This hardly was a Massachusetts campaign season for big ideas. Perhaps now there will be breathing room for some creative thinking, and the media will engage in an advice-fest for Governor-elect Charlie Baker like they did after Marty Walsh won the Boston mayoral race.
It’s OK to think small, too, and I’m hoping one sensible proposal, advanced by the Boston Business Journal, a Globe editorial, and Treasurer-elect Deb Goldberg, survives. It’s one a natural-born wonk like Baker should love: Establish an independent fiscal agency in the image of the Congressional Budget Office — a CBO mini me just for the Commonwealth.
Lawmakers too often grapple in the dark, for there is no objective, non-partisan, consistent source for vetting the economic implications of Beacon Hill’s legislation or government agencies’ new regulations. In a region that prides itself on Big Data, Massachusetts lawmakers too often seem to have minimal or no data.
A small agency, modestly staffed, could save Massachusetts taxpayers hundreds of millions of dollars by avoiding ill-considered proposals. It could also help the governor and legislators make more targeted investments with taxpayer dollars, ones that have better chances of paying off.
The need for something like an independent fiscal agency became apparent last year when the Legislature passed the so-called “tech tax,” a sales tax targeting a variety of computer services. The idea for the tax survived a laundry list of new revenue ideas Governor Patrick proposed early in 2013, and the tech tax was a key part of the $500 million transportation bill to shore up the Commonwealth’s aging infrastructure.
Unfortunately for lawmakers, the episode revealed a lack of understanding about the region’s tech industry, especially the ubiquity of computer consulting services, which permeate businesses in every industry. Shortly after the law was passed, the affected parties (mostly tech consulting companies and business groups) quickly delved into what the law meant, and there were more questions than answers.
There never was a reliable estimate about how much revenue the tech tax would raise (was it $160 million per year, as the Commonwealth said, or $500 million, as the Mass. Taxpayers Foundation claimed?) or how many jobs it would cost if it passed. The Legislature had egg on its face and repealed the tax only a few months after it was passed.
The lack of numerical analysis continues to be a trend on Beacon Hill. One glaring example is the debate about the minimum wage, which rises to $11 in 2016. One would expect the Legislature at least to acknowledge that raising the minimum wage by 37 percent would have some kind of economic impact, especially relative to job creation. After all, the CBO earlier this year estimated a US job loss of about 500,000 should President Obama’s proposal to raise the minimum wage to $10.10 become law. So, in Massachusetts, what would an $11 wage mean? Our political leaders never hazarded a guess.
There were some good reasons to raise the minimum wage, the best one being that it had been stuck at $8 for too long. But it’s only realistic to expect that some small businesses will have to cut payroll, or turn to technology to eliminate jobs, to manage the impact of the new law. Whether they wanted it or not, lawmakers should have had some objective economic-impact information in front of them, from a non-partisan source, before they took that vote. Perhaps it would have led to a compromise — for example, a less aggressive minimum wage hike for teens, so more of them would not be priced out of the job market.
There are plenty of other examples of numeric ignorance or fiscal wishful thinking. Did the Legislature make the right call in voting to spend $1 billion to expand the Boston Exhibition and Convention Center? Indeed, some people are optimistic about the prospects of an expanded convention center despite an overall decline in the convention industry. The $1 billion expansion is designed help the BCEC help land some of the conventions that have been too big for Boston. The vision is to make Boston a top convention city. But will it pay off? No one really knows, but everyone agrees the national convention industry is overbuilt. All the same, the Legislature voted in July to spend the $1 billion. Here a thorough assessment of the expansion — without giving too much credence to convention industry consultants who have given questionable advice to other cities — was called for.
Treasurer-elect Deb Goldberg embraced the concept of a nonpartisan fiscal agency in September, sensing a dearth of cost-benefit analysis on Beacon Hill. But she has since sounded tentative about its chances, saying House Speaker Robert DeLeo will “probably fight me tooth and nail” about it.
Why should a good idea like this face resistance? Massachusetts is only one of six states without a state-run agency devoted to sorting out the financial implications of proposed legislation. For years, the Mass. Taxpayers Foundation has been a leading source of government fiscal analysis, but it stayed away from issues like the convention expansion and the minimum wage.