GREG TORRES, MASSINC PRESIDENT: We tend to discuss winners and losers and is it a surplus or deficit and that is usually the extent of the debate other than among insiders, many of whom are in this room. We thought there was value to a trended view of public finance. It gives you a sense of where momentum can be found on the spending and revenue side, drivers of spending and revenue growth. Also it gives us a sense of what to expect going forward. This is done in the private sector, a run rate analysis when you look at what’s happened and you roll it forward to see what you might expect absent any action. We thought a look back is important because it reminds us of the cyclical nature of the budget. We have been here before, on the brink today of who knows what kind of economic downturn and who knows how long it will last. We wanted to tap into the benefit of the experience and perspective of those who have managed through the last two downturns. We have covered the years from 1985 to 2006, with one exception, 2004. Thank you to Cam Huff and Dana Ansel, our research chief for eight years. We invited responses to our report. We hope it sparks controversy. That we celebrate. Please take issue with our findings. Write something and get it to us. We will post it on our web site. Transcripts are available of today’s discussion through the State House News Service, our partner in crime on some of these issues. And it will be on our web site as well. Jim Braude has been making trouble on these issues for 21 years. At the Tax Equity Alliance he walked the State House halls during the first fiscal crisis. The real reason we picked him is we had to find someone who talks faster than Pat McGovern.
JIM BRAUDE (MODERATOR): This is pretty exciting. I am stunned by the turnout. Part of it is people are interested in a bipartisan adult conversation or because you could never get a meeting with these people and you wanted to see what they look like. Some of you know my favorite thinker is Marx. Not Groucho, who once said there is nothing like good planning and this is nothing like good planning. I have the outline of my daughter’s chemistry paper and she has probing questions. Let’s talk about how we got here and what here actually is. Then in the herding cats section of the agenda we will see if we can reach some bipartisan consensus on how one goes forward. I am a great admirer of everybody here. Pat, do you know the name of the soon-to-be-president of Russia? (Laughter). Let’s start with the basis for this, Cam Huff’s piece. There have been huge events in the last couple of days. Tom Birmingham, Deval Patrick does his big deal yesterday, $3.8 billion in borrowing. We thought 23,000 jobs. Now it’s thousands of jobs. Roads and bridges. Everyone knows the drill. Tom, is this part of the path out of this?
THOMAS BIRMINGHAM, FORMER SENATE PRESIDENT: It’s too early to tell. We are in a perilous fiscal situation but it is in the embryonic stages. I don’t feel comfortable predicting with any sense of specificity what the future holds for us much less whether Deval’s initiatives are going to bear fruit. I want you to know Braude, I spent many hours reading this thing so I didn’t have time to follow the events of the last 24 hours.
STEVE CROSBY, SWIFT ADMINISTRATION A&F SECRETARY: I learned my lesson about these events. The last time I did one was the last event on ethics in government. I didn’t know it was being recorded and transcribed and I said Howie Carr had almost personally been responsible for degrading the public discourse and he ought to be in jail. Little did I know that would show up on State House News and Howie Carr took care of me from thereafter. What Patrick did yesterday is constructive in terms of addressing these issues. I think Patrick for all his issues and ups and downs has quite dramatically changed the paradigm of discussion of revenues and expenditures. For 16 years, talking about new revenues was death. There was very little conversation, with the exception of Senate President Birmingham’s education reform, about new revenues and new programs in any big way. Patrick has put a ton of them on the table. He has put billions of dollars and new taxes on the table. We are talking about what new revenues we will have and what big spending programs we will undertake. At the macro level, what Patrick has done is totally changed the nature of the conversation in the Commonwealth.
BRAUDE: We had the largest per capita debt burden in Massachusetts yesterday and a far larger one if Deval Patrick’s plan passes. Is this a good idea?
