The Fiscal Crisis in Massachusetts

The international fiscal crisis has hit us very hard in Massachusetts. With a proposed state budget that has already seen a reduction of $3.6 billion in proposed spending, revenue estimates indicate we will need to find at least $1 billion more in cuts. If we continue to reduce the budget in order to run government in the present manner, we are going to devastate some programs. It is clear we need to change the way we run government in order to get through this fiscal crisis. Where there are challenges there are also opportunities and we need to seize these in order to conduct a top to bottom examination of how government is run and what is expected of it.

In 1988, I was part of a small group that worked to address the fiscal crisis at that time. We proposed that we cut the size of government by reducing our employees by 6,000 (10%) and finding $600 million in reductions in our approximately $11 billion budget. We proposed reforms to change the way we delivered services. We also proposed raising taxes. After a lot of consternation and debate, we ended up passing almost all of our plans. The challenge is even larger this time and we need to examine everything we do, and how we do it in order to cope with this crisis.
It is clear that in any given year we can’t sustain the current budget even given better times and revenues. In 1980, the voters in Massachusetts passed a limitation on our property taxes. It restricts the amount that cities and towns can raise in property taxes. As a result, communities look to state government for more assistance and the state has responded. Also in the 1980’s the federal government cut back on federal programs and eliminated federal revenue sharing. David Stockman, the budget director in the Reagan White House put it succinctly, saying that you can’t share revenues when running a deficit. There were no revenues to share. Considering that Reagan raised the budget deficit more than every President combined up to his time, he was probably right, but it placed even further burden on state government. You have one branch shouldering a burden that was previously shared by three.

Even though state government has picked up a larger burden, it has not been without cost. Our infrastructure has suffered as well as long term programs such as our pension system. Even in relatively good years we have underfunded or avoided our obligation on such things as the Big Dig or the MBTA. In order to address long term concerns, we need to fix our budget, decide the proper role for state government, and set us on a course that promotes long term planning and stability. During this year’s budget debate, I said several times that we need a four pronged approach to address our fiscal dilemma. We need to cut, increase taxes, reform government and increase our job base.

Cuts: We need to examine the core functions of government. Every program in state government has a constituency and does good things, but we can’t afford to be all things to all people. One of the raps on democrats is that we decide what is best for people rather than let them make a choice (candy tax?). We need to examine all programs to find those that we can’t afford and either eliminate them or cut them back. We also need to examine the number of people in state government and find ways to cut the number of employees that we have. That doesn’t mean that employees don’t do a good job, most do. However, we need to find ways to do more with less. In order to get our house in order, we need to cut the budget. I have always opted for cutting programs out rather than enact across the boards cuts. Across the board lessens all programs regardless of their efficacy.

Taxes: Taxes are the price we pay for government. In fact, our budget demands are countercyclical. The need for our services rises during economic downturns while at the same time, our revenues plummet. Our tax burden is not high in Massachusetts. I am cognizant of the fact that the cost of living is high in Massachusetts and we need to factor that into discussions over tax burden, but once we find the core functions of government, you have to pay for them. Nuff said. We need to have a discussion over this that we never seem to have. First we need to determine what we expect from government and then we need to discuss how we pay for this. Former Speaker Charles Flaherty once told me that we should make a list of line items in order of importance in the state budget. Then we should apply state funding. If we run out of money we need to discuss whether we should fund those things left. Either they are not important or we find the revenues.

Reform: Much has been said about reforms by our Governor lately. I appreciate his passion, but I have a different definition of reform. I have several problems with the Governor’s approach. First, he is setting up straw men. We will address his concerns by the time the budget comes around to his desk. By demanding action, he is not advancing the arguments of reform, just playing politics. Second, I haven’t seen a lot of reform, just cuts and these cuts don’t address the bottom line of the budget. In the Governor’s initial Youtube budget video, he states that his pension reform will save a billion dollars over the next twenty years. That is laudable, but we need to save one billion this year! The Governor can criticize pension all he wants. (He never filed a reform bill.) We all agree on the programs and changes he is referring to. I agree on the MBTA pension, but the percentage of employees that take retirement in their 40’s is very small. After twenty years at that age the pension is around 40%, so one can’t realistically afford this. As for “retired” legislators, yes, take away a stupid loophole that most of us would be embarrassed to take. However, the three million dollar savings is an estimate if people currently in their forties and fifties live to their late eighties! This hardly solves the problem. Again, I am not saying we shouldn’t do these, but they are easy and we all agree on these. This is hardly major reform, but a political talking point. They are straw men.

