State Budgets

Governor Baker Highlights Tax-Hike Free Budget and Accomplishments

Massachusetts Governor Charlie Baker delivered his third State of the State address, highlighting the states’ successes and challenges over the past three years and his administration’s plans to tackle future challenges. The governor’s address reflected the bipartisan nature of his administration, embracing ideas from both parties. Of Gov. Baker’s accomplishments, the 2017 budget negotiation process stands above the rest.

In 2017, 11 states began their fiscal year without a budget, including Massachusetts. Some budget battles were resolved over the Independence Day weekend, whereas others dragged on for four months. Part of the delay can be attributed to partisanship, but revenue shortfalls initiated and drove the debate. Gov. Baker began the battle with a $1 billion dollar structural deficit and ended with a deficit under $100 million without raising taxes. In the end, the final 2018 fiscal budget increased spending 1.7 percent over the previous year.

Massachusetts’ recent legislative changes have improved its business climate relative to its high tax neighbors, such as Connecticut, New York, Maine and Vermont. In fact, Massachusetts has climbed from 29th place to 25th in economic outlook in four years in the Rich States, Poor States ALEC-Laffer State Economic Competitiveness Index, a ranking system which uses 15 variables associated with economic growth such as top marginal income tax rates, public employment as a percentage of total population, and tax expenditure limits.

Recently, Massachusetts has enjoyed faster economic and population growth than the regional average. As the governor points out, “In a 2014 national survey, Thumbtack gave Massachusetts a D+ for small business friendliness. Last year, they gave us an A-.” This growth has allowed Massachusetts to increase spending in FY 2018 without increasing statutory tax rates. A competitive business environment, especially compared to neighboring states, is vital for maintaining core state services.

The governor also highlighted lawmakers and the administration’s efforts to find cost savings. Some examples were as broad as his efforts to trim $320 million from the 2018 budget while others were more detailed, such as reducing the energy consumption of streetlights by 60 percent. The governor’s greatest challenge lies ahead, finding a way to reform MassHealth and reduce the potentially crippling future costs. On this, the governor was dismayingly brief, saying, “Our discussions with the legislature and other interested parties about MassHealth have been helpful. And we believe our shared goals of quality care and long-term sustainability can be achieved.”

Through job-friendly regulatory and tax reform, priority-based budgeting and healthcare reform, Massachusetts can continue to grow faster than its rising costs. Reform is urgently needed; as information and transportation technology improves businesses will base investment decisions not just on regional comparisons but also on national and international comparisons. Massachusetts compares favorably to Connecticut, New York and New Jersey; but some of the booming economies of the South and Midwest have already leapfrogged Massachusetts on needed reforms.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace …

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