The strategy of monetary policy

An abstract for this article is not available.Monetary policy

After the Revolt: A Framework for Fiscal Recovery

Despite the injection of new taxes in the amount of $1 .2 billion in fiscal 1991, and recently announced cuts in the budget of approximately$464 million, the Commonwealth\u27s fiscal condition - irrespective of the outcome of CLT\u27s petition -is precarious. Although the political juices are flowing in Massachusetts, with an eye on November 6th, Massachusetts decision-makers have not faced up to the problems inherent in the long-term, structural spending patterns of the state\u27s budget. Our five-year budget projection indicates that if expenditure trends continue without dramatic restructuring - particularly in the non-discretionary accounts - the Commonwealth faces a steady rise in annual deficits that could exceed $700 million in fiscal 1993 and may escalate beyond$1.3 billion by 1995. Between now and 1995, total expenditures are estimated to increase by 32%, whereas revenues will grow by only 24%

Boston\u27s Recurring Crises: Three Decades of Fiscal Policy

The word deficit has dominated the most recent 35 years of Boston\u27s fiscal history. This report probes the experience and lessons of this history in order to propose a more permanent resolution of Boston\u27s financial difficulties. Three deficit categories are identified and analyzed: appropriation deficits, revenue deficits and overlay deficits. Over the past 35 years, the City has had 12 years of appropriation deficits, 19 years of revenue deficits and 28 years of overlay deficits. In each year the City\u27s budget was certified as in balance. Deficits became a way of life. Fortunately the overlay deficit problem, except for the potentially expensive utility cases, has been overcome through revaluation. The appropriation and revenue deficits remain tobe eliminated. The report distinguishes between structural imbalances and operating deficits. Structural imbalances are attributable to impositions on Boston of service responsibili ties that are unique or of disproportional scale among cities of Boston\u27s population class. They include costs that are mandated by the historical patterns of service and cost allocation as between the Commonwealth and its cities and towns, and costs that may be explained by the special role that Boston fulfills as the state\u27s capital city, as the economic and cultural center of the New England region and as a major entry point and way station for successive waves of foreign immigration. Conversely some of the City\u27s financial difficulties represent operating gaps that occur because spending exceeds available resources. They indicate political and/or managerial inability or unwillingness to operate within the limits of expenditure/revenue plans. They also reflect the failures or absence of adequate fiscal planning and management systems and controls

Residential Tax Exemption Policies: Trends, Impacts and Future Options for Boston

This is an extensive report on residential tax exemption issues in the City of Boston with an evaluation of recently proposed revisions in current policies

The Massachusetts Fiscal System: Structure and Performance

On November 4, 1980 the citizens of Massachusetts, by a vote of 59% to 41%, resoundingly endorsed a tax reduction plan known as Proposition 2 1/2. All communities in the Commonwealth were faced with an immediate reduction in their local revenues due to the immediate cut in the excise tax that Proposition 2 1/2 called for, and up to 130 communities will have to implement a 15% reduction in their tax levies for FY 1982. Already there are protestations from many local officials that they cannot make the required tax cuts without severely reducing the level of local services. The Commonwealth\u27s older cities and towns are caught in a dual bind. On the one hand, they will face a series of tax cuts over the next few years, and on the other, they will have to cope with an annual rate of inflation that is not expected to fall under 10% for the rest of the decade. The combination of the two factors could effectively dismantle the structure of local government in these communities. Many commentators have interpreted the vote for Proposition 2 1/2 as a protest against the regressive and inordinately high local property tax, and not as a call for a cut in services. In short, this view holds that people want to cut the price of services but not the quantity of services. This view also holds that the public will be more amenable to a restructuring of the state and local tax systems when they begin to feel the pinch of the service cuts that will follow the implementation of Proposition 2 1/2. Accordingly, a number of proposals are already being advanced that would restructure the state tax system, and provide for an increase in state aid to the local municipalities to compensate for the revenues lost under Proposition 2 1/2 . Other proposals call for modifying some of the more severe provisions of Proposition 2 1/2 and allow the option of a local override. The debate, therefore, is being joined at many levels. It involves state and local government officials, public employee unions, educators, business leaders, and representatives of many special interest constituencies. Since it is in the nature of things that each group will seek to address its own special needs and see the problem in the light of its own concerns and constituencies, it is important, indeed imperative, that an objective framework is available which defines the context of the debate, establishes its objectives, and sets its limits. It is the purpose of this study to provide that framework. It has a two-fold purpose: To examine the structure of the Massachusetts fiscal system, and; To examine the performance of the Massachusetts fiscal system

