Massachusetts is in The Fiscal Stability Cellar
We’re accustomed to winning in Massachusetts.
The Red Sox, Patriots, Celtics, and Bruins have combined to earn 11 championships since 2000. No other region of the US comes close to these accomplishments in professional sports. Even more important, in the civic realm, Massachusetts ranks at or near the top nationally in education, talent, employment levels, capital investment, income, and overall quality of life. Even the country’s best pizza is made here in Massachusetts, according to TripAdvisor.
But all this success creates a risk of complacency, perhaps even an unwillingness to look beyond the trophies and accolades to evaluate the real foundation on which these accomplishments rest. It’s as if serious contemplation about the bedrock state of affairs might diminish our great achievements.
Perhaps that’s why, when an internationally renowned research center rings alarm bells about the state’s economy, it causes barely a ripple in the public psyche. Last month the George Mason University’s Mercatus Center ranked Massachusetts 47th out of 50 on its list of states ranked by fiscal stability.
Mercatus is no outlier. In the past year, US News & World Report ranked the state 40th in fiscal stability. Pew Charitable Trust ranked Massachusetts 35th in rainy day fund sufficiency. S&P Global Ratings said the state has “an elevated risk” of financial distress during a recession, and Moody’s Analytics predicted Massachusetts would face a nearly $3 billion annual budget gap in a moderate recession and a $5 billion gap in a severe one.
Our private economy is the envy of the nation. Yet we’re in the fiscal stability cellar alongside financial basket cases like Connecticut, Illinois, and New Jersey. How could this be?
Consistently singled out as problem areas, the Commonwealth’s debt service, underfunded public pensions, unfunded retiree health obligations, and burgeoning MassHealth/Medicaid costs at times seem impervious to reform or repair, or even worthy of serious attention. With these costs now consuming two-thirds of the state’s budget, we’ve got a looming crisis, especially if the economy falters.
The problem isn’t a lack of revenue, nor is the solution increased taxes.
What’s required is a sustained nonpartisan advocacy effort to increase engagement among private employers, civic leaders, and elected officials that will focus on improving Massachusetts’ fiscal position and preserving its ability to invest in shared priorities.
Massachusetts’ fiscal stability is not an obtuse math riddle for public finance experts and bond analysts to ponder. Instead, it forms the very foundation that will support or undermine every public objective we choose to pursue as a Commonwealth. Furthermore, every state’s fiscal condition, and how responsibly state leaders choose to manage it, sends increasingly important signals to economic decision makers and job creators about where to grow employment and invest capital.
At the High Tech Council, we often describe Massachusetts as a product that competes with other states and nations. Massachusetts business leaders are rightly proud of the way our innovation-centered economy is able to compete in the global market for economic activity. But our job as business leaders is not just to be salespeople for the state, we need to do the serious and challenging work of continually improving the product.
With the 2018 state elections behind us, our public finance “team” roster is set. We congratulate Gov. Charlie Baker, Senate President Karen Spilka, and House Speaker Robert DeLeo on their reelections, and look forward to working with them and their colleagues to address these problem areas and to stabilize and strengthen our fiscal outlook. Together, we can implement new fiscal performance objectives and benchmarks to help secure the state’s fiscal strength and address the primary cost drivers in the state budget that threaten stability and have begun to crowd out discretionary public funding for economic development, workforce preparation, and infrastructure investments. We must incur obligations prudently, rigorously assess program effectiveness and sustainability, and insist on efficiency and transparency.
This year’s World Series was a reminder that talent coupled with determination, attitude, and strategic thinking creates new ways to win and the path to victory can be led by unexpected participants. Let’s keep that in mind as we devise winning formulas for Massachusetts’ fiscal stability.
Robert L. Reynolds is president and CEO of Putnam Investments and Great-West Financial.
Christopher R. Anderson is president of the Massachusetts High Technology Council.