Tone Deaf on Wall Street

Speaking of being tone-deaf, nobody seems to have a harder time hearing the pulse of America than the executive at AIG. Okay, I get that AIG had legally binding contracts with these executives and that these contracts required them to pay these guys "retention" bonuses. I get the legalities of that . . . although I don't quite get how those retention bonuses can apply to executives who've already left the company.

But here's a question: why don't we ask these executives to waive their rights to these bonuses and not insist on the fulfillment of their contracts. Mayor Menino has asked City of Boston employees to take unpaid days off, and state employees routinely take furloughs in a financial crisis. There are stories in the news about companies whose workers have given up pay so that their colleagues won't be fired. And we can't ask these AIG execs to waive their bonuses voluntarily?

I mean, I'm not surprised that Congress is looking at solutions, like trying to tax these specific bonuses at a 98% tax rate. Cute idea if it works. but I'm not sure that's constitutional . . . and apparently neither is the Congress. Ex post facto problems? Potentially. Wouldn't it just be simpler for the Execs to volunteer to give the bonuses back. That would buy them at least a little bit of good will for the next round of begging with the American people.

Tone Deaf in the State House

The Boston Globe had a story today about how Transportation Secretary James Aloisi's sister had a "no show" job in the State House for six months. According to the Globe story, former Speaker Sal DiMasi assigned Carol Aloisi to former State Representative Rachel Kaprelian, who is now the Registrar of Motor Vehicles in Governor Patrick's administration. According to the story, the incoming Floor Leader, Garrett Bradley of Hingham went to his new office, he literally "found" her there.

My question is simple: how tone deaf are these guys? Why would anyone with any common sense give that much ammunition to the Howie Carrs and Mike Barnicles of the World. Why didn't Carol Aloisi ask to be reassigned to somebody else?

This kind of stuff makes me crazy. Because state government is actually an honorable enterprise. Because most folks working for state government put in an honest day's labor, and many of them are actually underpaid. And this kind of story ruins it for all of them. I don't get it.

When will 2009 Info be Available on the General Court Homepage?

Here's a question: we're already half-way through March, and yet there's still no information about the 2009-10 session available on the General Court's homepage. For example, the bill histories page only has bill histories from last session, and treats that as if it were current.

See: http://www.mass.gov/legis/ltsform.htm

Or, the Session Laws have links back to 1997, but no links for the 2009-10 session.

See: http://www.mass.gov/legis/laws/seslaws.htm

Hey Gang, we have enacted legislation already for the 2009-10 session that people would like to see! Okay, so far it's only one piece of legislation. It's Chapter 1 of 2009, relative to expanding the Governor's Authority to Address Deficiencies in Revenue. (How do I know this? Because I'm subscribed to the InstaTrac system.)

However, last night the House and Senate enacted House Bill 3415, a supplemental appropriation providing an additional $96.8 million in spending for this fiscal year. It's been laid before the Governor. It might be nice to see the enacted version of that on the Legislature's homepage before it becomes yesterday's news.

Comparing Gov. Patrick's FY09 and FY10 Proposals

For those who argue that the sky is falling, or that the bottom is falling out of our economy, it's interesting to compare what Governor Patrick proposed in his FY 2009 budget last year to what he's proposed in his FY 2010 budget this year. The initial evidence suggests that Governor Patrick is proposing to spend about the same amount overall, with a very slight uptick. Here are the overall numbers:

Type	FY09	FY10	Difference	Percent
Direct Appropriations	$26,794,198,689	$27,499,508,518	$705,309,829	102.63%
Chargebacks	$295,092,747	$519,562,340	$224,469,593	176.07%
Retained Revenue	$1,369,666,331	$473,627,971	($896,038,360)	34.58%
Subtotal	$28,458,957,767	$28,492,698,829	$33,741,062	100.12%
Federal Grants	$2,168,024,888	$2,379,530,426	$211,505,538	109.76%
Subotal with Grants	$30,626,982,655	$30,872,229,255	$245,246,600	100.80%
Trust Spending Total	$12,420,884,159	$12,551,727,618	$130,843,459	101.05%
Grand Total	$43,047,866,814	$43,423,956,873	$376,090,059	100.87%

The first subotal ($28,458,957,767) is a little higher than the Governor's FY 2010 subtotal ($27,973,136) listed on his website.

