The budget is the most important piece of legislation that we deal with every year. Even before September 11th 2001, there had been several months of declining tax receipts. This was mainly due to the implementation of the Question 4 tax cut that was on the ballot in 2000 but, since September 11th, the economy has been in a free fall. We have now had a full year of declining tax revenue causing about a three billion dollar deficit in the Commonwealth's budget. This has created a painful and complex problem that a knee-jerk cut in services will not resolve.
Too many people and children would have suffered if we hadn't passed the freeze in the tax rate and that's why I voted for it. Without the added revenue that the tax freeze provided, we would have forced towns to increase their property taxes to pay for schools, among other things. Property taxes are less fair than income taxes and tend to burden low-income people and seniors more so than income taxes.
The Massachusetts Legislature has cut taxes 42 times since 1991. According to US Census Bureau statistics, Massachusetts ranks 42nd in the nation in per capita total tax load as a share of income. Mississippi is now ranked higher in total tax burden than Massachusetts. In FY 1999, before the Question 4 tax cut in 2000, Massachusetts' state and local revenue amounted to 14.2% of personal income in Massachusetts compared with a national average of 15.3%. It is even lower after the initial Question 4 tax cuts. State and local revenue would have been $2.4 billion higher in FY 99 if we had been at the national average thus dramatically diminishing the deficit. While our income tax collections as a share of personal income were higher than most states in FY 99, our sales and excise tax revenue was nearly the lowest in the country. The only states lower were the five without any sales tax.
According to the US Census, in 1979 Massachusetts' state and local spending on education was 6.1% of personal income. In 1999 it was 4.9%. In 1979 our spending on elementary and secondary education, as a share of personal income, was ranked 7th nationally. By 1999 we had fallen to 49th, below most southern states. As a state that prides itself on education this is a dismal statistic.
We pay hospitals about 70 cents on every dollar they spend to take care of Medicaid patients. We pay nursing homes only about 60 cents on every dollar that they spend on our seniors on Medicaid. Consequently, these essential institutions are subsidizing our taxes and their financial solvency is deteriorating. Many nursing homes have gone bankrupt in recent years. I would hesitate to put my mother or father in a nursing home because the nursing homes are falling apart and they can't retain good help because of the very low wages they are forced to pay. All of us will eventually come to rely on state Medicaid funding if we turn to a nursing home care for more than 6 months.
We were the only state in the nation to lay off Department of Social Service Workers, the people who are the last defense separating children of the Commonwealth from abusive living conditions. Meanwhile, the principals of the Red Sox realized a $200 million profit from the sale of the Red Sox, and paid no capital gains tax. DSS workers, and all laid off workers in the Commonwealth, pay taxes on their unemployment benefits.
Please remember that I don't like taxes. Every increase in taxes I vote for, I also pay. This year I, and most of my colleagues, have taken a pay cut to reduce this expense to the Commonwealth. It is a small consideration on my part, but it serves to remind me how important a job is to a family.
Even though we passed the tax package, we are still cutting one billion out of the budget. That's going to reduce or eliminate many programs upon which many people rely. Other efficiency measures are being considered like the recommendations that came out of my subcommittee on Medicaid Waste, Fraud and Abuse to modernize Medicaid's software and help more senior citizens remain in their homes if that is their desire and they can manage with some help.
People may think there are other areas where we can cut the budget like the so-called "big dig," but the state's share of that project is funded with borrowed money. Just like paying your home mortgage, you can't stop making payments to the bank or your credit will by destroyed. Annual payments for all of the Commonwealth's long-term debts including the Big Dig amount to less than 10 % of our total state budget.
We are indeed fortunate that the legislature had previously set aside about 2.4 billion in rainy day funds to meet unforeseen financial emergencies. The rainy day fund has softened the blow and allowed us to meet half of the deficit with those savings. We will try to spread the rainy day fund out over three years.
It is a spiritually impoverished nation that permits infants and children to be the poorest Americans.-- Marian Wright Edleman