PATRICIA McGOVERN, FORMER SENATE WAYS AND MEANS CHAIR: At the end of the day we have to do the roads and bridges. We have a problem. Something has to be done. I don’t know if this is the right way. It’s a conversation starter. Leslie Kirwan and her entire team have been doing a great job of dealing with some difficult budget issues. Kudos to Dana Ansel and Cameron Huff. It was well written and reasoned and fun to read. Some of the points in it were terrific. The transportation stuff you can put aside, the larger point is the kind of spending over the last 20 years – we were all present at the creation of this over two decades and everyone tried really hard to curb spending and to do the right thing. Notwithstanding that, the Medicaid budget now is 30 percent of the state budget as opposed to 16 percent. It’s a huge problem and it’s a national problem. It transcends the state budget. It is a business, private sector problem. They are upset about the cost of health care. Disclosure, I work for a health care institution. We are very aware of what’s going on. This discussion is a broader, deeper more profound discussion about coping with these health care issues. We have to do something. If the trend continues, we may be saying in the next decade that it’s 50 percent of the budget and nothing else will flourish or grow. I am not sure I agree with my friend Steve Crosby that people are ready to do a tax increase.
BRAUDE: This is a pretty depressing moment. Twenty years ago we talked about health care busting the budget. Did we learn any lessons?
MCGOVERN:: We’ve learned some lessons. People have done a lot. Without those reforms and changes, the Medicaid line item would be a lot larger than it is today as odd as that sounds and the other budget busters have pretty much come under control. This is the one we said would be the difficult. It is the most complicated of the budget busters. If we start coping radically with Medicaid what do you do with an economy that is bolstered by health care? The percentage of people in this city and in eastern Massachusetts who work directly or indirectly in health care is staggering. It’s one of our economic drivers. This is our employment base and an amazing cost driver for all of us.
TOM TRIMARCO, FORMER GOP TREASURY, EXECUTIVE BRANCH OFFICIAL: I see the transportation issue as an indication of the problem we are in. There was a transportation finance report – some of the best and brightest focused on infrastructure needs, and there is consensus that it’s a $20 billion nut that has to be met. It’s been deferred over the years principally because of the cost of the Central Artery project. A roadmap was put forward. It’s clear that it’s a staggering number. It has to be paid for and it has to be paid for with new revenues. They had the audacity to suggest that tolls would have to be increased, the gas tax might have to be increased and people have so run away from that reality that it’s really disheartening. It’s part of the political problem. You have one party that if you talk the T word, whether it be tolls or taxes, it’s like you’ve signed your political death warrant. The other party says it works for the working class people and the working class people don’t want to hear about one penny of new taxes and they’re trying to figure out how to pay their mortgage. You see the process at the State House and what influences the party and it’s a lot of special interest groups, labor unions that are causing public projects to be increased in cost because of certain contracts, it’s very disheartening. I applaud the governor for addressing – here’s the thing, we in Massachusetts are never going to be a low cost state and we can never compete with North Carolina. We are going to compete with our quality of life and if we watch infrastructure crumble around us and do not have the ability to talk about revenues, it’s a disappointing picture going forward.
BRAUDE: You guys have lived through two decades of all of this stuff. Is there anything any of you did that contributed to this structural imbalance? Or the flip side. Is there something you did that put us in a better position?
CROSBY: I don’t think you can answer that question without speaking to the issue of tax cuts. I was secretary when the debate was going on about reducing the personal income tax from 5.9 to 5. The right way to approach that was to stage it against the performance of the economy. I probably would have been fired from the administration if I had sided with that and it never came to a vote. That was a much more prudent way to do it. We would have missed one or two of the cuts that went on. Government is a blunt instrument and we go from gross meat cleaver to gross meat cleaver and I am not sure scalpels are part of our work.
BIRMINGHAM: The growth of the stabilization fund is a marked difference between where we were in 1987. That’s a very very positive development. The laws of economics – what goes up goes down – and it is prudent and necessary in the good times to store away money for the lean years. Given the volatility of the capital gains tax, in the good years we should dedicate some percentage of that to the stabilization fund so in the fat years we are contributing and in the lean years we can mollify the hardships that occur. In 2002, we also had a stabilization fund of over $2 billion and it made a difficult task easier.
