In crisis, state revenue sources must be protected

October 24, 2008
By

All of us have been reading, watching and feeling the events of the past few weeks. We are all aware of the state of the current economy. The mortgage crisis, coupled with signs of a recessionary economy, have created an unprecedented financial crisis that has no comparison in global economic history. We are waiting to feel the effects of a congressional bailout package whose positive effects on the average person are unclear at this time.

The crisis has affected the Commonwealth dramatically. Last week Gov. Deval Patrick announced sweeping and dramatic cuts to the state’s fiscal year 2009 budget. These cuts include state employee layoffs and spending reductions, among other actions. Looming on Election Day is also the Question 1 ballot initiative which seeks to abolish the state income tax. These times are truly challenging for the average family but moreso for the vulnerable. How is Massachusetts doing, given the crisis, and what should we be doing about it?

Massachusetts is in better standing than other states in making it through these tough times, due to pre-emptive actions taken by the legislature. Our budget shortfall is relatively low in comparison to other states. For example, California is currently facing a 22 percent budget shortfall ($22.2 billion) while Arizona is facing a 19.9 percent ($2 billion) budget shortfall. At this point, Massachusetts is facing a 3.8 percent shortfall ($1.4 billion).

Mitigating actions already taken by the legislature include building up a $2.25 billion stabilization fund balance heading into fiscal year 2009 (the highest of 41 other states). We have also allowed municipalities to save money by joining the GIC (State Employees Health Insurance) and enter the state’s pension system, as well as sustaining $66 million of the governor’s vetoes, more than any year in recent history. We have also passed legislation gaining the Commonwealth $460 million through various revenue enhancements.

Going forward, we must protect the revenue sources that we have. Prognosticators are suggesting we should count on 30-50 percent less from capital gains taxes. If, under question one, we were to lose the income tax—the one progressive form of taxation that Massachusetts has—the income tax, under Question 1, the results would be catastrophic. For example, right now we are seeing budget cuts as high as 12 percent that will directly result in the loss of: police officers on our streets; the maintenance of our parks and parkways; and some significant government services. If Question 1 passes, $12.5 billion would be cut right out of the state budget, and we would face cuts as high as 71 percent.

While the future of the Commonwealth’s fiscal condition seems unclear, I am optimistic, and I will continue to work with all sectors of our communities to come together in the face of adversity through activism and engagement to weather the storm we are adrift in. We must continue to work hard as a community to make sure that the gains of the past aren’t compromised by the problems of the present. We must also assure that Question 1 is soundly defeated.

State Rep. Jeffrey Sánchez
Jamaica Plain