Fiscal recovery requires partnership

From The Beacon, Summer 2010, Vol. XXXVI, #7

It’s an even-numbered year, so with the summer heat and humidity also comes an extended break for the Legislature. The House and Senate have suspended formal sessions until January, and legislators and the governor will increasingly focus on winning re-election this fall.

It has been a difficult 19 months since the gavel opened the two-year session in January 2009. State government has enacted two budgets and many laws during that period, but it has spent more time cutting spending, eliminating programs, and reacting to bad news caused by the deep national recession. Local aid has been reduced by record amounts, and city and town officials have endured extraordinary fiscal distress as a result.

There have been positive notes during the past two years, primarily passage of local-option meals and lodging taxes, closure of the telecommunications tax loophole on poles and wires, and the extension of pension funding schedules. Overall, however, cities and towns and state government are all doing less with less. Services have been cut, taxes have been raised, reserves have been drained, and the challenges remain.

In late July, the administration revealed that without aggressive management and new tools, the fiscal 2011 state budget could be facing a $1 billion shortfall, due to increased demand for services and potential revenue gaps. Just weeks into the fiscal year, it is clear that the pattern of the past two years has not ended.

And the fiscal 2011 budget was passed using $1 billion in one-time money that will disappear next July. Given the expected cost trends, the fiscal 2012 budget is already more than $2 billion out of balance, meaning that the budget debate next winter and spring looks to be even bleaker than this year’s.

The good news is that we are not alone. The National Governor Association is reporting that the fiscal 2012 budget for most states will be the most difficult of any year since the recession began in 2008. But this shared misery is little comfort.

If voters approve Question 3, the ballot question to slash the sales tax to 3 percent, the state will lose $2.5 billion in annual revenues, including more than $1 billion in fiscal 2011. A bleak year would immediately morph into a full-fledged fiscal crisis, as there is absolutely no way that Question 3 could be implemented without causing extreme harm to all municipal, school and state services.

And so, as the summer recess begins, the hard climb has not ended. The journey is not finished.

Looking ahead, a few things are crystal clear.

It will be vitally important to educate citizens about the true state of public finances here in Massachusetts – and the fact that we cannot afford to pass an irresponsible ballot question that is intended to create fiscal chaos. Voters must agree that the common interest calls for defeat of Question 3; otherwise, state and local government will be thrown into the fiercest budget storm in memory.

Next, all returning and aspiring legislators and governors must recognize that the next legislative session must usher in a season of reform and partnership.

A partnership means that the state must recognize that shifting its fiscal problems to the local level cannot be standard practice, and local aid should not be disproportionately cut to balance the state budget. Municipal aid has been slashed by more than 30 percent, but state spending is at the same level it was in 2009. This is not sustainable, and merely forces deeper cuts in local services that are vital to our economic recovery, while increasing the already-too-high property tax burden.

A partnership means that key measures such as true municipal health insurance reform must pass because we can no longer afford the status quo. Catering to public-sector unions on this issue wastes more than $100 million in local taxpayer dollars each year, and residents are demanding change. Moreover, citizens are increasingly outraged over the unsustainable benefits that unions are insisting on preserving at all costs, here and across the nation. Until reform prevails, and costs are brought under control, municipalities will be forced to slash important services in order to pay for the unaffordable health insurance plans and other benefits that must be right-sized. Meanwhile, voter anger will grow, and voters will lash out, with damaging results.

A partnership requires balance and fairness. Local officials embrace the virtue of shared sacrifice and will shoulder their share of the burden, while concurrently striving to renew and rebuild our economy. But communities need the tools and resources to do the job.

Study after study shows that economic development requires a strong foundation of local services, including public safety, public education, public works and infrastructure, and public amenities. That’s how we will retain and attract businesses and families to Massachusetts, create private-sector income and jobs, and compete successfully in the global economy.

Summer is here. But this is not a time to rest, it’s a time keep moving forward and recognize that the only way Massachusetts will finish the journey through difficult times intact will be through a stronger state-local relationship that treats communities and local leaders as partners on the road to recovery.