Backers push amendment for rainy-day fund
Massachusetts lawmakers plan to consider a constitutional amendment that would automatically funnel a certain percentage of the state budget into a rainy-day reserve fund during healthy fiscal times.
The idea, which has been endorsed by House Speaker Thomas M. Finneran and the Greater Boston Chamber of Commerce, is designed to cushion the blow of inevitable economic downturns, allowing the state to navigate tough budget times without making deep cuts to popular programs.
"Governments don't easily or always plan for the future," said Paul Guzzi, president and CEO of the Greater Boston Chamber of Commerce, which released its detailed amendment proposal yesterday. "We don't view this as fiscally conservative or fiscally liberal -- we think it's fiscally sound."
House and Senate leaders say the amendment is likely to come up in July, when lawmakers reconvene in a constitutional convention to deal with issues other than gay marriage. The Legislature would have to approve the amendment again in the next session in order to place it on the November 2006 ballot.
Because Massachusetts built up its reserves during the booming 1990s, it didn't have to cut as deeply when the economy slumped and tax revenues plunged. At its peak in June 2001, the rainy-day fund contained about $2.3 billion. The state has cut about $3 billion from its budget over the last three fiscal years, but it would have slashed even more if it hadn't taken $1.65 billion from the reserve fund.
Under the chamber's proposal, the state would have to put 2 percent of its total revenues into the reserve fund at the beginning of every fiscal year, except during years when revenue is down or in the years immediately following such difficult times.
If the measure were in effect this year, it would require the state to set aside about $300 million in the rainy day fund. The amount of money in the fund would be capped at 17 percent of the state budget, which is currently about $23 billion, and Beacon Hill could not drain more than 50 percent from the reserve pool in a single year.
In a speech last week, Finneran endorsed the amendment idea, though he proposed an annual contribution rate of 1 percent. The Massachusetts Taxpayers Foundation, a government watchdog group, and the Massachusetts Human Services Coalition also said yesterday that they support automatic contributions into the rainy-day fund.
Representative John H. Rogers, the chairman of the House Ways and Means Committee and a key Finneran lieutenant, said an amendment is needed to force lawmakers and the governor to act prudently.
"There's always a political need to either spend money or give it back to taxpayers when there are surpluses. Those are very real political pressures," Rogers said. "There is absolutely no political pressure to sock money away."
