Lately in Massachusetts, this catch phrase has lead to all sorts of one-upmanship and criticism in the State House. The Governor has threatened to veto a proposed sales tax until he gets real reform and the House and Senate has gone off on the Governor for not understanding the process. I think we all need to take a step back and start again.
The newspapers and blogs have taken the Governor’s side in this and have gone as far as asking citizens to call their legislators to tell them to reform the system before revenue enhancements. This is complicated and let me give you one legislators opinion.
First, there is the premise that Legislators don’t want to reform the processes that we govern by. This is not true. As a matter of fact, both the House and Senate have passed various reform bills concerning ethics, pensions, and transportation. We are now reconciling these in conference committee. This is the process by which we work. The Governor should understand that. Second, while you may or may not agree with all the parts in the bills passed, all would be an improvement on the existing statutes. These will get better in conference and I think that most will be happy with the final bills.
So why not do these before the budget and any revenue increases? Our budget has to be passed by July 1st. We need to pass budgets in the House and Senate prior to that in order to conference the budget and get it to the Governor in time for his deliberations and signing. We can’t stop this practice as the state wouldn’t have a budget if we did and that would be bad for all of us. And we have a huge budget crisis that needs our attention. This is the worst I have seen in my 23 years in the Legislature and we need to resolve it before we know what else we can do on things such as transportation.
The Legislature is frustrated with the governor because he should understand this. The ethics bill doesn’t save a dime for the state and I would suggest that it doesn’t make us any more ethical. If you have a bad apple, they will continue to be ethically challenged regardless of how many laws one passes. This doesn’t mean that we shouldn’t examine our laws and change them to reflect our times, but this is not the most pressing issue for most people. As for the pension bill, by the Governor’s own words, it saves $1 billion over the next twenty years. We need to save $1.5 billion additionally in our budget this year because of lowered revenue figures in the past month! Again, I think most people would agree that we need to stop some of the past practices regarding pensions, but the real crisis is the budget and how we keep services intact for the citizens of the state.
I believe that the Governor is setting up “straw men” with issues that are popular with the press and play well. This is an old and reliable political ploy. However, his reticence to work with the Legislature on budget issues makes it far more difficult to resolve our budget problems.
The Governor has chastised the Legislature for not passing his gas tax. Then he has criticized us for passing a sales tax. As I have said in the past, the sales tax was not my first choice, but it was the only one with enough votes to pass. The Governor has said that a broad based tax such as the sales tax is a thumb in the eye to the citizens of the Commonwealth. Yet his gas tax would be a far larger broad based tax and much more unfair to large regions of the state. His criticism of taxes rings hollow in the face of the proposed gas, sugar, rooms, telecom and meals taxes that he has proposed. His suggestion that expanded gambling in Massachusetts is a broad based tax on the poorest residents and his department of revenue has increased their enforcement of business taxes to the point that the business community is ready to revolt.
If we want to restore the faith of the electorate, we need to pass a balanced budget that is intelligent and fair. Most people that I have talked to aren’t all that concerned about another ethics law. They equate it to dozens of gun laws and yet we still have gun crimes in the Commonwealth. If you want an honest legislature, elect honest people and let them do their jobs. People in my district are concerned over their health care, whether they can buy a house, get a job or get their kid into a college and afford to pay for it. They are worried about the economy and whether their property taxes will go up if the state can’t afford local aid. They are worried that their bridge won’t get repaired or their state park my not open or that their child can’t get a summer job. These are all budget issues. We need to finish our budget deliberations in order to do that.
Again, as I have said in the past, our budget doesn’t balance in the best of times. That is why we’ve laid off big dig debt on the Turnpike. It is why we took school building assistance and the MBTA out of our budget and gave them a revenue stream. It is why we were so backlogged in capital projects. And it is why we don’t fully fund health care each year shorting one part or another of the system. We can’t afford to do all this with the healthiest of revenue streams.
Rather than calling cuts reforms; and rather than kicking each other over the process, we should be working together on the worst budget crisis in the last 70 plus years. We should be planning for when we get out of this. We should being working to expand the economy. And we should be trying to find ways to do things cheaper while maintaining services because this is true reform.
But that takes hard work. It is easier to criticize one another over who is at fault or who mom likes best.
Saturday, May 23, 2009
Tuesday, May 5, 2009
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.
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.
Monday, May 4, 2009
House State Budget Wrap-up (Spending)
The following is the press release we put out on the budget. We passed a budget that closed a #.6 billion budget gap through revenue increases, cuts to line items (including elimination of dozens of line items), and changes in programs (reforms) that lead to tens of millions in savings. The budget is balanced and we can move forward in the process.
Two items to note in the process were that we didn’t use any of our stabilization funds and we took a hit on insurance for our own state employees. With regards to the stabilization fund, it is down to $1.2 billion and we will need some of this to balance our books at the end of this fiscal year. We need to keep the rest as we know that this budget crisis will not end in one fiscal year. We will need this and the pain of dealing with short revenues and unmet needs will go on for several fiscal years. Charley Murphy, the Chair of Ways and Means deserves a lot of credit for not responding to the moment and planning for the future by keeping this money from being spent now.
As for the insurance increase, I wanted to keep our insurance split at 85-15. In other words, we pay 85% of the costs and the worker pays 15%. We ended up at 80-20. I know that most people will not understand this and will insist that workers pay more for their insurance. I know that people will point to the fact that most private employees pay more as a percentage of the costs. However, we shouldn’t spring this on our workers during a budget debate which gives them little or no time to plan for increased costs. Second, while the percentage has been the same and is, admittedly high, it doesn’t tell the whole story. Because our percentages have stayed the same, the insurance commission has increased co-pays and deductions. For example, if you have to go to a second tier hospital in our system, your costs can be as high as a $700 co-pay up to four ties in a calendar year. So it is not as if costs have stayed the same for state workers. They pay more even when the percentage contributions stay the same. I am not going to beat this horse, but in Berkshire County, if you are in Tufts Navigator, there are no first tier hospitals, so you end up paying more. If you have to take anything other than a preferred drug (for example, for some reason the generic drug doesn’t work and you have to pay for name brand), well, I pay $ 53 on a $60 prescription. For a state employee in the GIC indemnity plan, the 70-30 split would have cost $4,000 more per year. Tough to pay when one is making $50,000/yr. Even with the 80-20 split, the cost for the indemnity plan increases around $100/mo. That is tough to take as we decrease the number of employees, freeze wages, ask for furloughs, and then ask them to work harder. I wish we could have done better.
