E-Mail This Article to a Friend Funny money After three years of revenue crunch, Beacon Hill can’t decide whether it’s in spending mode or not BY DAVID S. BERNSTEIN
	Veto proof Following are some of the specific budget items vetoed by Governor Romney on June 30. All have been restored by legislative override. $80,000 - Newton Community Service Centers young-parents program $50,000 - Project Adventure Youth Leadership Program, Lawrence $50,000 - Franklin Community Action Center Corp. youth service $43,500,000 - Nursing-facility Medicaid inflation-rate adjustment $100,000 - National Kidney Foundation renal-disease program $50,000 - Louis D. Brown Peace Institute support services for homicide victims’ families and anti-violence programs $833,000 - Youth Residential Recovery Program at Long Island Hospital in Boston $90,000 - Battering-prevention program, New Bedford $1,000,000 - Early Intervention Program reimbursement funding $4,000,000 - Massachusetts International Marketing Partnership Inc. contract for promoting state tourism $200,000 - Aid to Incarcerated Mothers

Beacon Hill watchers must be feeling dizzy these days. After being hit over the head with one simple fiscal strategy — cut to the bone, and then keep cutting — they’re now faced with seeming legislative schizophrenia.

The July 18 announcement that the state’s tax revenue rose 7 percent in the 2005 fiscal year (FY), which ended June 30, raises serious questions for debate. Is the state on a new revenue track, or was this a short-lived bump? If temporary, should the excess go to capital projects or to restore the rainy-day fund? If long-term, should we restore spending levels or cut taxes? Is now a time for economic-growth incentives or not?

Don’t look for clear answers from the people in charge: Governor Mitt Romney vetoed $110 million of spending from the FY ’06 budget, then proposed spending $1.8 billion of the surplus revenue. The state Senate decried deep local-aid cuts to Bay State towns, but then agreed to cut the state income tax if future budgets ever restore local aid to mere 2002 levels. Legislators in both houses did away with corporate tax breaks, while simultaneously passing new corporate tax breaks. They also opted for a two-day sales-tax holiday that will cost the state some $15 to $20 million, while failing to provide funds to solve acknowledged crises, such as the lack of criminal-defense attorneys for the indigent (see "Criminal Justice," This Just In, July 8).

And while Romney and the legislators discussed how best to play with the state’s supposed revenue overflow, municipalities continued to report dire economic conditions. The town of Sherborn sold Nextel rights to build a cell-phone tower on Brush Hill to pay for badly needed improvements to its emergency-communications system. Wayland is paying employees to opt out of the town’s health-insurance plan.

"The loudest cries you hear now are over the decline in public services," says Noah Berger, executive director of the Massachusetts Budget and Policy Center. Yet restoring public services — those provided not only by local aid, but also by state agencies — seems to be the one option not under consideration on Beacon Hill.

"I think the characterization of our policies as schizophrenic is very accurate, and says a lot about our state," says Representative Liz Malia (D–Jamaica Plain). "I don’t think we’ve got any kind of handle on an economic strategy."

STRANGE MOVES

The strangest moves have come from (surprise!) the governor’s office.

Most of Romney’s June 30 line-item budget vetoes applied to small, non-controversial programs or to rate increases that were arguably long overdue (see "Veto Proof"). For most of these cuts he provided no justification, other than that the dollar amount did not match his January budget proposal. State House pols are only half-joking when they suggest that Romney simply wanted to boast on the campaign trail that he vetoed more than $100 million, and plucked randomly until he reached that goal.

He cut $175,000 from his own commission on gay and lesbian youth, $1.6 million in at-risk-youth matching grants, and $833,000 from a youth substance-abuse program. "You would think he did not like children," says Representative Alice Wolf (D-Cambridge). "These are very well-respected programs."

