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Thursday, January 18, 2007

A Fruitful Discussion

Many of you know that Porcupine figures as a Reality Check on the liberal/progressive 'Reality Based Politics' blog called Blue Mass Group. He is proud to figure upon their 'Differently Winged' blogroll, and is happy to retun the favour on his own blog.

Once discussion was begun by a liberal blogger caled GoldsteinGoneWild (henceforth GGW)who asked - Can Someone Explain Basic budget 101 to Me? A link to the BMG thread is
HERE, but Porcupine is posting part of the discussion here - which will no doubt be added to by others. In fact, one person has already begun the manic cry to just raise taxes, but GGW is made of sterner stuff and wishes to understand.

After referencing different newspaper articles about the budget, GGW asked -

Mitt is both claiming that we have a $1 billion surplus and that we needed $400 million in emergency cuts. Isn't that contradictory? Deval is claiming $1 billion shortfall, hence need for department heads to propose 5% to 10% cuts. Tax revenues are supposed to 3 to 4% higher in 2007 than in 2006. Our population isn't rising -- not like there's more people to serve. And inflation in our area is 2%. How do we have a shortfall? If I understand the gist is that we've been lucky enough to have tax revenue grow at 7 to 8% in the last few years, so instead of socking money away, we simply spent all of it. Yes? No?

Porcupine repsonded -

Apples, Meet Oranges. There are two sets of figures used all the time, sometimes interchangeably and sometimes in the same sentance.

Actual and Projected.

We projected a surplus, and we had an $872 million shortfall in Actual revenue, which generated the cuts. Deval promptly took money out of the Rainy Day fund to restore those cuts, but the shortfall for the next fiscal year hasn't gone anywhere - we just took money out of the Christmas Club to pay the utility bill. Christmas is still coming.

One thing to keep in mind is that if there are fewer people, there are fewer people to pay taxes as well. A couple of years ago, Eric Kriss [Mitt Romney's Chief of Administration and Finance] got into a WORLD of trouble by talking to the Boston Chamber of Commerce about the ratio of what he was naive enough to call 'Givers' and 'Takers' in the State. His point was that as we enacted ever more mandated benefits and social service programs, people in need of those programs would likely be drawn here, while at the same time, those who pay taxes and own busineses would find themselves increasingly regulated and might consider moving to a state (or country) with less regulation and taxes. You would have thought he was advocting wholesale euthenasia, but when you think about it it's logical. So - who exactly ARE our Mass. residents? Do they use state services, or pay for them?

The increase in revenue may not meet the increase in demand. If you have a 4% greater payment, but a 5% greater rise in entitlement programs - you have a 1% shortfall. I've noticed that projections tend to be in actual dollars, while demand is usually a percentage of past years (the phenomenon where level funding is called a 'cut' because you didn't get your expected 3% growth in program funding). Deval is finding out that the overall size of government actually HAS been shrunk in the last 16 years - with unfilled positions and people doing one and a half or two jobs for the price of one, mainly - and there's not a lot of fat left.

GGW questioned -

I find it interesting that you, a Republican (BMG's only?), says "there's not a lot of fat left." I don't have a good 16 year perspective: What fat was cut? And what's left?

I agree with the phenomenon you cite -- where 4% increase is called a "cut," even if inflation is just 2% or 3%, because someone made an agreement to increase salaries and benefits by 6% -- is pervasive. I'm not surprised that agencies say that, but I am surprised that reporters buy it so frequently.

Porcupine expanded -

Pears, Meet Apricots. Fat and Waste are not the same thing either.

Fat is inefficiency - a prime example is when Gov. Bill Weld took over; he discovered that there was a fleet of WELL paid couriers, toll taker level salaries, driving around the state delivering lottery tickets and colllecting receipts. He turned the whole shebang over to UPS, with insurance in case of lost tickets, etc., and got rid of the drivers, their health insurance, their comp, their benefits, their cars and their gas. THAT was cutting fat.

Waste is programs and earmarks that are a bad, but politically popular, use of taxpayer funds. The infamous Braintree Gazebo or the $500,000 to the City of boston to 'dialog' about race is an example of waste.

Admittedly, waste is more in the eye of the beholder than fat, but the old lottery drivers probably didn't think so. Fat is vastly reduced. Waste is rampant. THAT is Deval's biggest challange.

And so it is. Undoubtedly, this discussion will continue as the newly minted Democrat Governor finds his feet in the Corner Office. In the meantime, Porcupine will be burying his gold bars in the side yard.


Blogger googiebaba said...

Mr. Porcupine, I found this very helpful. However, I still have one question. Why is there a windfall projection when the actual revenues fall short? Where are they getting their projections from?

You will have to forgive me, I have a small child at home. He is a year old, but my brain never really recovered after giving birth.

6:04 PM  
Blogger blog guy said...

"Deval is finding out that the overall size of government actually HAS been shrunk in the last 16 years - with unfilled positions and people doing one and a half or two jobs for the price of one, mainly - and there's not a lot of fat left."

Intuitively, I just don't accept that Mass government has shrunk, and only have data back to 1995.

In 1995 there were 6,203,000 people in Mass and 401,000 Government employees.

In 2006, there were 6,399,000 people in Mass and 412,000 Government employees.

The fact that we've added 1 government for every 8.7 new people, may or may not be meaningful in this context, but, to me anyway, isn't evidence of shinkage.

Maybe it's a reduction in the growth rate. Maybe.

Regardless, waste removal is dirty business. Spending money gets the press; not spending money doesn't. I'm not holding my breath.

4:19 PM  

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