Here is the press release we have issued on the line items and areas that I worked with in the budget:
BOSLEY COMMENTS ON TOUGH BUDGET YEAR
BOSTON – With the conclusion of the House budget deliberations late Friday evening, State Representative Daniel E. Bosley (D – North Adams) commented on the amended FY 2010 proposed spending plan, saying; “This has been a very tough budget process. With a predicted $3.6 billion dollar deficit, many programs were cut or not included at all in this House budget. In recognition of the dire fiscal situation the state and nation are facing, my budget priorities this year reflected services that, in times like these, become heavily relied upon.”
To offset the deficit and to preserve local aid, the House voted to increase the sales tax by 1.25%. The vote keeps the exemption on key household items, such as food, clothing and home heating oil, which have never been taxed. It also eliminates the need for burdensome taxes on gas, alcohol and sugar. The estimates revenues from this are projected around $900 million, which will supplement the original local aid projections, as well as allow funding for other vital programs implemented across the Commonwealth.
Earlier in the week, the House passed an amendment to restore $205 million in local aid to cities and towns and a 6.65% increase from the original projections for the First Berkshire District. The recalculated projected Chapter 70 (local aid) funding, which includes funds from the American Recovery and Reinvestment Act (ARRA) for Rep. Bosley’s district are as follows:
Adams - 2,269,459
Charlemont - 325,522
Clarksburg - 2,241,267
Florida - 617,512
Hawley - 67,594
Heath - 87,779
Monroe - 109,266
North Adams - 19,118,020
Rowe - 79,485
Savoy - 654,064
Williamstown - 1,967,845
While the FY 2010 Budget adopted by the House for higher education does reduce state funding for our public higher education institutions by approximately $156.8 million (16%) from FY 2009 levels, the federal funds provided through the American Recovery and Reinvestment Act, when coupled with the state appropriations we provided in the House Budget, will bring funding for our public higher education institutions back to their FY 2009 levels. Massachusetts College of Liberal Arts was funded at $14,372,730 and of that amount, a total of $350,000 is for the Berkshire Wireless Learning Initiative, and of that, $100,000 is allocated for the Berkshire Compact, which assesses and evaluates the higher education resources available to Berkshire County residents.
Through a language change in a Medicaid line item, championed by Representative Bosley, North Adams Regional Hospital was able to prevent cuts of approximately $3 million to their budget. This boost of funding, won on the floor, is particularly important considering that the Hospital has already made $4.5 million in cuts to their budget from last year through cutting costs, lay-offs of staff, and contract negotiations.
This year’s budget was not heavily laden with earmarks. As a result, earmarks within line items that Representative Bosley has typically secured are not present as earmarks; however, the majority of funding for these earmarks was preserved as a certain percentage within the overall line item. For example, the Turner House, which serves homeless and low income veterans in Williamstown and has historically been funded at $42,000, will retain seventy five percent of their funding from last year (which equates to $31,500). In addition to that, the United Veterans of America: Soldier On, which has been funded at $100,000, will also retain seventy five percent of their FY ’09 funding (amounting to $75,000).
The Northern Berkshire Community Coalition (NBCC) oversees all of Northern Berkshire’s social services, making sure that there is no grant application duplication or programs competing to offer our small constituency similar services. One of the programs, the Berkshire Youth Development Project, was funded at eighty percent of its FY ’09 funding which gives them $120,000 to continue coordinating efforts aimed at youth. In addition to that, $200,000 was secured for the Massachusetts Model Community Coalitions, of which the NBCC will receive $50,000. According to Rep. Bosley, “in this low economic period, our community coalitions can mobilize our communities to advocate about those services that are most critically needed, ensuring that our constituents talk with each other in finding ways to coordinate, collaborate, and maximize those resources that are left. Dollar for dollar this program is, in my opinion, one of the best in the Commonwealth. For every dollar the State puts into this, $33 is generated in community projects and programs.”
Representative Bosley also sponsored an amendment, which the House passed, to clarify language in the dairy farm tax credit from last session. The 90% refundable tax credit allows farmers to take a credit when the federal milk marketing order price for the applicable market drops below a trigger price established by the Commissioner of Agricultural Resources. The Department of Agriculture is charged with developing regulations to ensure that the cost of the tax credit to the state range from zero when milk prices are sufficient to cover Massachusetts farmers’ production expenses to no more than $4 million. The technical correction ensures that farmers will have $4 million available for assistance each year.
The 15 Regional Transit Authorities across the Commonwealth received an $8.2 million increase in funding from the originally proposed budget for a total of $54,993,971. This funding would ensure that proposed service reductions that threaten to affect consistent transportation and will allow RTAs to provide quality, reliable and cost-effective service for seniors, workers, the disabled and the general public.
The budget also included language that allocates $1,000,000 for a grant application process to offset deficits incurred at highway information centers on state highways and federally-assisted highways, including the Adams Visitor Center. “In tough economic times, keeping the Adams Visitor Center functioning as fully as possible will help the Berkshires maintain the vital tourism industry and allow it to continue flourishing”, said Bosley.