MCGOVERN:: I would second what Tom said. I worked with the House folks to create the stabilization fund and it should be saved for the years that you need it. We should put some triggers in place and it shouldn’t be used as a piggy bank. It has been used that way. Not to say that I wouldn’t have done that. Having said that if we could set some parameters around that and set some metrics, ultimately that would help dramatically. We did a ton of budget reforms in the late 80s, including identifying Medicaid as a budget buster, including stabilization and dealing with off-budget issues. This is a funny question for me. I am very conflicted about it. I will be sorry to say this. The last great series of tax increases, late 80s, I was there for every one of them, did every one of them. There were days I felt we saved the commonwealth from bankruptcy. That’s the good news. The bad news is the fallout from that in the intervening years is part of the discussion we have today. When you have to raise especially broad-based taxes, you have to find a way that a chunk of the public is with you – somebody has to be with you – to build consensus with the business community and the media. Part of the fallout beginning in ‘91 with too many taxes in Massachusetts was a direct reaction to that time. I am kind of conflicted about it. Deep down I think we did the right thing. We couldn’t go into bankruptcy. But the other part of me says ooh, I wish we could have done it a little better and differently and gained more consensus so the backlash in the last decade, decade and a half would have been less.
BRAUDE: I want to talk about symbols. Tom Trimarco, you said the public was unwilling to buy new revenue. It seems to me it’s not the big issues but the little issues. We wake up the other day to read that the guy who presided over the Big Dig for seven wonderful years was entitled to a $23,000 pension, said he resigned, it turns out he was fired even though he still says he resigned and his pension goes to $73,000. It will cost us roughly an extra $2 million bucks. Two million is nothing out of $28 billion, but if you stop ten people on the street, they don’t know anything about Medicaid or 350,000 people signing up for health care but they know the turnpike guy triples his – how do you deal with the issues you want to deal with when there are those constant things people are focused on.
TRIMARCO: You are right. That is part of the dilemma and political reform that is necessary. It’s these small issues that aggravate. Twenty Boston Police officers in Boston making more than $200,000 a year? That’s more than the governor. People just know in their gut it’s not right. If they would know the contracts of the toll takers at the turnpike, they would be outraged. We are paying those people more than we pay our teachers. It’s not right and yet it must be taken care of on Beacon Hill. And this is the dilemma. The party that represents the working class people – they are unable to take on those interests. We need a new social compact with everyone. It just can’t keep going this way. The rainy day fund is a great accomplishment. The dilemma is we submitted a budget in a year that revenues are $800 million as of the end of March more than last year and in terms of budget revenue forecasting almost $400 million. April is a big month and that all can change. The budget from the governor, to make it balance, $400 million in gaming revenues from licensing fees that are very speculative and the use of rainy day revenues to make his budget work. That is not right. We need some discipline. We are going from the tax and spend mentality that we had in the 80s to what I am afraid is a spend then tax mentality and the public is not ready for those tax increases because of those little things that really firm up in the public’s mind that we are not being prudent with their monies.
BRAUDE: Tom Birmingham, you are in great part responsible for ed reform. The fear was for years that it is going to disappear due to budget pressures. Now the new ed reform is health care. Tim Cahill is the only public official I know who says he is not sure we can honor that commitment. Most of us loved this great expansion in the abstract and knew there was no cost control. As someone who helped maintain this issue on ed reform, what do we do with this budget buster, health care?
BIRMINGHAM: When we passed ed reform, there were two groups of skeptics. One thought we were just throwing money and the other thought we would not keep the financial commitment. I think we confounded both. I had thought we would need a dedicated revenue stream. We were not out of the woods in 1993. At one stage in the process there were three dueling banjos of education reform proposals and mine included a penny increase on the sales tax. I didn’t know we would have the Massachusetts tiger, the tremendous economic growth that allowed us to support ed reform without the need for additional revenues. In the early years especially ed reform was supported because we made it a priority. All too often we think of the budget as made up of monies and figures and dollars but more importantly it is about choices and values and setting priorities. Through the 90s, we gave primacy to education. It was appropriate, especially in Massachusetts where we have historically lived by our wits. Cranberries we have for natural resources but we are not going to build an economy on that. It was about setting priorities and making hard choices in other areas – we cut a lot of programs to have the money for education.
BRAUDE: So what’s the moral of education for health care?
BIRMINGHAM: I hope everyone appreciates that 50 percent of Medicaid is reimbursed by the federal government. So in terms of state spending, it’s 15 percent of state dollars, which is not a nickel and dime proposition We ought to have as duel priorities improving education an improving health care. That means other issues will not be addressed. That is nothing new. Every year we have requests for worthwhile programs that are ten times what our resources allow us. If we consciously and explicitly set our priorities and defend them on the merits I think that’s the safest way to go. Whether we can provide health insurance for 400,000 people who had been previously uninsured without a revenue stream is I think a fair question.