Boston\u27s Fiscal Future: Prognosis and Policy Options for 1984 to 1986

The finances of the City of Boston have been variously affected throughout its long history by regional and national economic cycles, by legal constraints and changes in the state-local tax system and by inter-municipal resource and expenditure disparities. In more recent years, however, a series of tremors converged to propel Boston\u27s seemingly chronic fiscal problem to the crisis stage. As inflation climbed to unprecedented double-digit levels, an overwhelming majority of the state\u27s populace supported specific limits on property taxes, the primary source of municipal revenue. As a result, Boston was forced to reduce property tax levies by $144 million during the two year period, 1982-83. To complicate matters federal assistance has been sharply reduced from an annual peak of$133.5 million in fiscal 1981 to an estimated $71.6 million in fiscal 1983. These factors followed a State court order in 1979 that disproportionate assessments of commercial properties were unconstitutional, thereby generating a City obligation for tax refunds that was originally calculated at over$140 million. To cover this extraordinary fiscal liability and to cope with the initial cutbacks under the property tax limits, the City went through a period of upheaval in fiscal 1982 until the Funding Loan Act of 1982 (the so-called Tregor Bill) was passed. Passage of this bill provided for the reemployment of many laid-off employees, particularly police officers and fire fighters, and provided calmer waters in fiscal 1983 for the City\u27s ship. As fiscal 1984 approached, the respite of 1983 was short-lived and new storm clouds appeared on the horizon. Would Boston face lay-offs and budget crises once again in fiscal 1984 and in subsequent years? The Administration that will take office in January, 1984 must contend with more than the above synopsis of fiscal problems and compensating factors. Fiscal 1984 decisions, those already made and those to be made throughout the remainder of 1984, will to a considerable extent shape the spending and resource requirements of the next two subsequent fiscal years. This report is designed, therefore, to identify the key revenue and expenditure variables for the fiscal years, 1984-86, projecting estimates for each major tax rate component on the basis of clearly delineated assumptions, indicating the revenue shortfalls for each year, and outlining available options for closing the predicted expenditure-revenue gaps

After the Miracle: A History and Analysis of the Massachusetts Fiscal Crisis: Being a Drama in Five Acts, with an Implied Invitation to the Reader to Participate in the Crafting of the Final Act

After the Miracle documents the factors that have shaped the recent political debate in Massachusetts and are likely to determine continuing economic and fiscal conditions in Massachusetts in the near future. The paper indicates that 1990 may begin a decade of real limits for Massachusetts. The economy has stagnated and the next two years will be a period of deep economic uncertainty. It is also clear that a resurgence, like that of the boom period of the eighties, is unlikely to be replicated. The 1980\u27s was a period when state-local spending in Massachusetts, propelled by the infusion of double-digit tax revenue yields, increased by about 72% (from $10.8 billion to$18.6 billion), an average rise of 9% each year. State spending excluding direct local aid distributions between the 1981 and 1989 fiscal years increased from $4.8 billion to$9.6 billion, or by over 12% on average per year. As a result, the state share of state-local spending increased from 45% to 52% of the total. By contrast, spending by cities and towns climbed by only 50% (from $6 billion to$9 billion) during this same period, or by 6% on average per year. The study shows that currently eight major cost centers dominate the state\u27s spending priorities. They are like giant termites, eating away at a revenue stream with limited growth potential. If their total allocation over the current fiscal year had not been essentially level-funded (on the basis of proposed major policy and program changes), they would have added more than one billion dollars to the Governor\u27s recommended budget for the 1991 fiscal year. Even as submitted, the $8,039 billion in budgetary requests for seven major cost centers, excluding pensions, is$2.0 billion over actual expenditures for these same purposes just four years ago, a jump of over 34%. The major cost centers account for 68% of the Governor\u27s entire budget submission for next year as compared with 62% of total spending in the 1989 fiscal year. Estimated spending for all purposes other than the major cost centers, on the other hand, will be about 13% below actual expenditures for these same purposes two years ago