Better Government

Has Massachusetts made progress towards providing a better quality of life for its residents while maintaining financial stability over the past decade or so? In July 2014, Governor Deval Patrick signed into law the eighth and final budget of his administration with only a few vetoes and recommendations to the General Court. Five years after the financial crisis, this is an opportune moment to review and reflect upon the fiscal state of Massachusetts and what has changed since the beginning of this governorship more than seven years ago.

This study presents the MBTA Retirement Fund (MBTARF) as a cautionary tale for institutional investors not merely with the benefit of hindsight, but as its story unfolds towards what will likely be an unfortunate conclusion.

Massachusetts’ ranking among the states in overall R&D spending by industry rose from fifth to second between 1991 and 2006, but although it’s ranking improved, Massachusetts – and every other state – lost market share over that period to California, which had enacted much stronger tax incentives. In fact, the commonwealth’s market share of national R&D spending by industry actually declined between 1991 and 2011. Over that same period California increased its industrial R&D spending by more than its top seven competitor states combined, including Massachusetts.

With the Massachusetts Convention Center Authority (MCCA) claiming that no new taxes or fees would be needed to expand the Boston Convention and Exhibition Center (BCEC), it came as no surprise that a $1 billion convention center expansion bill sailed through a November Joint Committee on State Administration hearing without opposition. But when something seems too good to be true, it usually is, and a closer look at the convention center legislation reveals that the "no new taxes or fees" claim isn't quite as airtight as they've led us to believe.

Testimony Before the Joint Committee on Public Service Regarding the MBTA Retirement Fund Provided in February 2014.

The primary goal of this policy brief is to evaluate the insinuation that MBTARF is in a position to fulfill its obligations to its beneficiaries without help from the commonwealth.

For the past few years, officials from the Massachusetts Bay Transportation Authority (MBTA) and the MBTA Retirement Fund (MBTARF) have promoted the narrative that the T's pension system has been reformed so that benefits are "fair" and it holds no risk for taxpayers.

Testimony before the Joint Committee on Public Service of the General Court of the Commonwealth of Massachusetts Regarding the Fiscal Condition of Local Retirement Systems provided in January 2014.

The purpose of this paper is to provide tools to quantify the costs of delaying the funding of pension obligations – those incurred in the aftermath of the financial crisis as well as projected costs more generally. Policymakers should be aware of these implicit costs when making budgetary decisions, and so should taxpayers, who ultimately are liable for what essentially amounts to a long-term financing cost for current spending.

In a recently published article,1 Robert Novy-Marx identifies what he believes are inconsistencies in the valuation methods espoused by the Governmental Accounting Standards Board (GASB). He advocates that current GASB methodologies for determining the discount rate be replaced by what some academic economists call a “fair-value” or “risk-adjusted” rate of return.