BRAUDE: Every time I ask a spending question, you have ended with we have to be realistic about revenues. With transportation they are trying to convince the public they are serious about reform. I assume they will eventually say we need a gas tax. Where do we go? Where is the will?
CROSBY: We had 16 years of Republican governors, several of them quite honestly and legitimately fiscally conservative. To think we are going to squeeze a lot of spending out of the state government that hasn’t been squeezed out in the last 16 years is a total figment of our imagination. It just flat out is not going to happen. I don’t think there is a lot to be had. There is a commission now on compensation of public officials. Someone ought to be able to step in. And there are things like flagmen or the Quinn bill, the whole host of issues with public safety unions that politicians can’t address. But they are not macro dollars. If you put them all together, they are not going to solve the budget problem.
TRIMARCO: That’s a new version of the 80s refrain that we were cutting to the bone. And I reject that. I am not saying we can solve our problem by cutting. We miss an excellent thing about the report and that is the structural deficit that exists – we are spending on a path that exceeds our likely revenue growth. That’s a given even if we were launching into a boom time. It’s not because we all think we are probably heading into a recession. I do think and I thought I read something from Leslie Kirwan that in part of the freeze the governor is imposing, I would hope that because we have these needs going forward, saving the health care reform proposal – the feds pay 50 percent to a point and not when we exceed the federal benefit standard – everybody’s program is on the table. We have to have metrics to find out where we get bang for those bucks and we have to go at it seriously.
BIRMINGHAM: When we talk structural balance, we are given two choices, spending and revenues. In the last several years, part of what appears to be a structural balance is a function of unreasonably low revenue projections. The governor and Ways and Means are required to come to a tax revenue consensus. A battery of experts come before us and present what they think the growth will be. No one has a crystal ball. When I was chair of Ways and Means, it was our practice to adopt the lower end of the band of revenue projections. In fiscal 2006, for the first time in my memory at least, the governor and the Ways and Means chairs could not agree on a consensus tax estimate. The experts proposed a range between $17.3 billion and and $17.5 billion. Gov. Romney adopted the low end and the House and Senate went beneath what the experts said to $17.1 billion. That sounds like a lot of numbers. Politically that meant the governor could do the first year of his income tax cut – $200 million – and still spend with the Legislature dollar for dollar. It would be irresponsible to make a projection above the parameters set by the experts and it’s really equally unreasonable to set the revenue below the range articulated. When you are trying to recover from a fiscal crisis where a lot of worthwhile programs suffered cuts, when you leave $200 million gratuitously on the table, you are prolonging the agony. $200 million is real money based on what I perceive to be an unreasonable revenue projection.
BRAUDE: No politics, you are the czar and czarina of spending reform, no politics or worry about colleagues, What’ s the one single thing with a maximum bang you would unilaterally do tomorrow to rein in the spending side?
TRIMARCO: It’s a suggestion the governor has adopted in his budget that I recommended to Leslie Kirwan and it’s a budget saver of about $100 million a year, maybe 80 and not only is it a budget saver, it goes to your point Jim about the little things that upset taxpayers. It’s the employees’ contribution to their health care. We are asking taxpayers to pay for benefits they would die for in their jobs. The governor did it in a thoughtful way. I am dying to see whether the House will go near it. When we proposed it, it went into the circular file. I hope Mr. DeLeo will do the right thing this year.
MCGOVERN:: I would agree with Tom that we should do such things as the employee health. I agree that small things such as the flagmen, all those need to be done. I would grapple with the Medicaid budget and get some of the best minds in the commonwealth and put them around a table and say we have a problem even with the federal reimbursement. The feds are now looking at Medicare and Medicaid and there are going to be some changes there and we are going to be hurt by those. I would say let’s try to find a way to deal with this account. You add up the other things and it doesn’t matter. Because you have an account that is fundamentally out of control and it has been for two decades. We said we need education reform and we did it. We thought about it. With Medicaid, nobody thinks about it. It just is. It keeps growing. It’s so big and people lose faith with our ability to grapple with it and reform it. There is no one thing with Medicaid. But go to your local doctor and the woman who does the billing, she works with 75 insurance companies and fills out 75 forms. If we adopted the Medicare form in Massachusetts, we would make an amazing reform. You could move to electronic data keeping. But you really need to listen and you need to show the leadership to implement and then you have a fighting chance. Some of the business must be moved from academic medical centers downtown where I am gainfully employed and I love my hospital to community hospitals around the state where they can do the procedure for half or a third of the cost and they will do it just as well.
