Political Fallout

Posted on April 29, 2009 by billmanzi

The House vote to hike the sales tax to 6.25 percent is causing some major political ripples on Beacon Hill, with both the Speaker and the Senate President expressing astonishment and outrage that the Governor would be critical of the Legislature. The exchanges between the Big Three were pretty tough and extensive, with the Legislature defending against Patrick’s charges of inaction and watered down reform. Patrick stepped it up a notch with new threats to veto either the Pension Bill or the Transportation Reform bill currently in conference. From the State House News Service:

Patrick made his comments Monday in an interview with WBUR reporter Martha Bebinger. Asked whether he would veto the Legislature’s pension or transportation bills if he deemed the reforms inadequate, Patrick said “you bet.” “I’m not interested in some papered over victory, something that is halfway there that we can claim is reform and then move on,” he said, according to a transcript of his remarks. “I’m not about fighting with the Legislature. It’s about fighting for our values and priorities.”

As the process moves forward there were some interesting developments yesterday.

The House, utilizing revenues from the sales tax increase, put $205 million back into the local aid account. I believe that would translate to about a million dollars over the House Ways and Means number for Methuen.

The Senate President said that FY2009 benchmarks were going to be off by $400 million or more. Neither Legislative branch has taken any steps to deal with the FY2009 shortfall. It will likely have to come out of the State rainy day fund.

Senate Ways and Means Chair Steve Panagiotakos seemed to indicate that the Senate would go along with a sales tax increase of some magnitude, and I saw Senate President Murray say that additional revenues may be needed beyond the sales tax.

Michael Widmer’s Massachusetts Taxpayers Foundation has produced a short sales tax primer that deals with revenue estimates and state to state comparisions. I have attached it below. Widmer gives an estimate for FY2010 of $905 million in increased revenue for the 25% increase in the sales tax, which is in line with legislative revenue estimates. I had questioned the $900 million dollar figure, but Widmer’s estimates have been pretty reliable.

The Beacon Hill Institute has produced an anaysis of a sales tax hike to 6%, and that study says it will cost 10,000 jobs and have the Commonwealth lose 42 million dollars of business investment. That study is below.

The Tribune slammed local reps who voted in favor of the sales tax hike pretty hard. The Tribune editorial link is below.

The Globe, who had expressed some editorial support for a sales tax hike this week, shifted gears somewhat and supported the Governor’s call for reforms. The Globe editorial highlighted two items that the Legislature will apparently fund with some of the additional revenues. First, the Quinn Bill at $50 million. The second would be an elimination of the House budget provision increasing the percentage paid by state employees for health insurance from 20 percent to 30 percent. The Globe was heavily critical of both of those items, as well as legislative inaction on the other reform items. That editorial is linked below.

Read the Tribune editorial here.

Read the Globe editorial here.

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Methuen Swine Flu Preparations

Posted on April 28, 2009 by billmanzi

There has been much talk and concern about the “Swine Flu” outbreak, and although we have not had any recorded cases as of yet in Massachusetts I have asked our Emergency Management Team, our Public Health Director, and our School Department to work jointly to prepare for any problems that might arise. This Monday I activated our Emergency Response effort, and we had a meeting today to deal with preparation and best practices to try to avoid infection. Our preparations include today’s Emergency Management Meeting attended by School Superintendent Whitten, as well as continued contact with and coordination with regional emergency management as well as with the State Department of Public Health. We are also in contact with Federal Emergency Management folks as well. Action items include advance procurement of some additional supplies, including supplies that may be needed by first responders.

We have also begun coordination with the Holy Family Hospital Infectious Disease Coordinator, and today our Health Department participated in a conference call between Holy Family Hospital and the State Department of Public Health.

We are prepared to open an EDS (Emergency Dispensing Site) if needed to deliver medication. The federal government has released 25% of the SNS (Strategic National Stockpile) of flu treatment medication to every state to expedite the delivery of medication to the general public if needed.