In addition to those achievements, Representative Bosley and the other members of the Berkshire delegation – Representative Smitty Pignatelli (D-Lenox), Representative Denis Guyer (D-Dalton) and Representative Chris Speranzo (D-Pittsfield) were able to secure funding for the following local and statewide programs that directly affect the Berkshires:
• $150,000 for the Western MA Enterprise Fund to provide workforce training in Western MA
• $9,383,215 for Berkshire Community College
• $50,521,840 for regional school transportation, 72% of the FY’09 total allocation
• $150,000 for the Bay State Games, which is crucial funding for the annual events held in Williamstown and North Berkshire County
• $50,000 for the Senior Farm Share Program
• Local police departments will receive 25% of their FY ’08 Community Policing grant awards
This bill, the House budget proposal, engrossed in the House, will now be sent to the Senate for consideration and debate. Once the Senate engrosses its version of the budget document, a conference committee will work out the differences between the two versions for final enactment. The bill will then be sent to the Governor.
Two items to note in the process were that we didn’t use any of our stabilization funds and we took a hit on insurance for our own state employees. With regards to the stabilization fund, it is down to $1.2 billion and we will need some of this to balance our books at the end of this fiscal year. We need to keep the rest as we know that this budget crisis will not end in one fiscal year. We will need this and the pain of dealing with short revenues and unmet needs will go on for several fiscal years. Charley Murphy, the Chair of Ways and Means deserves a lot of credit for not responding to the moment and planning for the future by keeping this money from being spent now.
As for the insurance increase, I wanted to keep our insurance split at 85-15. In other words, we pay 85% of the costs and the worker pays 15%. We ended up at 80-20. I know that most people will not understand this and will insist that workers pay more for their insurance. I know that people will point to the fact that most private employees pay more as a percentage of the costs. However, we shouldn’t spring this on our workers during a budget debate which gives them little or no time to plan for increased costs. Second, while the percentage has been the same and is, admittedly high, it doesn’t tell the whole story. Because our percentages have stayed the same, the insurance commission has increased co-pays and deductions. For example, if you have to go to a second tier hospital in our system, your costs can be as high as a $700 co-pay up to four ties in a calendar year. So it is not as if costs have stayed the same for state workers. They pay more even when the percentage contributions stay the same. I am not going to beat this horse, but in Berkshire County, if you are in Tufts Navigator, there are no first tier hospitals, so you end up paying more. If you have to take anything other than a preferred drug (for example, for some reason the generic drug doesn’t work and you have to pay for name brand), well, I pay $ 53 on a $60 prescription. For a state employee in the GIC indemnity plan, the 70-30 split would have cost $4,000 more per year. Tough to pay when one is making $50,000/yr. Even with the 80-20 split, the cost for the indemnity plan increases around $100/mo. That is tough to take as we decrease the number of employees, freeze wages, ask for furloughs, and then ask them to work harder. I wish we could have done better.
Here is the press release we have issued on the line items and areas that I worked with in the budget:
BOSLEY COMMENTS ON TOUGH BUDGET YEAR
BOSTON – With the conclusion of the House budget deliberations late Friday evening, State Representative Daniel E. Bosley (D – North Adams) commented on the amended FY 2010 proposed spending plan, saying; “This has been a very tough budget process. With a predicted $3.6 billion dollar deficit, many programs were cut or not included at all in this House budget. In recognition of the dire fiscal situation the state and nation are facing, my budget priorities this year reflected services that, in times like these, become heavily relied upon.”
To offset the deficit and to preserve local aid, the House voted to increase the sales tax by 1.25%. The vote keeps the exemption on key household items, such as food, clothing and home heating oil, which have never been taxed. It also eliminates the need for burdensome taxes on gas, alcohol and sugar. The estimates revenues from this are projected around $900 million, which will supplement the original local aid projections, as well as allow funding for other vital programs implemented across the Commonwealth.
Earlier in the week, the House passed an amendment to restore $205 million in local aid to cities and towns and a 6.65% increase from the original projections for the First Berkshire District. The recalculated projected Chapter 70 (local aid) funding, which includes funds from the American Recovery and Reinvestment Act (ARRA) for Rep. Bosley’s district are as follows:
Adams - 2,269,459
Charlemont - 325,522
Clarksburg - 2,241,267
Florida - 617,512
Hawley - 67,594
Heath - 87,779
Monroe - 109,266
North Adams - 19,118,020
Rowe - 79,485
Savoy - 654,064
Williamstown - 1,967,845
While the FY 2010 Budget adopted by the House for higher education does reduce state funding for our public higher education institutions by approximately $156.8 million (16%) from FY 2009 levels, the federal funds provided through the American Recovery and Reinvestment Act, when coupled with the state appropriations we provided in the House Budget, will bring funding for our public higher education institutions back to their FY 2009 levels. Massachusetts College of Liberal Arts was funded at $14,372,730 and of that amount, a total of $350,000 is for the Berkshire Wireless Learning Initiative, and of that, $100,000 is allocated for the Berkshire Compact, which assesses and evaluates the higher education resources available to Berkshire County residents.
Through a language change in a Medicaid line item, championed by Representative Bosley, North Adams Regional Hospital was able to prevent cuts of approximately $3 million to their budget. This boost of funding, won on the floor, is particularly important considering that the Hospital has already made $4.5 million in cuts to their budget from last year through cutting costs, lay-offs of staff, and contract negotiations.
This year’s budget was not heavily laden with earmarks. As a result, earmarks within line items that Representative Bosley has typically secured are not present as earmarks; however, the majority of funding for these earmarks was preserved as a certain percentage within the overall line item. For example, the Turner House, which serves homeless and low income veterans in Williamstown and has historically been funded at $42,000, will retain seventy five percent of their funding from last year (which equates to $31,500). In addition to that, the United Veterans of America: Soldier On, which has been funded at $100,000, will also retain seventy five percent of their FY ’09 funding (amounting to $75,000).
The Northern Berkshire Community Coalition (NBCC) oversees all of Northern Berkshire’s social services, making sure that there is no grant application duplication or programs competing to offer our small constituency similar services. One of the programs, the Berkshire Youth Development Project, was funded at eighty percent of its FY ’09 funding which gives them $120,000 to continue coordinating efforts aimed at youth. In addition to that, $200,000 was secured for the Massachusetts Model Community Coalitions, of which the NBCC will receive $50,000. According to Rep. Bosley, “in this low economic period, our community coalitions can mobilize our communities to advocate about those services that are most critically needed, ensuring that our constituents talk with each other in finding ways to coordinate, collaborate, and maximize those resources that are left. Dollar for dollar this program is, in my opinion, one of the best in the Commonwealth. For every dollar the State puts into this, $33 is generated in community projects and programs.”
