BUDGET WATCH: December revenue figures released

The Department of Revenue (DOR) finally had some positive news to report today in terms of state revenue collections – well, sort of.

The good news is that, based on preliminary figures, $1.866 billion in total revenues were collected in December of 2008. That’s up $21 million (or 1.2 percent) from the previous December and is $55 million more than the revised monthly benchmark that was set last October. But there’s a catch.

DOR reports that December tax collections were boosted by nearly $170 million in corporate settlement payments and other one-time payments. Without these payments, total revenues would have actually come in $115 million below the revised monthly benchmark and $149 million below December 2007 collections.

That’s not very comforting news, especially when you consider that most everyone is predicting there will be a steep drop in capital gains tax collections in January.

Business confidence at 17-year low

We all know 2008 was a tough year for the economy, both locally and nationally. But a new survey helps put things into some historical perspective to show just how bad the state’s business climate really is.

Today’s Boston Business Journal reports that the Associated Industries of Massachusetts (AIM) Business Confidence Index (BCI) took a huge hit in 2008, falling to its lowest level in the 17 years that AIM has been tracking these figures. The BCI fell 5.5 points in December to finish the year at 36.3, easily shattering the previous monthly low of 41.4 recorded in October of 2008 and capping a 17.2-point drop for the year. You’d have to go all the way back to the 1991-1992 recession to find anything even remotely resembling the latest index ranking (the index stood at 41.5 in December of 1991).

Just another reason why it makes sense for the Commonwealth to repeal the $500 million corporate tax increase as soon as possible.

ON THE AIR - Tisei hosts MBTA's Dan Grabauskas on this month's 'Legislative Report'

MBTA General Manager Dan Grabauskas is the guest on this month’s edition of “Legislative Report”, hosted by Senate Minority Leader Richard R. Tisei.

“Legislative Report” can be seen on the following local cable access stations:

Malden Access Television (MATV) on Wednesdays at 7:30 p.m. and Thursdays at 8:30 p.m. (Channel 16)

Melrose Massachusetts Television (MMTV) on Mondays at 9 a.m. and Tuesdays at 6:30 p.m. (Comcast Channel 3 and Verizon Channel 39)

Reading Community Television (RCTV) on Mondays at 3 p.m., Tuesdays at 9 p.m. and Thursdays at 4 p.m. (Comcast Channel 10 and Verizon Channel 32)

Stoneham TV on Wednesdays at 2:30 p.m., Thursdays at 8 p.m. and Fridays at 8:30 a.m. (Verizon Channel 34, RCN Channel 3 and Comcast Channel 9)

Wakefield Community Access Television (WCAT) on Sundays at 6 p.m., Mondays at 7 p.m. and Wednesdays at 7 p.m. (Comcast Channel 16, RCN Channel 13 and Verizon Channel 42)

GOP leaders to file legislation to repeal controversial $500M corporate tax increase

Casey Ross takes a look at the implementation of the state’s controversial corporate tax increase in today’s Boston Globe. The story includes comments from Senate Minority Leader Richard R. Tisei and House Minority Leader Bradley H. Jones, Jr., who today announced plans to file legislation to repeal the increase.

The following is the text of the GOP leaders’ announcement:

Senate Minority Leader Richard R. Tisei and House Minority Leader Bradley H. Jones, Jr. announced today that Republican legislators will be filing legislation on January 14 to repeal the $500 million corporate tax increase that took effect on January 1.

The tax increase – believed to be the largest business tax increase ever passed in the Commonwealth – was approved by the Legislature on July 1, 2008 without the support of a single Republican legislator and signed into law by Governor Deval Patrick the following day. The tax changes impact businesses that employ nearly 40 percent of the state’s workforce, including many multi-state companies that are based outside of Massachusetts.

“The combination of a bad economy plus a substantial increase in the cost of doing business brought on by these tax increases could cripple our state’s economy,” said Senator Tisei. “The real damage will be over the long-term, as many of these businesses will not replace the jobs that are lost here and will instead opt to move the jobs to more tax-friendly states.”

“We are in the midst of what is expected to be a very deep recession,” said Representative Jones. “Imposing new taxes on struggling corporations could have a disastrous effect on our state's economy and I am confident that these tax increases will lead to more layoffs in the short term and more companies fleeing the state in the long run.”

Both Tisei and Jones served on the special commission that reviewed the state’s corporate tax laws, but did not support the commission’s final recommendations and voted against the resulting legislation.

Because the tax increases were introduced halfway through the current fiscal year, they are expected to generate $290 million in new revenues for the state in Fiscal Year 2009, which ends on June 30. Once they are fully implemented, however, the state expects to bring in as much as $500 million in additional corporate tax revenues a year.

In calling for the repeal, Tisei and Jones cited recent unemployment figures which show the state’s jobless rate is creeping upwards. According to the Department of Labor and Workforce Development, the state’s unemployment rate now stands at 5.9 percent, the highest it’s been since August of 2003. Between August and November of 2008, Massachusetts lost 19,100 jobs, and economic forecasters are predicting the state could lose anywhere from 26,000 to 100,000 jobs by the time Patrick’s first term ends in 2010.