And finally we have begun preparations to open our Emergency Management Operation Center, if needed.

At this time we do not anticipate that such actions will be needed, but advance preparation is the key to successful Emergency Management. I will keep you apprised of any new developments, and please feel free to call us with any questions. You can call us at the Mayor’s office at 978-983-8505 and we will do our best to get you the answers you need. Superintendent Whitten and I will send home a letter to parents on this subject that will go out this week. I have attached three advisories from the Massachusetts Department of Public Health, including one on schools and the flu.

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Governor Patrick Takes to the Tube

Posted on April 28, 2009 by billmanzi

Governor Deval Patrick cut a You Tube video to make his argument on revenue and reform, and once again threatened to veto a sales tax hike. The Governor now has the high ground on reform, and if he is smart he will never leave it again. Running against the Legislature is like picking beautiful fruit off a bountiful tree. It is just so easy. And the fruit is delicious.

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Arlen Specter to Switch Parties

Posted on April 28, 2009 by billmanzi

Senator Arlen Specter, in a major development, announced today that he is running for re-election as a Democrat. Specter was facing an almost certain loss in the Republican primary to Club for Growth guru Pat Toomey, who led Specter by over 10 points in some recent polling. Chris Cillizza of The Fix at the Washington Post broke the story this morning. Specter would have to be considered a big favorite in a general election campaign against Toomey, if he can safely secure the Democratic nomination. Specter’s switch will now bring the Democratic caucus in the Senate to 60 after the arrival of Al Franken of Minnesota. From the Specter statement:

“I have decided to run for re-election in 2010 in the Democratic primary,” said Specter in a statement. “I am ready, willing and anxious to take on all comers and have my candidacy for re-election determined in a general election.” …
“Since my election in 1980, as part of the Reagan Big Tent, the Republican Party has moved far to the right. Last year, more than 200,000 Republicans in Pennsylvania changed their registration to become Democrats. I now find my political philosophy more in line with Democrats than Republicans.”

So the Republicans drive out another moderate, and their numbers continue to dwindle. Specter had been heavily criticized by Toomey for supporting the Obama stimulus bill. He was one of only three Republicans to do so.

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Mass House Passes Sales Tax Hike

Posted on April 28, 2009 by billmanzi

The Massachusetts House, working into the night, passed a sales tax hike of 1.25%, bringing the sales tax to 6.25%. The House passed the increase after a day of hard lobbying by the Speaker, by a vote of 108-51. I will post the full tally as soon as it is available. The margin that the Speaker achieved was veto proof, with 107 needed to get to that mark. The Speaker felt obligated by the Governor’s veto threat to drive the whip hard, and he certainly did do that. The fight now moves to the Senate, where Ways and Means will have to produce a budget with a more realistic revenue number than the House.

It is inconceivable to me that the Speaker would have gone to all this trouble if he did not have an agreement with Senate President Murray to have the Senate move in the same direction on revenue. Will the Senate be able to produce a veto proof majority for a sales tax hike to 6.25%? It is going to be a battle, with Republicans unable to produce sufficient numbers to help the Governor sustain a potential veto. But what will come out of the Senate will be a budget that will show how little of an impact this hike will really have. Constituencies that believe this tax will be budgetary salvation are in for a rude suprise. I have talked about the numbers in a prior post, so no need to rehash here. Today’s Tribune has a story on the sales tax proposal. I called the proposal a job killer, and that it is. Read the Tribune story here.

Sales Tax Roll Call Vote is Now Posted Below.

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Governor Patrick Steps Up

Posted on April 27, 2009 by billmanzi

This morning I posted on the potential for a sales tax increase, and in that post I asked where the Governor was, and speculated about the potential for a veto threat from him. He must have read my blog. He has, this morning, sent a letter with an explicit veto threat against the sales tax hike. Good policy choice, and an outstanding political move. The Governor deserves praise and credit for having the guts to threaten the veto. The move towards this sales tax increase is poorly thought out, and will destroy what is left of business along the New Hampshire border.