Representative Bosley also sponsored an amendment, which the House passed, to clarify language in the dairy farm tax credit from last session. The 90% refundable tax credit allows farmers to take a credit when the federal milk marketing order price for the applicable market drops below a trigger price established by the Commissioner of Agricultural Resources. The Department of Agriculture is charged with developing regulations to ensure that the cost of the tax credit to the state range from zero when milk prices are sufficient to cover Massachusetts farmers’ production expenses to no more than $4 million. The technical correction ensures that farmers will have $4 million available for assistance each year.
The 15 Regional Transit Authorities across the Commonwealth received an $8.2 million increase in funding from the originally proposed budget for a total of $54,993,971. This funding would ensure that proposed service reductions that threaten to affect consistent transportation and will allow RTAs to provide quality, reliable and cost-effective service for seniors, workers, the disabled and the general public.
The budget also included language that allocates $1,000,000 for a grant application process to offset deficits incurred at highway information centers on state highways and federally-assisted highways, including the Adams Visitor Center. “In tough economic times, keeping the Adams Visitor Center functioning as fully as possible will help the Berkshires maintain the vital tourism industry and allow it to continue flourishing”, said Bosley.
In addition to those achievements, Representative Bosley and the other members of the Berkshire delegation – Representative Smitty Pignatelli (D-Lenox), Representative Denis Guyer (D-Dalton) and Representative Chris Speranzo (D-Pittsfield) were able to secure funding for the following local and statewide programs that directly affect the Berkshires:
• $150,000 for the Western MA Enterprise Fund to provide workforce training in Western MA
• $9,383,215 for Berkshire Community College
• $50,521,840 for regional school transportation, 72% of the FY’09 total allocation
• $150,000 for the Bay State Games, which is crucial funding for the annual events held in Williamstown and North Berkshire County
• $50,000 for the Senior Farm Share Program
• Local police departments will receive 25% of their FY ’08 Community Policing grant awards
This bill, the House budget proposal, engrossed in the House, will now be sent to the Senate for consideration and debate. Once the Senate engrosses its version of the budget document, a conference committee will work out the differences between the two versions for final enactment. The bill will then be sent to the Governor.
House State Budget Wrap-up (revenues)
Friday brought the end to budget deliberations in the House. The House of representative passed a $906 million increase in the sales tax in Massachusetts. That raised the tax from 5% to 6.25%. We kept the exemptions the same, so food (except for meals tax) and clothes under $1175.00 are exempt as are many other goods and services. Any tax increase is a tough vote. I think that many members were cognizant of the fact that we have had a sharp increase in unemployment over the past six months and we know that many people are worried about their finances. However, the nature of government is that demand for our services is countercyclical with revenues and we need to try to meet demands as much as possible. Our budget, due to the global recession and falling state revenues was $532 million less than the Governor’s budget and we needed to backfill revenues to meet demand. The tax increase allowed us to cover close to $300 million in transportation costs, commit almost $300 million to increasing local aid, and cover some programs that weren’t covered in the budget originally. I think that this was worth it.
The inclusion of the sales tax increase in the budget caused quite a firestorm with the Governor. He sent a letter to house members stating that he wasn’t happy with a broad based tax in the budget and later said he would veto the sales tax if it hit his desk. He later said that he wanted reform before revenues, and even later, said he wasn’t against the sales tax, but wanted to get his package in place instead. All of this leads one to wonder where the Governor will be when the budget is placed before him. At any rate, it was important that we passed a budget and send it to the Senate as they need to get to work on it. Budgets are snapshots in time and our “snapshot” on revenues is based on consensus revenue figures available at the start of the House budget process. We know that the figure we will end up with is much less, and both the Senate and conference committee will need time to process this. One could ask why we didn’t downgrade our revenue figures if we knew that revenues were dropping. Good question. Budgets are snapshots and if we downgraded or upgraded revenues based on the data available when we were deliberating, it would change every day. The same is true of line items. The needs change every day and if we reacted to this, we could never get a budget done. So we did our budget in order to keep the process going and we will work out revenues available with the best information available during budget deliberations as well as during the conference. The Governor also has the power to make corrections by vetoing or amending the budget as well as limiting the amount in the budget during the year by using his power to withhold funds in order to keep the budget balanced. This is a constitutional requirement in Massachusetts as well as most other states.
As for revenues, the final decision to vote for the increase was an easy one, although as readers of this blog (my daughter, Greg Roach and Clark Billings!) know, it was not my first choice. I felt that if the average person was going to be hit with $144/yr in order to increase the sales tax by $906 million/yr, then we should have raised the income tax to 5.8% 9or an average of $150.00/yr/average person)in order to raise $1.2 billion. In other words, for a burden of an extra $6.00/yr, we could have raised an additional $300 million. However, as the Speaker correctly pointed out, “politics is the art of the possible”, and the votes for the income tax were not present in the House. So we went with the sales tax in order to bring more money primarily to cities and towns as well as fund some of the transportation budget gap.
The other reason that this was easier for me was that it replaced the Governor’s proposals to increase a tax on “sugar” foods and a gas tax increase. While the Governor decried the use of a broad based tax to balance our budget, his gas tax would have cost the average taxpayer in my district about double the burden of an increased gas tax. I am not sure why the Governor does not consider this a broad based tax. Given this choice between the gas and other taxes, or a sales tax, the choice was easy.
Finally, the gas tax would have been used in the Boston area disproportionately while the sales tax will be collected more heavily in the Boston area, so again, this was an easy choice.
