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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Tuesday, December 05, 2006

Much ado about what?

I know this may come as a shock but I can't quite make out what's going on with this latest twist in the state's budget saga.

Up until now, it's been clear. Mitt was grandstanding for the national press by imposing unilateral cuts where they didn't seem necessary or justified. After sufficient hue and cry, he reinstated some of them by saying the state had a better November than expected in tax revenues.

Now along comes Treasurer Tim Cahill -- warning legislators that the state needs to borrow money to pay its bills and that could b a sign of things to come.
"I want to prepare the incoming administration and the Legislature for what could be some tough times," Cahill said in an interview yesterday. "They need to know the truth, and the truth is we have a cash-flow crunch, maybe not a crisis, but certainly a cash-flow shortage. It's not good for a household, and it's not good for government."
But cash flow crunches or shortages are normal this time of year. Local aid payments to cities and towns go out around the first of the year -- as do income tax forms. The dollars from those forms flow into the state from January to April.

To cover that gap, there's a financial tool called a tax anticipation note. Investors buy those short-term notes to help state and local government cover their cash needs.

Yes, there are issues surrounding the fiscal 2007 budget -- largely caused by the Legislature's decision to dip into the stabilization fund to pay for some expenses today instead of the proverbial rainy day. But those issues were caused by Romney's decision to veto the transfer and the Legislature's inability to override the late veto.

There are legitimate questions about the wisdom on dipping into that fund -- but they are separate and apart from what's going on now. As Michael Widmer of the Massachusetts Taxpayers Foundation says:
"It's certainly a yellow flag, and it reflects the fact that the spending increases in [fiscal year] 2007 were . . . larger than they should have been," he said. "But at the same time, tax revenues are likely to cover the spending increases in 2007 when the year ends."
So the thoughts naturally turn to politics -- namely what is Cahill up to? On the surface this is weird: the treasurer is a Democrat who supported Deval Patrick and Doug Rubin has been a top aide to both men (although he left Cahill under weird circumstances involving a non-disclosure agreement). As we've seen once already, tax revenues generally meet or exceed expectations because of the conservative tendencies in projecting them.

So what's the story here? Muscle flexing? And to what end? Stay tuned for the next installment of "Under the Golden Dome."


Anonymous Anonymous said...

Cahill has been told by his advisors to maintain some distance from "for-it-all" Patrick. He is to be the fiscal conservative foil to Patrick's big spending approach to government. This sets him up for a future gubernatorial run, either against Patrick if Patrick stumbles or to replace him when he moves on to a national cabinet position under a Democratic president. Or, to run for Senator Kerry's seat if he pursues the presidency.

December 06, 2006 10:17 PM  

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