CROSBY: Two things that I would do. One of the major drivers in per-treatment cost is we subsidize federal research and subsidize the training of doctors. Much of our treatment is done at teaching hospitals which are less efficient because you have interns and other students dragging along. It’s a great thing but it increases the costs. We subsidize the training. We get federal research funding, which is great, but not enough to cover the overhead. The other component would be to be able to use local aid as a management device for cities and towns. If you could say we don’t need x, y, z police or public health services and we are going to a host of shared service agreements – if we could use local aid as a constructive tool, not as a punitive tool, that is a change I would make.
BIRMINGHAM: I would change the way we build the budget and approach it from a perspective of zero-based budgeting. The first step now is the maintenance process to determine how much it would cost to duplicate services we provided last year. It does build in a certain presumption for the status quo. There would be lots of savings if we stated there are no presumptions and we are not doing maintenance. We want the agencies to justify what they do. I can’t give you a precise figure for savings. My sense is you would save tens of millions of dollars and we would defend our choices and our values on the merits. I think there would be loads of savings.
BRAUDE: On the revenue side, forget politics, whether it’s equity, reliability, predictability, whatever it is, what needs to be done?
CROSBY: Clearly the gas tax at a minimum has to be adjusted for inflation and probably equalizing the tolling system so that there is a fair distribution of toll revenues across all of the arteries with some offsetting benefits like extending the southeast expressway or somehow increase the lanes. Those two things are a matter of equity and would general substantial revenue. I think that not only is there an appetite for new taxes, I think we have already seen it. The loopholes have been closed. Some loopholes have been closed. That is a tax increase. It looks like there is going to be a cigarette tax increase. There is a conversation about new revenues. We swing in these cycles. We are starting to swing back again.
BRAUDE: Well, one would argue Proposition 2 ½ is rearing its head again by virtue that the overrides are failing by more than 50 percent.
CROSBY: That’s my point. We have these pendulum swings. That’s the nature of democracy. It’s not a bad thing.
MCGOVERN:: I would acknowledge that we are overly reliant on the cap gains tax and that scares me because it so volatile. There are more loopholes that can be closed. Some folks are retired from the private sector that know where every body is buried. We had one as tax commissioner not too long ago. He was terrific. We closed those loopholes. Cigarettes, that’s a given. I voted I think for the last increase in the gas tax. That is a matter of equity. Tolls, you can deal with those. Small things. I live near the New Hampshire border. As soon as you go over the border, you start paying tolls. In Hooksett it’s two dollars. I am not suggesting two dollars. But we have an inflow from New Hampshire every morning on 93 and there’s nothing to say you couldn’t extend tolls and grab people who come to work in Massachusetts.
BRAUDE: Briefly, not on your list was the broadening you tried and I worked with you on 18 years ago of the sales tax. We are more of a service economy now than then. It was a disaster. Why is it not on your list?
MCGOVERN:: That was a value-added tax. It happens in Europe all the time. This country will eventually get to it. I don’t think it would be tolerated now. I don’t think it would work now.
TRIMARCO: We made recommendations on the spending side that would I would conservatively say would be $500 million a year. After that in my view the gas tax is a no brainer. It should happen. It’s been twenty years since we’ve raised it. Our infrastructure is crumbling around us. I mean let’s get real people, it has to happen. The toll system, it has to be reformed because it’s unfair for the people in the western part of the state.
BRAUDE: Why are you saying reform the toll system and not dump the toll system and deal with the user fee that the gas tax is so then you don’t have to worry north-south, east-west?
TRIMARCO: That is an alternative.
MCGOVERN:: That is an alternative.
BRAUDE: Those are people in the western suburbs thank you very much.