The inclusion of the sales tax increase in the budget caused quite a firestorm with the Governor. He sent a letter to house members stating that he wasn’t happy with a broad based tax in the budget and later said he would veto the sales tax if it hit his desk. He later said that he wanted reform before revenues, and even later, said he wasn’t against the sales tax, but wanted to get his package in place instead. All of this leads one to wonder where the Governor will be when the budget is placed before him. At any rate, it was important that we passed a budget and send it to the Senate as they need to get to work on it. Budgets are snapshots in time and our “snapshot” on revenues is based on consensus revenue figures available at the start of the House budget process. We know that the figure we will end up with is much less, and both the Senate and conference committee will need time to process this. One could ask why we didn’t downgrade our revenue figures if we knew that revenues were dropping. Good question. Budgets are snapshots and if we downgraded or upgraded revenues based on the data available when we were deliberating, it would change every day. The same is true of line items. The needs change every day and if we reacted to this, we could never get a budget done. So we did our budget in order to keep the process going and we will work out revenues available with the best information available during budget deliberations as well as during the conference. The Governor also has the power to make corrections by vetoing or amending the budget as well as limiting the amount in the budget during the year by using his power to withhold funds in order to keep the budget balanced. This is a constitutional requirement in Massachusetts as well as most other states.
As for revenues, the final decision to vote for the increase was an easy one, although as readers of this blog (my daughter, Greg Roach and Clark Billings!) know, it was not my first choice. I felt that if the average person was going to be hit with $144/yr in order to increase the sales tax by $906 million/yr, then we should have raised the income tax to 5.8% 9or an average of $150.00/yr/average person)in order to raise $1.2 billion. In other words, for a burden of an extra $6.00/yr, we could have raised an additional $300 million. However, as the Speaker correctly pointed out, “politics is the art of the possible”, and the votes for the income tax were not present in the House. So we went with the sales tax in order to bring more money primarily to cities and towns as well as fund some of the transportation budget gap.
The other reason that this was easier for me was that it replaced the Governor’s proposals to increase a tax on “sugar” foods and a gas tax increase. While the Governor decried the use of a broad based tax to balance our budget, his gas tax would have cost the average taxpayer in my district about double the burden of an increased gas tax. I am not sure why the Governor does not consider this a broad based tax. Given this choice between the gas and other taxes, or a sales tax, the choice was easy.
Finally, the gas tax would have been used in the Boston area disproportionately while the sales tax will be collected more heavily in the Boston area, so again, this was an easy choice.
Saturday, April 25, 2009
Budgets and Revenues
I have written a lot about the budget lately. Obviously, it is the most important document we pass each year as it sets not only the spending levels for each program run in state government, but also details our collective priorities for the upcoming year. It is important we take care of the things that people rely on in the Commonwealth and it is important that we balance our budget to be fiscally responsible.
Most budget discussions center around cuts in spending and revenues. There are a few other things we should consider. First we should take this opportunity to do a top to bottom review of how we conduct business. In 1989, several of us rolled out a plan to raise taxes and cut our budget. We proposed specific ways in which we felt we could better conduct the business of government. We proposed cuts in paperwork, consolidation of services, and we proposed the elimination of 6,000 jobs. That was ten percent of the work force at the time. Today we have grown from 66,000 workers to over 100,000. We need to do the same thing as we did I 1989. This isn’t easy, nor is it politically safe. In 1989, then Representatives Bob Havern and John Bartley, and I, the three proposers of our plan were harshly criticized by conservatives for wanting to raise taxes, and from liberals for wanting to cut our work force. At the end of the day, we enacted our tax plan and cut over $600 million out of government spending.
The other area we can’t ignore is job creation. I have spent time on this before and won’t repeat those posts, but it is important that we create more jobs, and by extension, more taxpayers and more revenue.
One final thought on the sales tax that everyone seems to be migrating to as a way to raise revenues. That would not be my first choice if indeed we have to raise taxes. However, these are the two logical places to look for increases in revenues. Tax policy is incredible arcane and complex. We shouldn’t be setting tax policy in the budget as these need to be thoroughly vetted before we make an informed choice.
Back to sales versus income tax. If we were to raise money, I would look to the income tax first. There are several advantages. First, it is more progressive than a sales tax. The sales tax drives people to the internet or to other states. People may avoid making a purchase of a larger item if sales tax increases makes it more expensive, but everybody take a pay raise even if they pay more in taxes. Most importantly, the average person would pay less if we enacted a slightly larger income tax vs. sales tax. According to the Mass. Taxpayers Foundation, a two penny rise in the sales tax would cost on average $230.00/per capita/yr. It would raise $1.45b.
A rate raise from 5.3% to 5.9% would raise the same amount, $1.45b. However, it would cost the average taxpayer $185.00/per capita/yr. That is a savings of $45.00/yr for the average taxpayer for a tax that is more progressive and is deductable on your federal income tax! This just makes sense to me.
One final final note: In 1989-90, people were very angry over the budget and the tax increases. We will see this again this year. Over the past twelve months, 102,000 people have been added to the unemployment rolls. That means that 1,000,000 people are fearful they will lose their jobs and that means they don’t think they can afford more taxes. When people are nervous about their bills, families, and jobs, it is a hard time to raise their taxes. More importantly, one top of that, we are asking them to pay more for less service. If we passed an income or sales tax increase, the best case scenario is that we restore about a third of the cuts that we are facing. And that is prior to the Senate deliberations that will probably have to base a budget on one half to a billion dollars less revenue than we are basing our budget on. People will be angry and we need to demonstrate responsibility and restrain.
Most budget discussions center around cuts in spending and revenues. There are a few other things we should consider. First we should take this opportunity to do a top to bottom review of how we conduct business. In 1989, several of us rolled out a plan to raise taxes and cut our budget. We proposed specific ways in which we felt we could better conduct the business of government. We proposed cuts in paperwork, consolidation of services, and we proposed the elimination of 6,000 jobs. That was ten percent of the work force at the time. Today we have grown from 66,000 workers to over 100,000. We need to do the same thing as we did I 1989. This isn’t easy, nor is it politically safe. In 1989, then Representatives Bob Havern and John Bartley, and I, the three proposers of our plan were harshly criticized by conservatives for wanting to raise taxes, and from liberals for wanting to cut our work force. At the end of the day, we enacted our tax plan and cut over $600 million out of government spending.
