EagleTribune.com, North Andover, MA

Merrimack Valley

June 14, 2009

History repeats as states face looming budget deficits

The story tells the tale of the budget struggle in Massachusetts. State tax revenues are down, led by a sharp fall-off in capital gains tax receipts. The governor proposes a variety of tax increases in an attempt to close a looming budget deficit.

It's all too familiar. But the story in The New York Times is from 1988 and the governor is Michael S. Dukakis.

Twenty-one years later, Massachusetts, New Hampshire and most of the other states are replaying this scenario as a new recession slashes tax receipts, leaving legislators and governors struggling to fill the gaping holes in their budgets.

How is it that we find ourselves in this cycle of fiscal boom and bust? Were there no lessons learned from past budget crises? Did no one predict that the good times would not roll forever?

You must be joking, says Massachusetts anti-tax advocate Barbara Anderson, the executive director of Citizens for Limited Taxation.

"Legislatures respond to economic conditions. They don't use forethought in any way," she said. "If they have lots of money, they spend it. They just ratchet it up into bigger and bigger budgets."

When economic times are good, tax receipts flow freely into state coffers. Legislators use the excess cash to start new programs, offer new benefits under existing programs and increase the pay and benefits of public employees, Anderson says.

"Public employee benefits are ratcheted up in good times," she said. "How do you say no to the unions when you've got the money?"

All this establishes a new, higher baseline of spending each year. When the good times inevitably end and tax receipts drop off, state budgets are left running deficits.

With this national recession, the good times have ended with a thud.

All but three states — North Dakota, Montana and Wyoming — face budget deficits. California's is the worst at more than $24 billion.

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