Cutting the state sales tax could force MBTA fare increases, service cuts, T advisory board says

The MBTA Advisory Board analyzes the potential impact of Question 3, which would cut the state sales tax from 6.25% to 3%, concludes passage and actual enactment would mean a big hit on the T, which now gets 57% of its revenue from state sales-tax revenue.

A portion of the sales tax is dedicated to the T; the board notes the T last year forestalled fare increases in part through additional revenue from the increase in the sales tax from 5% to 6.25%.

In addition to requiring fare increases and service cuts, the board writes passage could affect the covenants on bonds the state issued for capital projects that were based on the assumption they'd be repaid in large part through sales-tax revenue:

Any attempt to disrupt this framework could place the MBTA and Commonwealth in violation of its bond covenants, potentially triggering major and expensive legal action that could result in the seizure of assets.



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    One Pool

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    Since when are any of our revenue streams considered in isolation. Bonds are generally issued as general obligation - meaning they are backed by the full tax authority of the state, the only major exception being revenue bonds which are backed by a specific project (for example a dormitory or hospital or utility may be funded solely on the revenue from those facilities - which typically carry a higher interest rate and may occasionally be subject to AMT. The only stream possibly guaranteed to the MBTA are their own revenues). This sounds like another one of the Halloween scare tactics Beacon Hill is throwing out there. My guess is this goes down to reasonably narrow defeat - but I'm voting YES on 3. I'd rather have them coming to me for more and justifying it than giving them more sand in the box. I believe I recall seeing that the state budget has gone up by over 20% since 2005, a time when inflation has run about 10-12% and they are STILL broke.

    As I understand it

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    The MBTA is given 20% of the state's sales tax as a moronic way of paying for its budget. When this was done based on extrapolation of the sales tax figures of the 90's, the T would be able to pay its operating costs AND a huge debt obligation dropped on it as a way of foisting these expenses off of the Big Dig so that state/federal money went to the other parts of the Big Dig costs. Well, guess what, sales tax revenue fell through the early 2000's. So, by boosting the tax rate to 6.25%, they effectively covered their ass on having setup this stupid funding system for the MBTA in the first place.

    Now, Q3 wants to halve that income. That would in proportion halve what the MBTA gets to cover operations and debt obligations. Debt obligations are immutable. The only outcome is to increase fares, decrease service, or some combination of the two. The only other option would be to force the state to give the MBTA revenue from another of its sources...which it doesn't have to give either.

    Yes, it's a stupid system to have primarily tied the MBTA's budget to the sales tax revenue...but the State House is too busy dicking around about casinos and other complete nonsense to undo their stupidity from 1999 and adequately fund the MBTA as a budget item instead of some jury-rigged system involving the sales tax.

    all fair and agreed

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    I just have a hard time imagining that there are specific bond covenants that are tied to the sales tax being say at least 5% - and it would be highly unusual for it to be tied to anything that specific. The timing and vague wording of the announcement is questionable at best. Like they didn't know this 6 months ago? Boo - the T is going to be in default if you vote for this.

    Most major public transit

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    Most major public transit systems in the US are funded partly through sales tax set asides. That's why most of them have had funding issues lately, with declining sales tax revenue due to the economic downturn and increased ridership they've faced a bunch of problems.

    So why, exactly, should the T

    So why, exactly, should the T be relying on the sales tax, as opposed to general state revenue? Because they want to be able to hold you hostage, exactly like this. "Well, you can't lower the sales tax, because it will cripple public transportation."

    Where have I heard this before? "Well, you can't eliminate the liquor sales tax, because it funds alcohol treatment programs."

    If the legislature sees fit to fund the T at the current rate, they can damn well take the money out of the general fund. Same for alcohol treatment. Then, if these taxes are cut, they can sort out their priorities. If the T and alcohol treatment are more important than something else, they get funded. I not... not.

    Or they just make up excuses,

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    Or they just make up excuses, because an illiterate electorate means the question will have little effect on re-elections and political appointments.