The other area we can’t ignore is job creation. I have spent time on this before and won’t repeat those posts, but it is important that we create more jobs, and by extension, more taxpayers and more revenue.
One final thought on the sales tax that everyone seems to be migrating to as a way to raise revenues. That would not be my first choice if indeed we have to raise taxes. However, these are the two logical places to look for increases in revenues. Tax policy is incredible arcane and complex. We shouldn’t be setting tax policy in the budget as these need to be thoroughly vetted before we make an informed choice.
Back to sales versus income tax. If we were to raise money, I would look to the income tax first. There are several advantages. First, it is more progressive than a sales tax. The sales tax drives people to the internet or to other states. People may avoid making a purchase of a larger item if sales tax increases makes it more expensive, but everybody take a pay raise even if they pay more in taxes. Most importantly, the average person would pay less if we enacted a slightly larger income tax vs. sales tax. According to the Mass. Taxpayers Foundation, a two penny rise in the sales tax would cost on average $230.00/per capita/yr. It would raise $1.45b.
A rate raise from 5.3% to 5.9% would raise the same amount, $1.45b. However, it would cost the average taxpayer $185.00/per capita/yr. That is a savings of $45.00/yr for the average taxpayer for a tax that is more progressive and is deductable on your federal income tax! This just makes sense to me.
One final final note: In 1989-90, people were very angry over the budget and the tax increases. We will see this again this year. Over the past twelve months, 102,000 people have been added to the unemployment rolls. That means that 1,000,000 people are fearful they will lose their jobs and that means they don’t think they can afford more taxes. When people are nervous about their bills, families, and jobs, it is a hard time to raise their taxes. More importantly, one top of that, we are asking them to pay more for less service. If we passed an income or sales tax increase, the best case scenario is that we restore about a third of the cuts that we are facing. And that is prior to the Senate deliberations that will probably have to base a budget on one half to a billion dollars less revenue than we are basing our budget on. People will be angry and we need to demonstrate responsibility and restrain.
Monday, April 20, 2009
2010 Budget continued
One other thought on taxes. We are stuck in an old tax system that may not work as well as it should in the best of times. Our corporate taxes have decreased as a portion of revenues over the past decade and longer. We are arguing over increasing the gas tax as we look for alternative fuels and higher cafe (mileage) standards for cars. As we urge people not to smoke, we up the cigarette tax. All of this means that we need to recognize that these sources of taxation are diminishing over time and will not be able to carry our budget needs in the future. Add the sales tax to that. We are concerned over a higher sales tax sending more people to New Hampshire, or even elsewhere as the tax advantage on other borders is diminished or wiped out. We also know that more and more is being bought and sold over the internet and we don't tax that, which is already a disadvantage to local businesses. An increase in sales tax adds to that disadvantage. There is a diminished marginal utility to raising taxes in these areas.
Our reflex reaction seems to be to increase these taxes to make up the revenue shortfall, which further exacerbates the problem; or to "close loopholes", which leads to anti-competitiveness and further devolution of our tax base. We need a complete rethinking of how we tax and what we tax to bring it in line with a new economic paradigm. We no longer make widgets like we used to in Massachusetts, yet our tax policy is geared to that rather than finding new (and fair) revenue streams in new services or technologies. These don't necessarily have to be taxes. In the Life Science Bill, we included a portion that allowed us to take an equity position in new companies that we assist as start-ups. Perhaps other innovative ideas can be explored.
We also don't account for the fact that companies are global in scale today. In fact, we inhibit this with new tax policy that gives us the opportunity to look at a multinational companies holdings as a way to increase our tax take here whether they actually do business in Massachusetts or make money here. At a tine when we are trying to increase our share of new technological companies, this is a huge inhibitor to increasing our job base in state.
Our reflex reaction seems to be to increase these taxes to make up the revenue shortfall, which further exacerbates the problem; or to "close loopholes", which leads to anti-competitiveness and further devolution of our tax base. We need a complete rethinking of how we tax and what we tax to bring it in line with a new economic paradigm. We no longer make widgets like we used to in Massachusetts, yet our tax policy is geared to that rather than finding new (and fair) revenue streams in new services or technologies. These don't necessarily have to be taxes. In the Life Science Bill, we included a portion that allowed us to take an equity position in new companies that we assist as start-ups. Perhaps other innovative ideas can be explored.
We also don't account for the fact that companies are global in scale today. In fact, we inhibit this with new tax policy that gives us the opportunity to look at a multinational companies holdings as a way to increase our tax take here whether they actually do business in Massachusetts or make money here. At a tine when we are trying to increase our share of new technological companies, this is a huge inhibitor to increasing our job base in state.
Saturday, April 18, 2009
2010 Budget
The FY 2010 budget was released this week and it is a grim document. The global recession has taken its toll on our revenues and this budget is much less than last year’s version. As a result of revenue declines, the Ways and Means Committee had a $3.6 billion deficit to cope with. They produced a budget that didn’t use any of the remaining stabilization funds nor did it increase taxes. The result was a stark budget reflective of the revenues available. Even for those who are well aware of the fiscal situation we face, seeing it in the budget document in black and white was very disheartening.