See: http://www.mass.gov/bb/h1/fy10h1/brec10/ga/hdefault.htm.

I'm wondering, why the discrepancy? My numbers were all derived from the Governor's house1.xls spreadsheet, which can be downloaded off his website.

See: http://www.mass.gov/bb/h1/fy10h1/dnld10/hdefault.htm

Maybe the difference is due to rounding errors, since the Governor is rounding all his summary figure to the nearest thousands -- i.e., the "752,034" figure for the judiciary should really be read as "$752,034,357" (which is the actual figure when you add up all his Judiciary accounts).

Now I'm curious why the posted numbers and the ones I added up from the house1.xls spreadsheet don't match. Stay tuned, campers, as I try to sort this one out.

More on the Brian Mooney Article

With respect to the previous post (Legislature's Use of PAC Money) I contacted Brian Mooney from the Globe and asked him if he knew in which line-item accounts the reserve was stashed. His response was that that the prior-year appropriations are merely carried forward into the same accounts, which are then supplemented by annual appropriations for estimated operating expenses. Mr. Mooney reported that these accounts function as reserves but are technically part of a single amount in the respective line items.

Legislature's Use of PAC Funds

In case you missed it, the Boston Globe had an interesting article on how the Legislature has apparently been squirreling away money in a reserve account which they're now using to offset cuts they claim to have made. The Globe article claims that for the first round of 9C cuts in October, the Legislature announced $9.1 million in cuts and that for the second round in January, they announced an additional $1.6 million in cuts. The article further claims that not many cuts are actually being made because the Legislature has a little-publicized reserve fund of $32 million, the result of surpluses accumulated over a number of years.

If the legislature has a $32 million reserve fund, it really is well-hidden. The legislature historically used 65 different line-item accounts which, for the 2003 fiscal year, they consolidated into two: one for the House and one for the Senate. (Click here for a full list of Legislative line-items from FY 2000 through FY 2010, as proposed in House 1)

The total amount of legislative appropriations in the last decade look like this:

• FY00: $51,815,807
• FY01: $56,975,326
• FY02: $58,591,135
• FY03: $54,260,572
• FY04: $56,067,472
• FY05: $54,300,572
• FY06: $57,771,907
• FY07: $59,231,814
• FY08: $59,603,655
• FY09: $59,603,655
• FY10: $59,659,898

I'm not quite sure how the Legislature was able to squirrel away $32 million in a reserve account from those figures, but I'd be interested to know from anyone who has any insight into that question.

Percent of Approptiation Types in Budget

As we already know, the appropriated portion of the budget includes direct appropriations, chargebacks, retained revenue and federal grants. (Trust Spending is the non-appropriated portion of the budget.) Looking at the FY 2009 enacted budget (before vetoes and 9C cuts) we see the following breakdown in budget types:

Type	Appropriation	% of Whole
Appropriations	$26,768,226,385	90.22%
Chargebacks	$297,945,821	1.00%
Retained Revenues	$460,019,850	1.55%
Federal Grants	$2,143,391,914	7.22%
Grand Total	$29,669,583,970	100.00%

As expected, direct appropriations make up the vast majority (a little over 90%) of the appropriations. Chargebacks make up a scant 1% of appropriations, and retained revenue makes up another miniscule 1½%. The remaining 7¼% is made up by federal grants.

Budget Increases over the Last Decade

So the question arises, how much has the budget really gone up in the last decade. Well, we have totaled up the whole budget from FY 2000 through FY 2009 (before the most recent round of 9C cuts) and the results are set forth in the table below:

Fiscal Year	Grand Total	Difference	Increase	Over 2000
FY00	$ 22,094,399,720		100.00%	100.00%
FY01	$ 22,473,012,963	$ 378,613,243	101.71%	101.71%
FY02	$ 23,325,548,029	$ 852,535,066	103.79%	105.57%
FY03	$ 24,692,274,727	$ 1,366,726,698	105.86%	111.76%
FY04	$ 23,135,858,331	-$ 1,556,416,396	93.70%	104.71%
FY05	$ 24,098,331,541	$ 962,473,210	104.16%	109.07%
FY06	$ 25,138,808,460	$ 1,040,476,919	104.32%	113.78%
FY07	$ 26,795,395,705	$ 1,656,587,245	106.59%	121.28%
FY08	$ 28,313,126,959	$ 1,517,731,254	105.66%	128.15%
FY09	$ 29,662,031,134	$ 1,348,904,175	104.76%	134.25%

As you can see, the increases have actually not been that dramatic. From FY 2003 through FY 2005, the budget was actually in negative territory, going from $24.7 billion back to $24.2 billion. In that 10 year period, the budget has risen from $22 billion to $29.7 billion, which represents an annual increase of approximately 3.42% annually, on average. That is a little bit higher than the average inflation for the country as a whole (measured by the Consumer Price Index, or "CPI"), which was about 2.6% annually for the same period. The difference can probably mostly be attributed to the rising cost of health care, which makes up a big chunk of the state budget.

Where do I get my Data?

With respect to the question of where I get my data, the short answer is that I get it off of the State Legislature's website. So I have to manipulate the data -- which is normally a flat text file either in HTML or PDF format -- to the point where I can get it into a spreadsheet or database: one record per line-item. I also download materials made available by the Governor's office on his website which, thankfully, includes a number of useful Excel spreadsheets that can be downloaded.

Naturally, the data that I have is only as good as the data that the Legislature and Governor publish on the web. While most of that data is reasonably good, there are occasionally substantial errors that require quite a bit of work to sort out. So, take for example, the FY 2004 Budget, enacted as Chapter 26 of the Acts of 2003.

This particular document has an alarming number of errors in it. The problems include the following:

• First of all, the document is missing hundreds of line-items, which simply did not make it into the published document. For example, 0320-0003, the line-item for the Supreme Judicial Court is nowhere to be found.


• Second, the document repeats 169 line-items exactly as they were before. So, the document goes up to line-item4000-0300 and then begins again at line-item 0610-0093 (Bonus Payments to Persian Gulf War Veterans) which, naturally enough, appears twice.
  

This does raise the question, who proofs this stuff? That's not a minor problem in the document, which by the way, is still uncorrected almost six years later. The only way that I was able to make these determinations is by finding the Conference Committee report for that year importing that budget, and then comparing the differences.

But don't take my word for it: check it yourself. See if you can find any of the following line-items:

• 0321-0001: Commission on Judicial Conduct
• 0321-0100: Board of Bar Examiners
• 0321-1500: Committee for Public Counsel Services
• 4510-0113: DPH Office of Rural Health
• 7002-0500: Division of Industrial Accidents
• 7002-0600: Labor Relations Commission
• 8000-0105: Office of the Chief Medical Examiner
• 8000-0106: State Police Crime Laboratory

You can find them if you go to the Conference Committee report (House 4004) and look for them there.

So What's a 9C Cut?

So what is a 9C cut anyway? It turns out that "9C" refers to G.L. c. 29, §9C. That section, which functions in coordination with §§9B through 9G, basically provides that whenever the Governor (through his or her A&F Secretary) determines that revenues will be insufficient for the remainder of the fiscal year, the Governor either has to make cuts or raise revenue. The pertinent part of the section is set forth below:

Chapter 29: Section 9C. Deficiency of revenue

Section 9C. Whenever, in the opinion of the commissioner of administration, available revenues as determined by him from time to time during any fiscal year under section 5B will be insufficient to meet all of the expenditures authorized to be made from any fund, whether by appropriation or distribution, he shall within 5 days notify in writing the governor and the house and senate committees on ways and means of the amount of such probable deficiency of revenue and the governor shall, within 15 days after such notification, reduce allotments under section 9B, and submit in writing a report stating the reason for and effect of such reductions, or submit to the general court specific proposals to raise additional revenues by a total amount equal to such deficiency.


The Governor can only cut agencies and departments of the executive branch. He cannot cut the appropriations of the Judicial and Legislative Branches, nor of the Constitutional Officers. He also cannot unilaterally cut Local Aid. He cannot the spending form Quasi-Public Authorities, which generally don't get their fundings through appropriations anyway. He can ask all of these other parts of State Government to make voluntary reductions, which a number of them have done.