    This would make sense

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    IF the people deciding whether we should halve the revenue from our sales tax were the same people that were aware of all of our outstanding debt obligations and future needs.

    Alas, the people making this decision haven't got a clue what running the state of MA costs. They just know "they don't want to pay so much any more". Hardly an informed opinion and therefore not the right decision to be making on its face.

    Question 3 is just renegade stupidity given what little anyone could glean from our budget situation if they tried.

    Those stupid people are the

    Those stupid people are the citizens, and this is still a democracy.

    "What running the state of MA costs" is hardly a matter without dispute. How to run the state, while trying to provide all the services the legislature has taken on is another matter. Spending has risen over the last several years - ahead of inflation. The idea that the state can't cut spending is absurd.

    First, the fact that the

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    First, the fact that the things have been un- or under-funded is an issue, don't you think? I'm especially referring to the MBTA taking the brunt of the Big Dig for no logical reason at all.

    Second, what is your solution? Lower taxes would be great,* but how do you propose your roads get maintained, your water come out clean, your entitlements for being an Olde get paid for?

    Solutions, please, not platitudes about "justification" or whatever you blatted on about earlier.

    * Note: actually, I think my taxes are reasonable, about 35% of my net, plus whatever I choose to spend on taxable items. Not too bad, since I'm subsidizing all the self-important Oldes who will get the benefits of my SS payments (and I won't, since it will be insolvent when I retire in 40 years).

    No it won't

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    Fixing SS is easy. Medicare might be insolvent - but not SS. You just might have to work an extra 3-5 years prior to retirement.

    As for your questions:

    1) Roads could probably be maintained at sigificant savings if we opened the bidding to non-union shops
    2) I think the MWRA is a self sustaining utility - you pay for the water you use
    3) The state doesn't pay for the Ye Olde olde folk

    Mass has one of the highest rates of expenditure per capita in the country and geographically we are relatively small which should reduce the cost of things like transit. We have a lot of good things here - which is why I choose to stay - but we could easily cut our discretionary expenditures by 10% and probably 15%. That leaves 5-10% that we will need to make up to get back to even. This is doable - not easy - but doable. All kinds of companies and households have had to figure it out - time for govt to do their share (have we even had true budget "cuts" - shortfalls in not being able to spend as much as they like maybe - but not cuts. I think we just raised taxes and expenses, cut a bunch of heads, kept all the benefits and raised salaries.)

    >Those stupid people are the

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    >Those stupid people are the citizens, and this is still a democracy.

    Yes... Maybe our Founding Fathers had it right to restrict the vote to certain classes.

    They didn't quite have it right with restricting the vote to men with land, however. I'd personally restrict it to people with a certain education and IQ, myself.

    As far as I can tell, the

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    As far as I can tell, the MBTA was the only major transit agency in the entire country no not raise fares or cut service in the past 18 months.

    And it's the increase sales tax we have to thank for that. In fact, we've had some increased service - the bus tracking and a 33% increase in service for the silver line washington.

    Transit systems that have suffered:

    Washington DC - Major fare hikes
    NYC - Major service cuts AND small fare hikes
    LA - Fare Hikes
    SF - Major service cuts (slowly being restored)

    Philly and Chicago, Im not sure about.

    We now have, hands down, the cheapest monthly subway/bus pass in the nation, and this is a very good thing. NYC is going up to $104 a month, almost double our $59.

    From the polling I've saw,

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    From the polling I've saw, this may not pass... if it does, welcome to Mississippi!

    I think the MBTA should be

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    I think the MBTA should be getting funding from something more directly connected to transportation, but since the legislature wimped out on raising the gas tax (which hasn't gone up since 1991, meaning that the current rate is old enough to vote!) that's not going to happen.

    (IMO a sliding-scale surtax based on distance from Boston would be a good way to include T funding in the gas tax; a few cents per gallon inside 128 and nothing in Stockbridge.)