After six economically challenging years, the governor seems to have lost his appetite for the hard work of fiscal responsibility. In many areas, next year’s spending is held level or increased at a uniform rate. There is no deep-reaching effort to address the core causes of the state’s structural deficit – healthcare and the cost of public employees’ retirement benefits. There is no serious attempt to replenish the rainy-day fund. No squeezing efficiencies from departments and agencies. No paying down or refinancing the state’s and the MBTA’s debt. Yes, you are reading Pioneer’s annual “The Good, the Bad and the Ugly” review of the governor’s budget proposal.
The budget outline’s highlight is the governor’s suggestion to set aside all revenue from a lowered 4.5 percent sales tax to fund infrastructure. This welcome change is more than outweighed by heaping sides of tax hikes and meritless spending. The need to continue drawing down from the rainy-day fund, even in a year of (estimated) 3.9% tax revenue growth, is troubling. What’s worse are the governor’s long-term plan to increase state spending 6 percent a year through 2017 and to finance pet projects (good thing they are pet projects because they will have very few human riders) with another $1.9 billion of taxpayers’ money annually.
The proposal for enormous tax increases comes after years during which state government spending (and the budget) as a percentage of state GDP has increased significantly.
Moreover, since 2005, the size of the state budget has grown from under $24 billion to under $33 billion, a 42 percent increase, even as there is so much more federal money flowing into state programs. During that same period, personal income in Massachusetts has grown under 25 percent.1 Given the loss by members of the General Court of 1.8 percent of their salary, perhaps they will consider the negative impact of tax increases on economic activity – and income.
Is there some good in the governor’s proposal? Absolutely. But there is also a lot of bad and even ugly stuff in there as well. Read the full brief here.