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Deficit politics

Here’s how to balance the state budget without hurting our most vulnerable citizens

ON WEDNESDAY MORNING, as the Phoenix went to press, the state’s top elected officials appeared close to signing off on a plan that would close the estimated $1.4 billion budget deficit.

Unfortunately, Governor Jane Swift, House Speaker Tom Finneran, and Senate president Tom Birmingham are reportedly prepared to make dramatic budget cuts — on the order of $500 million to $700 million — to balance the state’s books. As they inevitably do, such cuts would fall disproportionately on the state’s most vulnerable citizens: the mentally ill, the mentally retarded, the sick, and the needy elderly.

More to the point, the cuts are unnecessary. State revenues have dropped precipitously in recent months as a result of the economic slowdown — a slowdown that turned into a rout following the terrorist attacks of September 11. But with a little bit of imagination and creativity, leavened with luck, we can get through this budget crisis without punishing those whose circumstances require them to rely on the kindness of taxpaying strangers.

If hundreds of millions of dollars are cut, you can be sure that human services will be hit hard. Programs already targeted for cuts by Swift include services related to AIDS, hepatitis C, breast cancer, and prostate cancer. Also likely to take a place on the chopping block: a new prescription-drug benefit for the elderly, and a $114 million, five-year commitment to care for mentally retarded adults whose parents are no longer able to meet their needs (see "Perseverance Pays Off," TJI, News and Features, December 28, 2000).

So how do we balance the budget without cutting programs and without irresponsibly borrowing from tomorrow to meet today’s needs?

In fact, it would not be as difficult as Swift, Finneran, and Birmingham seem to think.

Tap the state’s reserves. After the state’s last budget crisis in the late 1980s, a "rainy day" fund was established to help get us through the next fiscal crisis. Well, it’s raining, and all the major players agree that the time has come to make a substantial withdrawal. Those reserves have reached $2.3 billion. Swift proposes using $700 million, or less than one-third, in the current fiscal year. We suggest $800 million.

Postpone the tax cut. In November 2000, the public voted to repeal the income-tax hike rammed through in the late ’80s. Postponing the next phase of the cut for one year would save $200 million. Granted, flouting the will of the voters is a dangerous step to take — look at Speaker Finneran’s arrogant refusal to fund the Clean Elections Law, which the voters approved in 1998. But just as we have always supported reasonable changes in Clean Elections to make it more workable, so too would we support a delay — but not a repeal — of the tax cut, even though we editorialized against the tax cut’s passage. Extraordinary circumstances call for extraordinary actions. Unfortunately, Governor Swift says she’ll veto any delay of the tax cut, an action that could only be overridden with a two-thirds vote in both the House and the Senate. On Wednesday, both the Globe and the Herald reported that legislative leaders were ready to back down in the face of Swift’s veto threat.

Spend the tobacco settlement. The state receives about $300 million each year as its share of the national tobacco-company settlement. Of that, about one-third goes to a number of public-health programs (of which anti-smoking efforts are only a small part) and two-thirds are set aside in an endowment fund, so that when the checks stop coming, in about 20 years, the state can draw on the interest to meet crucial public-health needs. That’s smart and creative. But for this one year that effort should be suspended, and the $200 million slated for the endowment fund should instead be diverted to the state budget, as Swift proposes.

Skip a pension payment. Every year, the state pays $100 million into a fund — a "lock box," if you will — to cover its future employee-pension liability. This is fiscally prudent, but it needn’t be done in the midst of a budget crisis. Skipping a payment, as Swift suggests, would not affect a single retiree. Taxpayers could simply make it up after the state has been restored to fiscal health. Finneran has argued that such a move would be irresponsible, and he’s got a point. But not too many years ago the entire pension system was on a pay-as-you-go basis, with nothing set aside for future needs. As with the tobacco settlement, a one-year exception is acceptable in the midst of an emergency.

Raise health-insurance premiums. The Massachusetts Taxpayers Association has long proposed that state employees pay 25 percent of their health-insurance costs — the national average — rather than 15 percent. This step would save $70 million per year.

These steps will ease the state’s fiscal crisis for this year, but not for the future. Indeed, by some estimates the state faces a $4 billion shortfall over the next three years. But economists predict the state’s economy will likely begin recovery in the second quarter of next year. Our plan buys time without putting the burden on those who need assistance the most.

In the years to come, the state must address the most dangerous legacy of the Weld-Cellucci-Swift years: a series of tax cuts — some favoring special interests such as Fidelity and Raytheon — that, taken together, we simply cannot afford. When all these cuts are fully implemented, in 2004, they will cost $3.7 billion a year, according to the Tax Equity Alliance for Massachusetts. State officials must address tax reform. We simply can’t remove $3.7 billion from our revenue stream and not expect it to have an impact.

A final note: pushing Swift, Finneran, and Birmingham away from huge spending cuts will require legislators to vote their consciences, even if it means defying their leaders. Such behavior was once common but is almost unheard-of today, especially in the House, which Finneran rules with an iron hand. We urge you to contact your representatives and senators and encourage them to show some backbone. You can find out who they are, and how to reach them, at

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Issue Date: November 15 - 22, 2001

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