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by
David Tuerck
July
6, 2003
With
the fiscal 2004 state budget debate drawing to a close, let's
review the math to see what happened.
Consider,
for example, how the state handled the $3 billion "structural
deficit."
That's
the gap between what the state presumably needed to spend
in fiscal 2004 in order to "maintain services" and
what it could expect to raise in revenues under current law
and in the current economy.
How
much of this "gap" was closed with spending cuts?
The answer is zero, or, actually, less than zero, since total
state spending will be slightly higher in fiscal 2004 than
it was in fiscal 2003.
What
then was done to close the $ 3 billion gap?
Well,
when we add up the tax-loophole closings, fee increases, inter-fund
transfers, federal reimbursements and one-time revenue enhancements
in the new budget, we get about $ 1 billion.
So
far, so good. But things get iffy when we get to the still-missing
$ 2 billion. That $ 2 billion is supposed to represent a combination
of two numbers: service cuts and unit-cost savings.
The
trouble is that it's hard to tell the one from the other.
If a city cuts the crew for a fire truck from four to three
firefighters, do firefighting services go down, or is the
city merely reducing the unit cost of delivering the same
level of fire protection?
If the state restructures a government agency along "functional,"
rather than "product" lines, will it deliver the
same services with fewer workers, or will it just end up redrawing
the agency's organization chart?
We
don't know. And those are just two examples. There are hundreds
of line items in the state budget for which we could raise
equally tangled issues.
It
thus turns out that the much-touted structural deficit is
spun from whole cloth. Since estimates about the size of the
structural deficit involve sheer guesswork over how to measure
services and how to measure unit costs, such estimates are,
in the end, of no objective value in framing budget issues.
Indeed,
they mainly reflect the political biases of the people who
offer them.
Gov.
Mitt Romney deserves credit for trying to reduce unit costs
in framing the 2004 budget. His restructuring of health and
human services shows promise in this regard. He got state
workers to pay for more of their health insurance. His proposals
to merge Massachusetts Turnpike operations with those of the
state highway department and his efforts to reorganize higher
education and the courts deserve further consideration next
year.
The
governor made a mistake, however, in buying into the "structural
deficit" mumbo jumbo.
By
doing so and by giving himself the task of finding some $
2.7 billion in budget reforms, he put himself immediately
on the defensive, inviting criticism that his promised savings
were "unrealistic."
We
already hear warnings of a $ 2 billion fiscal 2005 structural
deficit.
The
governor can expect to suffer the same criticism next year
if he buys yet again into this mind-set.
The
governor would do himself and the commonwealth a favor next
year if he announced that there will be no more loophole closings,
fees or other taxlike revenue enhancements and that his goal,
as articulated in his campaign, is to reverse the billion-dollar
tax hike enacted in 2002.
Having
taken that stance, he could then invite a dialogue on how
the commonwealth can cope with this new fiscal discipline.
The
following are some suggested reforms:
- Reduce state education aid, now totaling $ 3.6 billion,
on the principle that education reform has made no measurable
improvement in school performance.
- Repeal the Quinn bill, and eliminate paid police details,
allowing flagmen to be used on the jobs as they are in other
states.
- Repeal the Pacheco anti-privatization law and the state
prevailing wage law, and end state subsidies to local school
projects that are built under union-only project labor agreements
(which adds enormously to their cost).
- Undo the law that gives the MBTA a fixed percentage of
state sales tax revenue, and put the agency on a tighter
budget.
- Further limit the growth of Medicaid spending and get
federal approval, if needed, for increased co-payments and
tighter eligibility standards.
- Invite local governments to negotiate tougher contracts
with the unions that represent police, firefighters and
teachers.
Politically unrealistic? When we look at last year's vote
on the state income tax and the number of failed attempts
to have voters override Proposition 2 1-2 in their communities,
maybe not.
Maybe the governor would find voters more than sympathetic
to the idea of letting the state Legislature and local governments
figure out how to make ends meet.
David
G. Tuerck, PhD, is chairman and professor of Economics at
Suffolk University where he also serves as Executive Director
of the Beacon Hill Institute for Public Policy Research.
This
article appeared in the July 6, 2003 edition of the Boston
Sunday Herald.
Format updated on 18 August, 2004
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