Democratic gubernatorial candidate Jay Gonzalez Thursday fired a fiscal torpedo at Governor Charlie Baker, accusing him of bungling state finances as Massachusetts faces a daunting half-billion dollar budget gap.
“We’ve got a governor whose whole case for being governor is he’s a great manager. And he is failing at that. And, as a result, there are real consequences to people,” he said in a telephone interview. “He has mismanaged this budget.”
The attack marks one of the first direct broadsides against the popular Republican chief executive, who bills himself as a responsible steward of the state’s $39 billion budget. The Democrat’s salvo drew the sharpest GOP response yet of the nascent campaign.
Gonzalez, like Baker, is a former state budget chief and one-time health care executive fluent in the same language of revenue spreadsheets and fiscal line items. Baker, whom polls have found to be the nation’s most popular governor, is widely expected to seek reelection next year.
In an interview Thursday, Gonzalez said Baker has endangered Massachusetts’ fiscal stability by repeatedly diverting money meant for the state’s emergency rainy day fund. He alleged Baker has lurched from budget crisis to crisis without a coherent long-term plan. And he argued the Republican has failed to properly control ballooning health care costs.
Baker aides referred some questions to the state GOP, which issued a lacerating statement about Gonzalez, who served as state budget chief from 2009 to 2013 and helped oversee the state’s health insurance exchange under Democratic Governor Deval Patrick.
“It is wildly hypocritical for Mr. Gonzalez to complain from the sidelines given the fact that as the former state budget writer, he raided the rainy fund to perpetuate wasteful spending and ran the Health Connector into the ground, resulting in hundreds of millions in wasted tax dollars,” Massachusetts Republican Party spokesman Terry MacCormack said, “not to mention the fact that his own Democratic colleagues added $265 million in pork spending to this year’s budget.”
The main line of attack from Gonzalez, a one-time secretary of administration and finance, is based on the hundreds of millions of dollars Baker — together with the Democrat-controlled Legislature — has diverted from the state’s rainy day fund, which is meant only for fiscal emergencies.
“The rainy day fund balance was higher when I left A&F, at the end of the recession, than it is today, after years of economic growth. It’s totally irresponsible, and it’s setting us up for a crisis,” Gonzalez said.
State law put in place under Patrick says revenue from capital gains taxes — levies on investment profits — above a certain threshold must be put into the rainy day fund. That’s for two main reasons.
First, capital gains revenue can fluctuate wildly; there’s no telling when people will offload their stocks. That makes it risky to premise spending on a stream of revenue that might not show up.
Second, the rainy day fund is meant to be a bulwark against extreme cuts to state services when tax revenue falters. So it’s important to fill it during good economic times.
But since the Great Recession ended, Beacon Hill leaders —
For example, in the fiscal year after Gonzalez left state service, Patrick and the Legislature took $350 million out of the savings account and diverted hundreds of millions of dollars meant for it, even though the economy was humming.
And in budgets Baker has been involved with as governor, hundreds of millions of dollars meant for the fund have been diverted to balance the budget. And, under his watch, a bond rating agency issued a sharp warning about the state frequently using the emergency fund to plug holes.
When he took office from Patrick in 2015, Baker faced a significant fiscal gap and shifted money meant for the rainy day fund into the state budget. But the habit has continued in subsequent years.
The Democrat-controlled Legislature — which can override any Baker veto — has the final say on every spending plan. But Gonzalez repeatedly declined to assign blame to Democratic lawmakers, saying, “The governor is the leader.”
And Gonzalez, a Needham resident who once served as chief executive and president of health insurers CeltiCare Health and New Hampshire Healthy Families, knocked Baker for making unilateral cuts to the budget this fiscal year, including slicing funding for programs for the sick and elderly. (Administration officials say Baker was ensuring a balanced budget — months after Democrats overrode his spending vetoes.)
Given the current budget crunch, Gonzalez also made a specific proposal: freeze the state income tax at its current rate of 5.1 percent.
In 2000, voters passed a ballot initiative incrementally knocking the rate down from 5.85 percent to 5 percent. The first ticks downward took place at the beginning of 2001 and 2002. But then lawmakers, facing tough economic times, froze the final tax cut.
Instead, legislators set a series of economic growth thresholds that would — much more slowly than voters intended — lower the tax rate to 5 percent, but only if the state economy was humming along.
But Gonzalez said the state’s budget is too tight, and the services residents’ tax money pays for — education, for example — are too important to lower the rate down to 5 percent, even if the economic growth thresholds are met. Massachusetts should be “permanently freezing” the rate, he said.
That sets up a contrast with Baker.
Brendan Moss, a Baker spokesman, said that despite inheriting a billion-dollar deficit from the Patrick administration, the governor has balanced budgets, increased investments in education and other areas, and overseen an increase in the rainy day fund.
“The administration is pleased that the income tax rate has been reduced since taking office,” Moss said, “and opposes any changes to the scheduled reduction.”