earned for programs.

One way or another, bolstering health care is a popular proposal. Cellucci and Fogarty both would dedicate their trust funds for health care. In Vermont, Governor Howard Dean said there is a consensus to use the money for prescriptions for seniors and health care for children.

Other lawmakers want to use the money for tax cuts or to solve fiscal problems. In Maine, Governor Angus King, an Independent, would return the money to the voters in the form of tax cuts. In Rhode Island, Republican Governor Lincoln Almond would put the money in the general fund, giving him leeway to fund existing programs.

In New Hampshire, Sytek wants the money to help pay for a solution to the state's education-funding crisis. A court-ordered deadline is looming, forcing legislators to devise a way to pay for public schools without relying on local property taxes.

Despite the prospect of riches to come, Fogarty sighs as he works to put together a coalition to funnel the money directly to health care programs.

"Sometimes it's better to manage in difficult situations -- you don't like what you have to do, but you know what you have to do," he said.

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