In his letter the Governor just about takes up the “reform before revenue” mantra, pointing to legislative inaction on his FY2009 proposals to create a new revenue stream for municipalities, the Senate’s failure to act on ethics reform, the legislative failure to act on municipal health care reform, and the pending conference committee on transportation reform which may produce a bill that the Governor considers substandard. He once again calls on the legislature to opt for “comprehensive solutions” to our problems. Without addressing reforms and revenue in a comprehensive way the Governor explicitly threatens to veto a sales tax increase.

The Governor’s veto threat should, if thought about without rancor, stop the House from voting a sales tax increase. Governor Patrick has stepped up and changed the political equation with one swipe of his pen. Now is the time for leadership to come together and bring bold solutions forward that will manage to offend some key constituencies but that will work for the Commonwealth as a whole. Kudos to Governor Patrick.

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The Speaker Makes His (Tax) Move

Posted on April 27, 2009 by billmanzi

Speaker Bob Deleo has finally shown his hand on revenues, coming out for a 1.25% increase in the sales tax. Both the Globe and Herald are reporting that the Speaker will support this increase, with the hope that the increase will bring in about $900 million in added revenue. Speaker Deleo plans to dedicate about $275 million to Transportation and about $200 million to local aid, which would leave about $425 million for restoration of other budget cuts. That is the plan as reported, and although I hate to rain on the Speakers parade let us look at some important facts.

1) The 1.25 percent increase will not raise $900 million but will raise about $800 million, if they are lucky. That is my best guess, but sales tax revenue has been in steady decline. Just ask the T how the 1 percent has been working out for them.

2) Revenue Estimates. Yes it is a boring subject, but it is at the core of why this gambit is destined to fail. The House budget relies on a revenue estimate that most sane folks think is short. That shortfall is likely no less than half a billion. If that number is correct then more than half of this increased revenue will be washed away when and if the Senate downgrades its Revenue Estimate when they unveil their budget. That would leave $275 million for transportation and $200 million for local aid, with the human services folks left holding the bag. And that presupposes that the Senate agrees on a sales tax increase of that magnitude and also agrees on the spending priorities outlined in the House version. Assumptions like that are politically dangerous, and put House members in the precarious position of possibly voting to increase taxes and having the Senate and or Governor pull the rug out from under them. I assume the Speaker has built some consensus with Senate President Murray and the Governor. If he has not then the House may end up with egg on its face.

3) The Transportation piece, while adding up to about a gas tax increase of 10 cents, will allow funding of the T at $160 million and the Turnpike at $100 million. Both agencies, with existing cost structures, will need substantially more almost immediately. None of the other vital Transportation needs, including bridge and road repair and taking Mass Highway employees out of the capital budget, would be dealt with.

4) With no cost structure relief the budget problems will just keep coming back. And the anticipation of relief from some of the cuts offered by Chairman Murphy will be an illusion.

5) Where is the Governor? What is his position on the Speaker’s proposal? He has, in the recent past, said that he would veto a gas tax increase that did not provide for full funding of the system. He has also said that he is not in favor of a sales tax. (Although he has refused to offer a veto threat). This proposal does not appear to give the Governor anything except a piece of transportation funding. And his House 1 budget is now not worth anything, since his revenue estimate is so wildly off. Yet the Governor has not stepped forward to revise House 1 in any way. He could still impact the House vote with a veto threat. Will he do so?

The prospective sales tax hike is bad for Methuen, even with the inclusion of new dedicated local revenues. We have managed to build a major retail presence on the Massachusetts side of the border in spite of state tax policy that has just about destroyed retailing along the New Hampshire border. That retail and business presence provides major tax revenue for our City, as well as jobs for citizens of the Merrimack Valley. Municipalities need new revenues, but this proposal, for Methuen, is a job and economic development killer.

