Facing a multi-billion dollar deficit in the coming years, Massachusetts lawmakers and policy analysts discussed possible solutions to the gloomy fiscal realities facing the state.
‘We have a budget deficit in a down economy,’ said Jeff McLynch, a policy analyst for the Massachusetts Budget and Policy Center at the Statehouse yesterday. ‘Nobody wants to increase taxes or cut spending, but you have to determine which is least desirable.’
The state’s fiscal crisis stems from a massive reduction in state revenue. While last year the state government collected almost $17 billion, this year the state has only received just over $14 billion. Assuming funding for all state and local programs remains steady or rises only at the rate of inflation, there will be a budget deficit up to $3 billion for fiscal year 2004.
According to Sarah Nolan, also from the Massachusetts Budget and Policy Center, while the current economic recession has played a factor, this situation is caused mainly by excessive tax reductions during the 90s, including a major tax cut passed by voters in 2000.
In all, 47 different tax cuts were passed between 1991 and 2000, leading Nolan to note that ‘the myth of Taxachusetts died a while ago.’
Nolan criticized Governor Romney’s budget, which proposes cuts in a wide array of social programs, including $350 million in local aid and $156 million in funds to higher education, mostly targeted at the University of Massachusetts.
‘The governor’s budget is the type only a literary critic could like,’ she said. ‘It’s all open to interpretation.’
Nolan also said those funds that the state had kept in order to weather the storm during a recession had nearly been tapped out. Even if all the governor’s spending cuts are passed, Nolan said her organization still projects a deficit of $1 to $1.5 billion for the next fiscal year.
Nolan said the situation was like ‘looking for change for the laundry, and it looks like we’re running out of quarters under the couch.’
Nolan proposed a number of measures to solve the state’s fiscal crisis, mainly by raising taxes, including a 1 percent raise in sales and excise taxes, and closing corporate tax loopholes. Nolan said basic structural changes in state tax code will be necessary.
‘If we just try for a quick fix, we’re going to keep coming back to this problem,’ she said.
Nolan argued that Massachusetts corporations should shoulder a higher share of the state’s tax burden, saying that while they paid about 16 percent of the taxes of the state in 1968, they pay only 4 percent today.
Michael Widmer, president of the Massachusetts Taxpayer’s Foundation, countered the argument, saying companies already pay a large share of sales and excise taxes in the state, as well as property and payroll, while providing fundamental opportunities for economic and job growth.
Widmer also expressed concerns with the state health care program.
‘We don’t have the revenues to match the growth,’ he said.
Widmer called for federal government action in this realm, perhaps by providing financial relief for cash strapped states.
‘In all my years in state government, I don’t think I’ve ever seen anything like this,’ Widmer said.