Click here for a nice additional explanation of the 9C cut process on OneMassachusetts.org.

FY 2009 Budget through the 9C Cuts

The table below sets forth the total amount of vetoes, overrides, and 9C cuts proposed by the Governor. As you can see, from the original $29.7 billion budget that came out of the Conference Committee report, the Governor vetoed $122 million, or not even 1/2 of a percent. The legislature overrode $56 million, or not not even 1/8th of a percent.

Fiscal Year 2009 Event	Amount	Running Total	% of Conference
FY09 Conference Report	$29,741,634,221	$29,741,634,221	100.00%
FY09 Vetoes	($122,341,502)	$29,619,292,719	-0.41%
FY09 Overides	$56,290,519	$29,675,583,238	0.19%
FY09 Enacted Budget	$29,675,581,134	$29,675,581,134	99.78%
October 9C Cuts	($664,784,096)	$29,010,797,038	-2.24%
January 9C Cuts	($190,326,883)	$28,820,470,155	-0.64%
Total 9C Cuts	($855,110,979)	$28,820,470,155	-2.88%
FY09 Final After 9C	$28,820,472,259	$28,820,470,155	96.90%

The 9C cuts were more significant (and don't include any voluntary reductions agreed to by non-executive branch agencies). In October Governor Patrick proposed $664 million in cuts, or about 2.24% of the budget. In January, he proposed an additional $190 million, bringing the total up to $855 million, or about 2.88% of the budget.

What was Wrong with the Debate on Question 1?

So what was wrong with the debate about question 1 anyway? After all, Question 1 is yesterday's news. The voters of the Commonwealth made a choice, in this case, I believe, the right choice. What was wrong for me was the disingenuity of the arguments and the lack of clear information. So for example:

• The backers of Question 1 indicated that the budget of the Commonwealth of Massachusetts is about $43 billion without indicating that about $14 billion of that $43 billion is trust fund spending. Trust fund spending is spending that is governed by Trust agreements and includes, among other things, most of the University of Massachusetts system and the entire State and Teacher's Pension systems. These are not "appropriated" funds; the revenues for these expenses are dedicated revenues. So, unless the backers of Question 1 were planning to close the University of Massachusetts and dismantle the entire state pension system, to include these funds in their calculation is disingenuous.


• No one in the discussion seemed to explain the role of federal matching funds. So, for example, when it comes to a program like Medicaid, the state receives a match from the federal government, so long as the state operates a program that meets with federal requirements. These funds are essentially off-limits, unless the state wants to forego the massive contribution they receive from the federal government. And to date, there is no state in the union that has declined participation in the Medicaid program.


• The backers of Question 1 made completely unsupported claims, such as that 41% of state government is waste. What was their source for that argument? An April 2008 poll that asked 500 voters to speculate on the share of every tax dollar that state government wastes. The backers seem to forget that the Commonwealth had sixteen uninterrupted years of Republican Governors, including Mitt Romney, the great reformer, who single-handedly saved the 2002 Winter Olympics in Salt Lake City. Romney did, in fact, reorganize functions of government -- for example, he centralized many human resources functions from individual agencies into their supervising secretariats -- yet he wasn't able to squeeze even a single percent of savings from his reforms.


• Little or no mention was made of the fact that some of state spending is not discretionary. Debt service, for example, is not discretionary spending. The Commonwealth must pay it's bondholders or risk junk bond status and credit default.
  


• The backers of Question 1 claimed that the income tax repeal would create hundreds of thousands of new jobs. This claim is equally unsupported, unless the backers of Question 1 were intending to privatize, for example, the entire corrections and transportation systems in the Commonwealth. That way, we could have tolls not only on the Turnpike, but on any road or bridge that had been privatized.

The reason that anybody would buy this malarkey is a symptom of the fact that the budget is complicated and poorly understood. Some of the blame for that goes to the Legislature and Administration for not doing a better job of explaining how the budget works (although the Patrick administration is improving matters on that score). Some of the blame goes to us for not doing more to educate ourselves.