Last year, Democrats were able to restore roughly $40 million of Romney’s $108 million in FY ’05 budget vetoes. This year, they put back almost every penny (the only cut they did not override was Romney’s veto of a new fee that sex offenders would have had to pay to register with the state). The vetoes were so indefensible that Republicans even joined the opposition: 10 of the overrides, replacing a total of $64 million, passed without a single dissenting vote in either the Senate or House.

But even while asserting that, on his vetoed items, legislators should hold to the budgetary dollar figures he proposed six months ago, Romney also bragged about the tax windfall — and put forward ways to spend it. On July 18, he proposed $1.3 billion in capital projects, including $400 million to colleges and universities in the state. He also encouraged the legislature to immediately reduce the income-tax rate. Romney’s office would not comment to the Phoenix about how all these pieces fit together.

TAXING MATTER

At least the governor doesn’t pretend to care about the effects of the last several years’ worth of budget cuts. Democrats in the state Senate do, which made their income-tax vote particularly strange.

The plan to reduce the income-tax rate to 5 percent, passed by referendum in 2000, is currently stuck, with the rate frozen at 5.3 percent; the new rate will be "triggered," as the economy improves, by a series of measures installed by the legislature.

Republicans want to skip the triggers and roll back the rate now. Senate Democrats have rebuffed their plan, calling it a fiscal calamity for cities and towns, given the huge cuts in local aid over the past three years. Debating the measure, Steven Tolman (D-Boston) said that "municipalities are crying out ... for the state to help them out, so they can afford public safety and other services," according to State House News transcripts. Steven Panagiotakos (D-Lowell) spoke of "accounts we need to revive," including badly underfunded higher education. Marc Pacheco (D-Taunton) chimed in about increases in health-care and other costs, and the resulting decline in local services.

All well-meaning and levelheaded. But those same legislators then promptly passed a bill altering the existing triggers; under this measure, the tax cut goes into effect when local aid rises to 2002 levels — which, at close to $5 billion, is merely $40 million more than the trigger required by the new FY ’06 budget.

"This would strike the right balance," said Senator Richard Tisei (R-Wakefield). It ensures that the state restores "aid that was cut" before reducing the tax, he explained. The Senate passed the bill 38-0.

Huh? A tax cut now would be catastrophic to towns, but if the local aid paid out by the state were less than one percent higher, the cut would be a good idea? The bill doesn’t even account for inflation, let alone the types of cost increases Pacheco railed against. Average teacher salaries in the state are rising nearly $2000 a year. Health-care costs have risen 63 percent since 2001, according to the Massachusetts Taxpayers Foundation.

"The voters called for that," Tolman says, trying to explain his vote. "I’m not one who truly believes in cutting taxes, but we have to report to the voters."

That argument isn’t flying in the House, where members are openly critical of the Senate tax bill — and of the senators themselves. "I don’t know what they were thinking," says one state rep.

The House did not attempt to address the Senate bill before recessing until the fall, and few expect the measure to pass in that chamber.

But don’t start hailing the House as the voice of sanity too quickly. True, it opposes an income-tax cut, because the state needs the revenue. Yet the House agrees with the Senate on a two-day sales-tax holiday — a different, less progressive way of giving an estimated $15 to $20 million of tax money back to residents, with no proven payoff.

The House has also agreed to a massive tax cut for the movie industry. The bill is intended to bring more productions — like the recent filming of The Departed — to Boston, generating new revenue. Opponents, like Representative James Marzilli (D-Arlington), argue that it will mostly just cut taxes for productions that would come here anyway.

Three days after the House passed the movie bill, the state’s Department of Revenue came down on Marzilli’s side, saying the bill would cost the state up to $60 million in revenue in FY ’06 alone.

That figure, if correct, would throw away about three-quarters of the estimated gain from another bill approved by both houses: closing of certain other corporate tax breaks. Those breaks, the legislators are calling loopholes.

Which goes to show that contradictory opinions are easy enough to justify. As Tolman says, explaining his own votes on these corporate-tax bills: "Rather than contradictory, I’d call it creative."

David S. Bernstein can be reached at dbernstein[a]phx.com