Watch Me Pull A Rabbit Out of My Hat

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Ruffle up my sleeve. Presto. The Great and Good have done it again. The just-passed 2012 budget, it has been proclaimed, has “solved” the structural deficit, which just half a year ago was said to be in the $2 to $3 billion range. According to the State House News Service (sub. required):

…The Patrick administration and lawmakers have also cheered what they have described as the elimination of a persistent structural deficit – caused largely by an annual reliance on onetime sources of revenue and an unchecked use of capital gains taxes – that has forced policymakers to close budget gaps each year with new revenues or revenue grabs, spending cuts or withdrawals from the rainy day fund.

SHNS further reported that Mike Widmer of the Mass Taxpayers Foundation

said the near-elimination of the structural deficit could help lawmakers begin to restore funds for programs that have taken deep cuts throughout the recession, or cover unanticipated costs in programs like Medicaid….

Really? And how was the courage mustered to do all that in one budget cycle, with the only big battle being over municipal health care reform, which will save municipalities money (good thing!) but in fact not save the state government any money?

Before you begin believing in magic wands, a transformational governor or rabbits living in the depths of a moose’s tall top hat, remember that we are dealing with the Great and Good. Can someone drop the magic pixie dust so readers can regain their memories? There we go.

Some examples of the Great and Good’s solutions include Chapter 40R, which was to address fast-rising housing prices, ensure that growth was channeled toward smart growth principles, and alleviate the need to make hard choices about the underlying 40A zoning statute. The number of units built since the law passed is, well, to twist around an over-worn phrase, enough perhaps to make a village, but it would be a mountain hamlet at best. Massachusetts remains a state with outsized housing prices on a relative basis, which act as an additional pressure on businesses seeking to attract and retain young talent.

Chapter 58 of the 2006 Acts, otherwise known as the Massachusetts Health Care Reform Act, otherwise known to the pitchfork crowd, the Wall Street Journal’s ed board and Tim Pawlenty as RomneyCare (or ObamneyCare), may have accomplished some good things (see here for Pioneer’s work evaluating it) but it was also meant to rein in escalating health care costs.

Don’t let anyone change the goal posts on you: It was explicitly meant to insure more of the indigent by getting them on private plans (thereby lessening the need for a Free Care Pool), allow small businesses to have a one-stop shop where they would have defined contribution/stripped-down/affordable plans, and help hold down cost inflation over time (through a push for cost and quality transparency for consumers). Has it worked? Brian Mooney (here and here) sure thinks so, and he is partially right. But on the core issue of cost containment, it has not worked because we did not have the courage actually to implement its cost containment provisions—the cost and quality transparency, and the defined contribution provisions. On flexible plans suitable and affordable to small businesses, well, it has been worse than nothing; the cost inflation to business that has come in tandem with the Connector’s gold-plated plans is troubling.

So, I come to the trumpet ceremony where business leaders acquiesce and call victory with a keen ear to the dissonance between facts and figures. In addition, the crack team at Pioneer shows just how much of a sleight of hand the 2012 budget is—in fact two sleights of hand. As my esteemed colleagues Josh Archambault, director of Pioneer’s health care operation, and Stefan Poftak, research director and once consultant extraordinaire to Bulgarian investors, put it in recent blog posts: OK, so we “solved” the state’s structural budget deficit of $2 billion by coming up with a mirage of $900 million in Medicaid savings and by pushing off the equivalent of $1 billion in current pension commitments to future generations.

So basically the House, the Senate and the Governor are telling us that they feel they can bank on higher receipts to make up the Medicaid hole in the budget. And basically we are solving our problems the way we always do — by kicking the can down the road. And that’s something to celebrate?

File under: I got to get myself another hat.