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Governor Patrick Continues Slide in Polls

Posted on April 26, 2009 by billmanzi

Rasmussen Reports, in their latest Massachusetts survey, found that Governor Patrick continues a serious slide in the polls. It is reflective of the Suffolk poll that had similar results a couple of months back. Some of the notable findings from Rasmussen:

Sixty-five percent (65%) now disapprove of Patrick’s job performance, including 39% who Strongly Disapprove.

Tough number for the Governor. It is not too late to get that reversed, but the economic problems besetting the Commonwealth make a political comeback a little bit harder.

Just 33% of Massachusetts voters say they are at least somewhat likely to vote for the Democratic incumbent if he seeks reelection in 2010.

That number speaks for itself. And Rasmussen adds a little insult to the survey:

Forty-nine percent (49%) say Patrick’s Republican predecessor, Mitt Romney, did a better job as governor, while 32% say Patrick is the better of the two.

Romney outpolling the Governor? Talk about kicking a guy when he is down. The Sunday Tribune did a story penned by Ken Johnson and Taylor Armerding. The story has comments from several observors, myself included. It reviews some of the clear mistakes made by the Governor that have caused his sinking numbers, with commentary from both sides of the aisle. There is no question that the Governor has been dealt a terrible hand by the gross mismanagement that preceded him. And there is no doubt that he has made some key political errors. But the Governor has told the truth about the fiscal situation, and has made the choice to try to avoid kicking the can down the road further. I do not agree with all of his prescriptions, but he has been quite honest about what ails us. And maybe, as Haverhill Mayor Jim Fiorentini, points out, the public is not quite ready for that type of conversation. It is still to early to write him off, in my opinion, but a turnaround must happen relatively soon if he is to reverse his political fortune.

Read the Tribune story here.

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Sales Tax Talk Moves to Seven Percent

Posted on April 26, 2009 by billmanzi

I had done a posting on the financial potential of a one percent hike in the sales tax a couple of days back, and I guess the numbers are not that hard to figure, since the House is now talking about a two percent hike in the sales tax, and a broadening of the items covered by that tax. Talk also includes adding gasoline to the list of covered products, and omitting the Governor’s proposed gas tax increase. It is difficult to put numbers out for discussion since those numbers are dependent on what additional items or services would be added, but a real big expansion of the “sales tax eligible” goods and services would likely produce a very big bump in revenue. Without an expansion a two percent hike would be worth about $1.3 billion. If gasoline alone is added the figure I have seen is an additional $400 million. So the Legislature can, with one vote to raise the sales tax by 2 points and add gasoline, raise about $1.7 billion and not have to deal with a separate vote on the Governor’s gas tax proposal, or any of his other tax proposals.

If the $400 million dollar number is correct this would be the equivalent of a 15 cent gas tax increase. (At $27 million per penny). But there are wider ramifications beyond static revenue raising at stake here. Current Massachusetts tax policy has created a dismal business enviroment on the New Hampshire border, and a two percent sales tax increase will be a pretty big disincentive for business to locate on the Massachusetts side of the border. Methuen has benefitted greatly from the presence of “The Loop”, which pays significant property tax to our City. The Loop, and the commercial corridor it has helped to create, could take a substantial hit from such a sales tax increase. As the legislature contemplates revenue it should be mindful of the adverse consequences to job creation and local tax revenues that a sales tax increase of that magnitude could engender. It would excacerbate an already terrible climate for business on the Massachusetts side of the border.

Finally on this topic the Governor must exercise some leadership. If he does not support a sales tax increase then he ought to say so. I understand that he is looking at the 15 cent gas tax increase achieved through the sales tax expansion with some realization that it may be the most revenue he can get for transportation, but he needs to make the call. If the Legislature’s talk of a sales tax increase is not acceptable he ought to threaten a veto. If the transportation revenues are too much to resist then he ought to be negotiating and setting parameters for the Legislature on a bill.

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President Obama’s Weekly Address

Posted on April 25, 2009 by billmanzi

The weekly address by the President, focusing on bringing innovation and fiscal discipline to government.

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