Massachusetts’ New Government Deficit Scheme
Boston is the birthplace of American fiduciary trust and mutual funds. A case can be made that Silicon Valley, Intel, Apple, Microsoft, etc, wouldn’t have been possible without the small investor capital that flooded into Fidelity’s tech heavy mutual funds in the 1980s and 90s.
Back in the 1920s, the common man didn’t trust banks or financial securities. New England was an exception. Fidelity, Putnam, MFS, Vanguard (Wellington), John Hancock, and many more, built upon New England’s reputation for fiduciary discipline.
Charles Ponzi reminded Bostonians, and the rest of us, about what happens when you let your guard down.
Back to the present. By law, Massachusetts must operate with a balanced budget. Currently, it is not. Unbalanced budgets are feared because they lead to desperate measures in the future. Ugly though it may be, Mass needs a balanced budget today, more than ever.
As of this writing the 3 million currently employed in Massachusetts will have to work off $1,000 each, to pay for the approximate $3 billion shortfall as of June, 2020 (and growing).
Since around March 15th, Massachusetts has been collecting significantly less money in sales and income tax. By May, it was clear that, at best, the State was going to collect 10%* less every month than a year prior.
To balance the budget, the State needs to either cut 10% of workers or 10% of their salaries. Or, raise taxes.
Instead, it has hidden behind endless Coronavirus updates and led the public to believe the Federal Government would one day make up the lost revenue.
Today it is July 25th, all business and income taxes have been collected for 2019 and parts of 2020. Massachusetts knows exactly how much money it has going forward for the 2021 budget.
Deborah B. Goldberg, the Treasurer, has not been forthcoming.
Like all of Charles Ponzi’s investors, Massachusetts residents believe there’s money in a place there isn’t.
The Massachusetts government has not fulfilled it’s fiduciary responsibility to inform the public. Yes, the cash flow report schedule is quarterly, but general corporate ethics dictate that when you experience a “material” event (which is every month these days) you provide timely updates. They did so for May, but not for June’s numbers. Where are they?
What can one do? That’s the thing about fiduciary values. They must always come from the top. Irony of ironies, we have a Republican Governor. For Ms. Goldberg’s part, as a Democrat, she doesn’t seem to be any better.
Bostonians no longer seem to worry. Things will work themselves out. They take a lot for granted. Trust is hard to develop, easy to lose. The Boston Globe’s days of “Spotlight” investigative reporting are long behind it. Weak and nearly bankrupt itself, The Globe won’t or can’t interview the State government on monthly finances, let alone question why the State is running without a balanced budget.
It’s the end of July. The budget is a month past due.
Every month that Massachusetts doesn’t cut pay for its management, let’s consider that 100,000 workers out of Massachusetts’ 3.2 million in 2019, it builds their savings by 10% while reducing the savings of the other 1,000,000 residents who have lost their job. Is that fair? When the smoke clears, I don’t expect the public will think so.
I roughly calculate Massachusetts monthly revenue losses running at $1 billion. Are they borrowing from Peter to pay Paul? Shouldn’t we know?
If the Governor and Legislature did their job and balanced the budget they’d be forced into an obvious solution going forward.
If the government reduced everyone’s pay, as they do in Europe, it would be easier for everyone to keep their jobs in the future. Instead, the deficit is growing to the point that Massachusetts will have no choice but to fire tens of thousands and cut spending. Baker will argue they have no choice.
I’m telling you today, July 25th, that they did.
He and others will never have to give back the 10% of pay that the State didn’t collect.
Please don’t get me wrong. I’m not arguing that one way is better than the other. Perhaps Massachusetts is taking the right course of action. I’m only pointing out that Governor Baker and various government agencies have not fulfilled their responsibility to keep the public informed about the current state of Massachusetts’ finances and the options it has before it.
They have a conflict of interest because a new budget would undoubtedly cut into their compensation. That should motivate them to make an extra effort towards transparency and maintaining public trust.
Like Ponzi’s investors, I don’t expect Massachusetts residents, who are not part of the government funding world, to ever be made whole. Payments were made in 2020 from taxes never collected. That money isn’t coming back.
A recent report from the Mass DOR, if you believe I’m exaggerating above: Massachusetts June Revenue Collections Interim Report
I sent the Mass Treasury this graphic with my question on how the Rainy Day fund could increase in 2020. NO REPLY.
*10% is a guesstimate but a conservative one.