There are a lot of reactions to this. Some have praised it as an honest budget. Some have criticized it for not looking at raising revenues to fund the deficiencies created by the recession. Others have just slammed it without offering any suggestions. The truth is that there is not one answer to the budget crisis, but we need to work in a lot of different directions at one time. As one of the authors of the tax increase as well as the spending cuts in 1990, I have seen this situation before. That said, this is much worse than I have witnessed in 23 years as a state representative. This crisis is much deeper and is exacerbated by avoidance over the past decade of coming to grips with structural deficits in our state budget. We need to set aside politics as usual and work on a long term solution to this problem. It is important that we not only find a way to balance our budget this year, but we need to create a plan that will look out five or ten years to avoid this situation in the future. That is easier said than done as legislators run for office every two years and budget each year. That means that we tend to think in terms of one or two year tranches. Politics lately seems to lend itself to fixing the issues of the day rather than looking to long term solutions. That is not just found today in politics, but is a societal problem where we tend to look at instant gratification as an American right. We have instant communication on cell phones, can get credit at the cash register, and talk to anyone anywhere instantly over the internet. The world has shrunk to the point where we can go anywhere in a 24 hour period, and politicians tell us that we can painlessly avoid taxes while entertaining ourselves in order to balance our budget (casinos anyone?) .
How do we fix this problem? It is not easy and even a multiple solution approach is full of Hobson’s choices. I have learned that a lot of political decisions are made deliberatively and that means that by the time we make a decision, events narrow our decisions for us. Waiting on our problems today have lead to a lot of problems that have no easy answers. This is going to be difficult and we need to make people aware of that. In 1990, people were angry because we had to raise taxes and still cut the budget. Our constituent’s expectations were that if they had to suffer higher taxes, they would be provided with services. Yet we raised taxes and services were still cut. That led to anger and frustration. The same is true today. Look, we have a $3.6 billion deficit. We have cut health care programs, eliminated 55 line items completely, and cut discretionary local aid by 25%. In a best case scenario, we could raise one of two broad base taxes, sales or income. If we raise the sales tax by a penny, we will raise an additional $750 million. That means we still have to cut over $2.6 billion from a maintenance budget. If we were to raise the income tax by .6% to 5.9%, we would raise $1.6 billion. That means we still have to cut $2 billion! People would see higher taxes and they would still experience cuts in programs they have come to rely on.
One final note on taxes: People seem to be leaning towards a sales tax increase, should there be a tax increase. However, they should add up all the sales tax they pay in a week. I did. If we are talking about an average increase of $2.00 each week, that is $104 per year in increased sales tax in order to achieve a state budget increase in $750 million in revenues. If we were to increase the income tax by .6%, the average family in Massachusetts would see a $120 increase for the year. That’s a little more than the sales tax, but it raises an additional $1.6 billion in revenues for the Commonwealth. That is over two times as much for a very small increase over the sales tax. And the income tax is more progressive in that people in higher income brackets will pay more while a penny on the sales tax is a penny regardless of income. I fail to see the reticence with the income tax if indeed we need to raise taxes.
However, and it is a big however, there are other considerations before we raise taxes. First, we need to understand how people feel about raising taxes in a recession. We have lost over 102,000 jobs in the state over the last twelve months. (Actually, we may have lost more than that, but unemployment claims are up that amount in the last twelve months.) First, if 102,000 people have lost their jobs, then 1.2 million think their jobs are in jeopardy. That means people resist paying more taxes as they don’t think they will be able to afford an increase if they lose their jobs, and people are angry and uncertain about the future. We need to be mindful of this. Additionally, people don’t think we have cut the budget enough and feel we should “economize” before we look for more revenues. I agree, to a certain extent, although I don’t think there are huge savings, or savings enough to avoid some revenue adjustment if we are to maintain core services.
In 1990, the “three amigo” stabilization plan, as our plan came to be known, called for an increase in taxes, but also called for deep cuts in our budget. We suggested that we cut our workforce by 6,600 jobs. At the time, our workforce was approximately 66,000 employees. So we were looking at a downsizing of ten percent. More than that, we needed to find new ways to continue services with less people in a more productive manner. I am not suggesting that we cut “waste, fraud, and abuse”, as that is a catch phrase that simply is not true on any sizable scale in state government regardless of the press highlighting a few cases. I am suggesting that we find new ways to deliver services that save us money and that we examine every mid-level manager in our system. Let’s use some common sense rather than create departments for each new initiative. Again, we need to demonstrate that each dollar we raise goes to delivery of services that people need or expect from state government. Unions need to sit down and be part of the solution and they have to be reasonable over how we deliver services. And government can’t arbitrarily take benefits away such as health payments at a time when we are going to ask them to do more with less people and with no increase in pay. We need to find ways to cut our costs such as utilities and paperwork. Let’s put some common sense in delivery of services. Finally, let’s combine services such as pension and health systems. Let’s let the cities and towns do more to manage their costs with minimal interference.
One last point; there is a third course of action we have to undertake. I know that all of this is not easy. It is clear that we can’t cut our way to a balanced budget without cutting into essential services. We also can’t tax our way to solvency. We need to increase the number of people paying taxes in Massachusetts. That means we need to increase our job base as much as possible. The federal stimulus bill gives us a few years to plan for a long term economic strategy. We need to take that time to do what we can. People have said that we can’t impact the economy much on a state by state basis as we are restricted by the national and international economic trends. However, that doesn’t mean we can’t impact our economic future at all. We have programs that work very well. The technical assistance program run by the community development corporations around the state have been leveraging money at a 25-1 ratio. Recently our Banking Commissioner testified before federal officials that our $10 million investment in the capital access program has resulted in over $241 million in private investment and over $100 million in payroll taxes. I created that program in Chapter 19 of the Acts of 1993. In the same bill we created the EDIP program. That has incentivized over $7.4 billion in private investment in Massachusetts! My point is that with intelligent planning, we can create jobs and revenue in Massachusetts. I would much rather have more people paying taxes than paying more taxes individually.
None of this is easy and none is without pain. However, we have no choice but to try this approach. We are out of options at this point. We cannot be ideologues, nor can we be ostriches. We need to start today to resolve our problems in a manner that is honest, intelligent and keeps faith with our constituent’s expectations.
