In the 1990-91 recession, my late father-in-law, looking at the dismal slump in his 401(k), decided to take the classic Wall Street 1929 response and jump out of the window. “Then,” he said, “I realized that I live in a one-story ranch house.”
I offer this tale because it seems our state government is acting like it about to jump out of the window, when, in reality, it can walk out the front door and get to work. The Patrick administration has already made massive spending cuts and the word is out that even more are planned. As Paul Krugman writes on his blog, this may make a bad economic situation worse.
All the talk these days is how the feds can enact stimulus programs. The states can too. Massachusetts must. One reason for strong state action is that Bay State cities and towns have few options in a major downturn. They must create balanced budgets. If the state plans reductions in local aid (directly and indirectly), there’s not much that municipal governments can do. If the leadership here in Smalltown-the Selectmen, the School Committee, the Finance Committee-got together, they might squeak through a $1 million operating override. That would be an increase of about $250 per year in real estate taxes–$21 bucks a month for the typical homeowner. One of our Selectman is already calling this “Unaffordable.” But if state aid is cut, then we might need a $2 million override to keep things on an even keel, and the tax-averse moonbats here will go berserk. $42 bucks a month is beyond the pale, even though we are at among the top median household income levels in the state.
Local spending on capital projects, another way to boost the local economy, is really a two-edged sword. Here in Smalltown we’ve been considering a new school and a public safety building. But projects like these almost always include a state aid component-which may well now be in doubt. And even if we could sell the bonds to get these built, the new facilities would come with higher operating costs-further stressing the Town budget. So these will likely be put on hold. And the race to the bottom continues.
The depth and extent of this economic crisis has surprised everyone. Are we going to let the wonks and the weenies craft our state level collective response? What happened to “Smart Growth?” Does the Patrick administration have anything besides state budget reductions to deal with this major crisis? It would be reassuring to know about this. 351 communities are awaiting an answer. Now.
I see two problems with this argument. First, the Governor is obligated to balance the budget as a matter of law. If revenue starts to decline, he must make cuts as early in the fiscal year as he can, or he will be forced to shut down state government before the end of the year.
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p>Second, I’m not sure that the Governor can take actions that will boost the state economy and generate new tax revenue in the near term so as to make cuts unnecessary. If he can’t do that, he must balance the budget with 9C cuts.
The Federal Government has the option, in an economic downturn, to keep spending as if they have the money. Massachusetts doesn’t.
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p>One option that I’ve heard mentioned would be for the Federal government to make loans available to the states to keep their budgets in balance while not cutting back on programs and projects, but I don’t know how the long-term health of the state would be effected by taking on such a loan. We’re already bonding a good number of projects that the state is moving forward with (bridge & infrastructure repair, etc).
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p>So far, the Gov has not touched local aid to cities and towns. I get the sense he absolutely doesn’t want to, but whether or not he has to will depend on what happens for the rest of the year.
Why not out-and-out grants to states as a stimulus plan? The money will surely be spent to deliver services — whereas giving money to corporations seems to result in them buying each other up and giving money to individuals seems to result in them either putting it in the bank or paying down existing debt.
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p>Better yet, how about increasing CDBG money so that the money is directed toward the areas that need it more? More affluent suburban residents pick up on that money too because more often than not, they are the ones providing the services paid for by the CDBG money.
MA isn’t growing. It’s one of the (few) states that are contracting.
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p>In my (not so small “town”) the school enrollment has declined nearly 40% in a decade, yet the budgets keep going up, up, up! It sure seems to me that there is some fundamental financial mismanagement within the public sector. Let’s address that issue first!
Without any idea of what town you are talking about, I’ll just throw out this thought: If enrollment has declined “nearly 40%” – let’s call it 37% – in a decade, then if the budget remained constant that would be a 59% increase per student. Over the course of a decade, that works out to 4.7% increase per student per year.
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p>Over that same period, inflation for the Boston metro area has grown by 39%, or 3.3% annually.
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p>In “real dollars” your school district budget seems to have grown by 15% per student over the last decade, or 1.4% per student per year.
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p>Which is higher than it should be, no doubt. Whether it’s unreasonably so, remains to be seen. Without knowing the town or any other details, it’s impossible to say.
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p>2. Get Obama to fix the dollar to gold or some physical basket to save us from these inflations and deflations.
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p>Otherwise forget it.
State that have “progressive” tax rates, and which consequently rely more heavily on the tax upon the income of wealthy taxpayers, are going to be hit harder as that income dries up.
A few months ago I posted “0.5% for the Kids -Lets Make Overrides History” http://vps28478.inmotionhosting.com/~bluema24/s… .
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p>The problem facing our local communities is that they fund their operations on a regressive preoperty tax. We need to make the progressive income tax available to our local communities so that the legitimate cost of education does not overwhelm our budgets.
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p>We need to increase the income tax 0.5% and mandate that it be distributed “around the statehouse” and directly to our local cities and towns on a per child basis. This would raise approximately $1B or about $1000 per child in the schools. It would substantially relieve the burden on those who cannot afford increased real estate taxes and shift the burden to those with income who are in a better position to afford it.
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p>We can’t get water from a stone and just wish the state had more money — the fact is they don’t have it.
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p>When I first posted and raised this with the Governor and his Finance and Administration Secretary, they said they could not consider it because of Proposition 1 to end the income tax. Now that the proposition was clearly defeated and with the likely pressure to keep services level and pass overrides, its time to reconsider.
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p>Bruce
We have 341 distinct communities in this state. Each has its own strengths and weaknesses. I think that we should allow communities as many options as possible to raise their own revenue.
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p>I live in a community that is constantly derided because we get so much state aid. We are considered a “welfare case”. Why do we get state aid? Because our housing is affordable and we can’t raise much in property taxes. We have a lot of multi-family housing which is valued at less than $50k per unit, with some units valued as low as $20k. Other communities have a fit if someone tries to build housing that is valued at less than $500k — they claim it “won’t bring in enough in property taxes as the new residents will cost”. Well, try funding services on a $20k unit.
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p>Shifting to an income tax on residents would certainly be more progressive, but it would seriously harm poorer communities. Why? Because our communities are already stratified by income, so a community like Wellesley would be able to raise $673 more per family (based on their 1999 median family income — admittedly outdated) but a community like Springfield would be able to raise just $181 per family.
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p>So how about adding another cent to the sales tax and allow communities to use this as an additional tool to raise revenue? Wellesley probably wouldn’t benefit from this method whereas Springfield would because we have a lot of commerce here. If both options are available to everyone, everyone could raise revenue according to their strengths.
The proposal would increase the income tax statewide (Wellesley included) and then mandate that the incremental revenue be allocated on a per child per district basis so that the unfunded educational mandates are covered by a greater percentage of funds drawn from the income tax. This would allow communities to reduce their local property taxes and would help all communities