BIRMINGHAM: I am afraid we are going to have to fight the hypothetical. To discuss these issues meaningfully outside of a political context really doesn’t make a lot of sense. The Legislature has been called a lot of things. It’s never been called the Oxford Debating Society. It is essential to view issues like raising or cutting revenues in a political context. There is nothing embarrassing about that. That is the context in which it will really be thought out. I established my bonafides by rushing in where angels fear to tread on tax increases – I ran for governor and I increased the taxes. That was brilliant. This year we have a referendum on the ballot to do away with the income tax altogether. People can snicker and laugh. I think there is a legitimate possibility that this could pass. So we could have our biggest revenue stream taken away from us. That provides a political framework within which we should talk about taxes. If we are talking about broad-based taxes, when there is going to be a referendum doing away with the income taxes altogether, I would say we shouldn’t go there. I’d borrow from George Bush and I’d pick as my slogan don’t mess with taxes.
BRAUDE: Tom Birmingham, three votes for the gas tax here, does it get a fourth?
BIRMINGHAM: I think it makes perfect sense. I think this is a bad time. Sin taxes are one thing – taxes on cigarettes, taxes on other forms of bad activity. Taxes on gasoline is like a tax on a sacrament as opposed to sin.
BRAUDE: I will give them five to eight minutes to put together a modest consensus agenda. If people have questions that are not speeches and that are brief, we will take some of them.
BOB TANNENWALD, FED RESERVE BANK OF BOSTON: I am from the Federal Reserve Bank of Boston. Suppose you take all the taxes, fees and charges leveled by government in Massachusetts and divide them by personal income of residents and rank the states. Where would Massachusetts rank in 1986 or in 2005? (Tannenwald took a seat awaiting a response from the panelists)
BRAUDE: You obviously know the answer. What is the answer?
BOB TANNENWALD, FED RESERVE BANK OF BOSTON: In both years we were well into the bottom quartile and we have been there every year except for one. We were the lowest when Mike Dukakis was governor.
MCGOVERN:: I would have said in 1988 we were in the top quartile. I would have been wrong. It’s all about education. If we took a poll of 20 people on Tremont Street, I bet you anything all of them would all say we are in the top quartile even now. That’s an interesting discussion. It doesn’t occur in this state. I am not so sure why it doesn’t occur. Everyone seems to think we are this overtaxed state still. The reality is, and I think we all understand this, that is not the case.
BRAUDE: There is another problem. Even if people knew, they would say I just know I can’t afford my taxes here. That is the mindset of most people. Those in government, in my estimation, are as ferocious in criticizing government as the angry public. They feed into that.
MCGOVERN:: It’s not just taxes but the cost of living in Massachusetts. Utilities are out of control. You can’t buy a house. Everybody blames the government and taxes but you look at the entire picture. I would like to hear what the Fed says about the entire cost of living picture, with the cost of utilities. I assume we go way high up. That is what the public is feeling.
AUDIENCE QUESTION: I am David Luberoff from the Rappaport Institute. What is the sense of the wisdom of increasing borrowing in the state? Most of the major proposals coming out the administration for new spending seem to be based on borrowing. We are already a high debt state. Is that in the long run going to be a wise choice?
TRIMARCO: The long-range capital plan put forward by Gov. Patrick and Jay Gonzalez was a well thought-out proposal and they have taken into account the cost of debt service, a big item. They are prudently making recommendations for 30-year debt that will add overall costs but will allow us to take care of our infrastructure in a way that is prudent.
CROSBY: I think it’s fundamentally a sound concept and addresses a need that needs to be addressed. It would be optimal if it were attached to or at least offset by revenue streams. The 11 percent going to debt service surprised me in the report. It raises this whole charade about the rating agencies and how our debt is graded and the interest rates as a result. There is a colossal scam going on out there. Our interest rates go up or down for specious reasons. I’d love to empower the secretary to address that at the same time. It’s sort of a side issue. There are offsets here because of job generation.
SHIRLEY KRESSEL: What do you think about the business incentives of subsidies given to corporations at all levels of government? It is documented that they don’t determine business decisions? Politicians take credit for jobs. What do you think about documenting that?
CROSBY: It’s a very tough situation when you get into bidding wars with other states and there is this race to the bottom if you will. It becomes hysteria and everyone is afraid that a company is going to leave. It’s tough to figure out to what extent these giveaways are really critical. I am on the board of a poverty institute in Rhode Island and they are afraid of incentives we are giving in Massachusetts. So it’s a legitimate problem. This is not just because people love corporations and love giving away money. You absolutely make an important point that there is no tracking mechanism when there are quid pro quos. Fidelity or Raytheon or somebody gets something and gives us something for it and we do next to nothing to track either the commitments made or the net effect as to whether these are good investments.