There are a lot of reactions to this. Some have praised it as an honest budget. Some have criticized it for not looking at raising revenues to fund the deficiencies created by the recession. Others have just slammed it without offering any suggestions. The truth is that there is not one answer to the budget crisis, but we need to work in a lot of different directions at one time. As one of the authors of the tax increase as well as the spending cuts in 1990, I have seen this situation before. That said, this is much worse than I have witnessed in 23 years as a state representative. This crisis is much deeper and is exacerbated by avoidance over the past decade of coming to grips with structural deficits in our state budget. We need to set aside politics as usual and work on a long term solution to this problem. It is important that we not only find a way to balance our budget this year, but we need to create a plan that will look out five or ten years to avoid this situation in the future. That is easier said than done as legislators run for office every two years and budget each year. That means that we tend to think in terms of one or two year tranches. Politics lately seems to lend itself to fixing the issues of the day rather than looking to long term solutions. That is not just found today in politics, but is a societal problem where we tend to look at instant gratification as an American right. We have instant communication on cell phones, can get credit at the cash register, and talk to anyone anywhere instantly over the internet. The world has shrunk to the point where we can go anywhere in a 24 hour period, and politicians tell us that we can painlessly avoid taxes while entertaining ourselves in order to balance our budget (casinos anyone?) .
How do we fix this problem? It is not easy and even a multiple solution approach is full of Hobson’s choices. I have learned that a lot of political decisions are made deliberatively and that means that by the time we make a decision, events narrow our decisions for us. Waiting on our problems today have lead to a lot of problems that have no easy answers. This is going to be difficult and we need to make people aware of that. In 1990, people were angry because we had to raise taxes and still cut the budget. Our constituent’s expectations were that if they had to suffer higher taxes, they would be provided with services. Yet we raised taxes and services were still cut. That led to anger and frustration. The same is true today. Look, we have a $3.6 billion deficit. We have cut health care programs, eliminated 55 line items completely, and cut discretionary local aid by 25%. In a best case scenario, we could raise one of two broad base taxes, sales or income. If we raise the sales tax by a penny, we will raise an additional $750 million. That means we still have to cut over $2.6 billion from a maintenance budget. If we were to raise the income tax by .6% to 5.9%, we would raise $1.6 billion. That means we still have to cut $2 billion! People would see higher taxes and they would still experience cuts in programs they have come to rely on.
One final note on taxes: People seem to be leaning towards a sales tax increase, should there be a tax increase. However, they should add up all the sales tax they pay in a week. I did. If we are talking about an average increase of $2.00 each week, that is $104 per year in increased sales tax in order to achieve a state budget increase in $750 million in revenues. If we were to increase the income tax by .6%, the average family in Massachusetts would see a $120 increase for the year. That’s a little more than the sales tax, but it raises an additional $1.6 billion in revenues for the Commonwealth. That is over two times as much for a very small increase over the sales tax. And the income tax is more progressive in that people in higher income brackets will pay more while a penny on the sales tax is a penny regardless of income. I fail to see the reticence with the income tax if indeed we need to raise taxes.
However, and it is a big however, there are other considerations before we raise taxes. First, we need to understand how people feel about raising taxes in a recession. We have lost over 102,000 jobs in the state over the last twelve months. (Actually, we may have lost more than that, but unemployment claims are up that amount in the last twelve months.) First, if 102,000 people have lost their jobs, then 1.2 million think their jobs are in jeopardy. That means people resist paying more taxes as they don’t think they will be able to afford an increase if they lose their jobs, and people are angry and uncertain about the future. We need to be mindful of this. Additionally, people don’t think we have cut the budget enough and feel we should “economize” before we look for more revenues. I agree, to a certain extent, although I don’t think there are huge savings, or savings enough to avoid some revenue adjustment if we are to maintain core services.
In 1990, the “three amigo” stabilization plan, as our plan came to be known, called for an increase in taxes, but also called for deep cuts in our budget. We suggested that we cut our workforce by 6,600 jobs. At the time, our workforce was approximately 66,000 employees. So we were looking at a downsizing of ten percent. More than that, we needed to find new ways to continue services with less people in a more productive manner. I am not suggesting that we cut “waste, fraud, and abuse”, as that is a catch phrase that simply is not true on any sizable scale in state government regardless of the press highlighting a few cases. I am suggesting that we find new ways to deliver services that save us money and that we examine every mid-level manager in our system. Let’s use some common sense rather than create departments for each new initiative. Again, we need to demonstrate that each dollar we raise goes to delivery of services that people need or expect from state government. Unions need to sit down and be part of the solution and they have to be reasonable over how we deliver services. And government can’t arbitrarily take benefits away such as health payments at a time when we are going to ask them to do more with less people and with no increase in pay. We need to find ways to cut our costs such as utilities and paperwork. Let’s put some common sense in delivery of services. Finally, let’s combine services such as pension and health systems. Let’s let the cities and towns do more to manage their costs with minimal interference.
One last point; there is a third course of action we have to undertake. I know that all of this is not easy. It is clear that we can’t cut our way to a balanced budget without cutting into essential services. We also can’t tax our way to solvency. We need to increase the number of people paying taxes in Massachusetts. That means we need to increase our job base as much as possible. The federal stimulus bill gives us a few years to plan for a long term economic strategy. We need to take that time to do what we can. People have said that we can’t impact the economy much on a state by state basis as we are restricted by the national and international economic trends. However, that doesn’t mean we can’t impact our economic future at all. We have programs that work very well. The technical assistance program run by the community development corporations around the state have been leveraging money at a 25-1 ratio. Recently our Banking Commissioner testified before federal officials that our $10 million investment in the capital access program has resulted in over $241 million in private investment and over $100 million in payroll taxes. I created that program in Chapter 19 of the Acts of 1993. In the same bill we created the EDIP program. That has incentivized over $7.4 billion in private investment in Massachusetts! My point is that with intelligent planning, we can create jobs and revenue in Massachusetts. I would much rather have more people paying taxes than paying more taxes individually.
None of this is easy and none is without pain. However, we have no choice but to try this approach. We are out of options at this point. We cannot be ideologues, nor can we be ostriches. We need to start today to resolve our problems in a manner that is honest, intelligent and keeps faith with our constituent’s expectations.
Subscribe to:
Posts (Atom)