What we need is more detail on his other reforms. Saving money on back room operations in our transportation departments is a good idea and standard business practice in the private sector, but how will this work? Time after time the Governor has filed bills with little detail and has expected us to pass these so that government could work out the details later. This is wrong and we are derelict of our duties if we pass something without working out the details beforehand. To me, reforms means walking into each secretariat and asking how we can deliver services for less using new technologies or techniques. Massachusetts’ economy and heritage has always been built on innovation. We need to apply these techniques to state government. For example, we have reformed our health care system, but not the delivery system. Why not a single biller system that takes the administrative costs off of individual health care entities and places them in one place doing the work of many. Why don’t we accept federal reporting requirements rather than duplicate these on the state level? Why don’t we make it easier to reuse unused drugs in nursing homes? Why don’t we push to include wiring in each new state subsidized housing project in order to place new technologies in elder apartments that keep people in their homes, monitoring them electronically? It is far cheaper than hospitalization, nursing home placement or even an individual care giver coming to each home to find out if they have taken medication. These are real reforms. Instead of pushing for the candy bar patrol, perhaps we should work on these ideas.
Reforms? Well, we know that six acres of photovoltaic produces one megawatt of electricity. That seems like a lot, but we have acres and acres of rooftops on state office buildings. Why don’t we lead by example and produce green power while reducing our electric costs? Why don’t we combine our phone systems and go out to bid for one phone system for state government? These are real reforms.

How about an executive order reducing paperwork in each department by ten percent? That’s real reform and in today’s technological society, I am sick of seeing people printing out each and every email.

Back to transportation: How about we take some of the green jobs money and exchange every
light in every traffic signal in the Commonwealth with new energy efficient lighting. We could cut energy consumption to a fraction of current use (no pun intended). It has saved a bundle on the Cape. Or how about we use roller compacted concrete as a base for our side roads at far less cost? Massport uses this as it is far more durable than asphalt. And let’s go out to bid for our aggregate (stone) for road jobs. We use the California standard. We primarily utilize two companies that ship aggregate in from out of state and we pay much more than the national average. If we used a different standard we could save millions in road projects. These are real reforms. Reforms aren’t simply cutting government, but real reforms require thought and innovation. How do we do more with less? Private companies constantly undergo this kind of self examination in order to stay competitive. We need to do the same.

We need to break down the silos in state government and let them communicate, like interlocking boards of directors. We need to place management from one department into others at staff meetings so we better coordinate state government actions and deliberations. That coordinates programs, cuts down on duplication and combines resources. That’s real reform.

The bottom line is that if we are to continue to deliver programs and services without continually telling people that we must make do with less, we need to reform our delivery system.

Increase jobs: Let’s face it, we can ask individual taxpayers for more money, or we can create more taxpayers. In order to do that, we need more people employed. That means we need to create jobs. I have written extensively about this before, so let me just reiterate a few points.

First, we need to stop treating the business community like the enemy. They create jobs and more jobs than government can create. And we need a consistent policy that gives the business community a level of comfort that the rules won’t continually change. They want consistency and transparency in rules and regulations. We haven’t achieved that and we must in order to create jobs.

We need to rein in the department of revenue. I know we need to maximize revenues, but they can’t take that task on. Their job is to promote a consistent policy, not to make policy.

We don’t need to take on individual business sectors in order to promote them over other sectors. We need to lay the foundation for any type of business that wants to be here. Things like workforce training, land preparation; coordination of assistance programs, and a healthy education system, as well as a clean environment is the basis for our economy. We need a consistent policy that promotes growth and makes business a partner with the state in order to grow revenues.

Another long post, but I believe that this is an important subject and is complicated. We have the responsibility to do more than cut and tax. We need a sense of history, not histrionics. People deserve more than catch phrases and slogans. I will post on the individual pieces of this more in the future.