BRAUDE: A self-serving moment. In the early 90s we had such a tracking mechanism and Tom Birmingham was big supporter of a corporate tax reporting law, which basically told us what we were spending and what corporations and banks and insurance companies were getting and are they creating new jobs. It was repealed by the Legislature after it was shown on the front page of the Globe to be wildly informative.
BIRMINGHAM: We should have transparency. We should have tracking. I would make the point that legislators acting in good faith are faced with a real dilemma when major employers in Massachusetts demand tax relief tailored to their interests with the implicit or usually explicit demand that they are going to take a lot of jobs out of Massachusetts. We have very little way to know whether such employers are crying wolf or if they really do mean to leave the state. It’s not just cozying up to business or a primary or secondary obligation of state government to be nice to corporations. It’s fear about what the potential non-competitiveness of Massachusetts will mean for the retention of jobs. Just as we lose jobs to the third world, we also lose them to South Carolina, to Texas, to low-wage states. It is a real dilemma for conscientious legislators to decide which way to go.
BRAUDE: This is the moment of truth. What you guys used to do for a living is listen to people with a decent base of knowledge and then say here’s what I can pick to build a consensus and move something forward. Based on what you’ve heard, who wants to craft a one-, two-, three-part agenda?
CROSBY: I need to say I have a different take on the starting point of the conversation. The report was brilliant in its clarity. To suggest we are at a major crisis point, a cumulative deteriorating position in terms of overall budget status, I don’t agree with that. This 20-year period has actually been extraordinary. We have net reduced the tax structure. We have taken our pension fund, a colossal liability, and got it 85 percent funded. We have increased health coverage and spending by a vast amount and lead the nation in doing that and in the generosity of our benefits. We have almost 4 billion dollars in cash reserves and every governor and legislative leader cries wolf about how terrible the deficit is – it is usually a negotiating ploy, it’s usually not as bad as it looks like it’s going to be – we are in a vastly better condition than we were 20 years ago. The only two things I can think of are outside help and advice for the tough political nuts that the politicians just can’t deal with, a base-closing commission. The second thing I honestly do think it is time for us to start to think about new taxes, new revenues and we will probably want some. It is time for us to say okay our needs are back again and we need to have new revenues.
TRIMARCO: Far too sanguine an appraisal of where we are. Right now we are avoiding hard realities. I can’t subscribe to your feeling that things are hunky dory here. I think we all made suggestions of what we can do when you asked about savings. I think there would be $500 million in savings in those approaches. On Medicaid, we really have to take a look at that. The numbers are shocking. Over a million people on Medicaid. It’s probably 33 percent of budget.
MCGOVERN:: The analysis of the last 20 years was interesting and I disagree with little of it. Enormous progress has been made. I agree with Tom that we have to put people around the table to get rid of things that should not be in the state budget. We’ve got to find a way to get them out of the state budget. I would subscribe to that. I subscribe to building a budget from the bottom up which we tried to do in the eighties. Base closing, building the budget from the base up, and I would think about some of the new taxes we’ve talked about. At the end of the day, I would put the Medicaid group together to see what we can do if anything.
BIRMINGHAM: One modest proposal I would make is a dedicated revenue stream for the stabilization fund. The recommendation for the capital gains tax for that is very positive. I would disagree with Steve’s assessment of the appetite for tax increases in Massachusetts. The governor has made several fairly modest proposals for tax increases that have been met with absolute, unequivocal unqualified rejection in the Legislature. He proposed a local option increase in the meals and hotel tax and with almost Granite-state rhetoric it was rejected because it constituted a tax, as if we can’t not have this discussion. I think that’s not where our policymaking should be, but if we’re going to have a political discussion, we have to talk where our policymaking is. I simply do not detect a strong appetite for broad-based tax increases in the foreseeable future.
BRAUDE: Tom Birmingham, would you rather sit with these three people for an hour and ten minutes or on your balcony with Tom Finneran?
BIRMINGHAM: I would be smoking again.