“These tax increases were passed at a time when the state was experiencing a very different economic climate,” said Tisei and Jones. “Given the unprecedented fiscal crisis the state is now facing, we think the best thing we can do to minimize the impact of the current recession is to eliminate these tax increases before they do any further harm to our workforce and our economy.”

HAPPY NEW YEAR!

The Massachusetts Senate Republican Caucus would like to wish our readers at Scaling the Hill a very Happy, Healthy and Prosperous New Year in 2009!

ON THE AIR: Senator Hedlund discusses the top news stories of 2008 on NECN

Senate Minority Whip Robert Hedlund was a featured panelist on NECN’s “NewsNight” end-of-the-year news wrap-up show. Sen. Hedlund opined on a number of the year’s top news stories, including Hillary Clinton’s teary-eyed performance in New Hampshire, Illinois Gov. Rod Blagojevich, the automaker bailout, and Alaska Gov. Sarah Palin’s star turn on the national stage. In case you missed it, we have part 1 and part 2 of the countdown.

Not so Happy New Year for Business in Massachusetts

House Bill 4904, signed into law by Governor Patrick in July as Chapter 173 of the Acts of 2008, drastically raises corporate taxes as of tomorrow, January 1, 2009.

These changes will result in an estimated increased burden of $500 million to be borne by Massachusetts businesses. Combining this new obligation with the most challenging economy for business in the past quarter century could prove fatal for many private corporations. From “check-the-box” to the sting tax, Democrats have characterized these changes as “closing loopholes.” Bottom line: when corporate obligations increase and sales revenues decrease, Massachusetts workers are hurt, which is why the Caucus will be leading the fight to repeal the corporate tax increase in the new year.

During the corporate tax debate, Senate Republicans tried unsuccessfully to lessen the impact of this legislation by offering several amendments, including one which would have allowed for an appropriate implementation period and given the Patrick Administration and others until 2010 to more carefully execute these provisions. Another amendment was filed that would have given cities and towns a one-time nonrecurring local aid payment from the funds generated by the implementation of this act. Unfortunately for private industry and its employees, their attempts were defeated.

Hiring freeze? What hiring freeze?

In politics, it’s often been said, it’s not what you know but who you know.

Case in point: Governor Deval Patrick’s selection to fill the new $120,000 a year post of Director of Real Estate Services at the Division of Capital Asset Management. According to yesterday’s Boston Herald, attorney and real estate consultant Dana Harrell is not only a “frequent contributor to Patrick’s campaign coffers,” he’s also a neighbor, living “less than a quarter mile” from the Governor.

It’s worth noting that Patrick is continuing to hire and create new positions, just two months after warning that 1,000 state jobs would be lost due to the economic downturn. It turns out those numbers were highly exaggerated, as many of the jobs “lost” were simply vacant positions that went unfilled. Not only that, but the Patrick Administration has yet to implement any type of hiring freeze, despite the fact that state revenue collections are continuing to nosedive. Instead, Patrick is relying on a “no net new hires” policy that still “allows for critical positions to be filled,” according to the Herald.

Reportedly, Harrell has been brought in to “help turn the state’s real estate assets into moneymakers.” Here’s hoping he’ll start by inventorying the assets of the MA Turnpike Authority, which the Patrick Administration has been keeping a closely guarded secret, despite repeated calls by the Senate Republican Caucus to use some of these assets to negate the proposed toll hike and pay down the Turnpike Authority‘s outstanding debt.

In case you missed it – Former Patrick aide fined for ethics violation leading to $350k job

The State House New Service reported the following story on Christmas Eve:

Former Patrick administration Undersecretary for Business Development and ex-state representative Robert Coughlin admitted to violating state conflict of interest laws and has paid a $10,000 civil penalty, according to the State Ethics Commission.

Coughlin was found to have repeatedly weighed in on "matters of interest" to the Massachusetts Biotechnology Council after he had applied to become the group's president. The Ethics Commission found that Coughlin had indicated his interest in the MBC presidency, the post he holds now, as early as April 1, 2007, and had emailed a resume to the presidential search committee. Coughlin did not inform the governor's staff of his interest in the job until July 24, 2007, a week before he was formally interviewed by the search committee, according to the report.

Coughlin accepted the $350,000-a-year job on Sept. 4, 2007. While the search process was going on, Coughlin, in his capacity as undersecretary, met with MBC staff regularly, advised the governor on life sciences issues, met with the administration's economic development team to discuss tax incentives for life sciences companies, and met with other industry officials.

“After Coughlin submitted his resume in April, his official actions taken in connection with the MBC and its members raised numerous appearances of conflicts of interest,” said Ethics Commission Executive Director Karen Nober, in a statement. “The penalty reflects the seriousness of those violations.”

A $1 billion, ten-year life science industry investment law is one of the most highly touted laws passed this session.

And since $350,000 minus $10,000 equals $340,000 Mr. Coughlin should be fine in ’09.

BUDGET WATCH – Republicans take lead on how (and how not) to balance budget

The Associated Press knows that Republicans on Beacon Hill are influencing the state budget debate. Rising to the challenge of the fiscal crisis upon the state, minority party leaders are challenging the Governor and Speaker and asking for a state salary freeze and transportation system reform before any tax hikes or drastic cuts to local aid.