Romney touts his Massachusetts record as fiscal hawk

By Mitt Romney's account, his record as governor of Massachusetts shows how cutting taxes and public spending spurs economic growth — and serves as a model for shrinking the U.S. government.

He says he stood up for conservative principles, guiding the state out of a fiscal crisis by ramming cuts through a recalcitrant Democratic Legislature.

Romney takes credit for vetoing more than 800 spending items passed by the Legislature, saying he wiped out unneeded programs, cut taxes 19 times, built up a $2-billion rainy-day fund and balanced the budget four years in a row. All of that, he says, shows he can stop overspending. "We can balance our budget and live within our means," he recently told supporters in Ohio.

But Romney's telling omits key facts that clash with the agenda of his campaign for president:

• The Legislature overrode most of Romney's spending vetoes.

• State spending rose by 22% on Romney's watch, nearly double the rate of inflation.

• Romney increased corporate taxes and state fees by $750 million a year, outstripping his tax cuts.

Romney's fiscal record has become a central focus of campaign advertising in presidential battleground states and has been mischaracterized by both sides. In an Obama campaign TV ad, an announcer says that Romney "cut taxes for millionaires like himself while raising them on the middle class," omitting the fact that Romney's moves were not aimed specifically at the wealthy or the middle class.

A Romney response ad released Friday states incorrectly that he did not raise taxes as governor. The Obama campaign responded, in turn, with a false accusation that Romney left Massachusetts with a $1-billion deficit.

When Romney took office in 2003, Massachusetts, like many other states, was reeling from a sharp drop in tax collections in the aftermath of Sept. 11 and the dot-com bust. The state constitution required a balanced budget, and its shortfall had ballooned to $3 billion.

But Democrats controlled both houses of the Legislature, as they had since the 1950s. Philosophically, they were sharply at odds with the Republican Romney, an outsider and corporate takeover executive who had campaigned on a pledge to "clean up the mess on Beacon Hill," the site of the gold-domed state Capitol in Boston.

In Massachusetts, the governor proposes a budget, but a Legislature dominated by the opposing party can ignore it and adopt its own. The governor can veto spending, line by line, but lawmakers, unbowed, can then assert their power to override — a ritual of Romney's tenure.

Romney was unsparing in his vetoes, risking political fallout far and wide. He reduced allocations for state police and local sheriff's departments. He deleted spending on suicide prevention, emergency food aid, job training, higher education, treatment for gambling addiction and services for victims of sexual assault and domestic violence. His rationale was simple: The state couldn't afford it.

"During the time of greatest crisis, in '03 and '04, when revenues were collapsing and costs were out of control, Gov. Romney came in with strong medicine that really worked," said Eric Kriss, who was Romney's secretary of finance and administration.

Romney did leave office with a replenished rainy-day fund, thanks partly to a surge in capital gains taxes paid by investors in a rising stock market.

But his ability to gain support for his fiscal agenda was limited, in part by his reluctance to engage with a Legislature that he viewed as tainted by patronage and corruption. Tom Finneran, a Democrat who was House speaker from 1996 to 2004, said Romney made less effort than his Republican predecessors to work with the opposition.

And like other governors, Finneran said, Romney liked to generate headlines by casting himself as a brake on overspending by legislators, even if he knew they would ultimately prevail.

"They were not terribly troubled by us overriding those vetoes," said Finneran, who resigned in an election map scandal and went on to work as a lobbyist and host of a radio talk show.

Some of Romney's political calculations on state spending came to light in emails first disclosed in March by the Associated Press and later obtained by The Times. Shortly before leaving office, he was weighing whether to respond to a slowdown in tax collections by ordering midyear budget cuts, known as "9C" unilateral reductions by the governor.

In an email that he sent to advisors on Nov. 4, 2006, Romney defined his choice: leave the cutting to the new governor who would be elected in a few days or "let the fur fly" by slashing spending one last time before launching his 2008 presidential campaign weeks later.

"I hate appearing as if I am just playing national politics with 9Cs when in fact this is about getting spending under control for the state and a new admin. Hmmm," Romney wrote.

Romney heeded the advice of a top campaign advisor, Beth Myers, who told him in an email that she saw no viable alternative to a final round of spending cuts. "The politics of leaving an unbalanced budget for Patrick to fix aren't good," she told Romney in an email. (Democrat Deval Patrick was elected as Romney's successor.)

Just before Thanksgiving, plans for Romney cuts targeting the homeless, mentally ill, deaf, autistic and others led to a blast of bad publicity. Fearing it could get worse, Eric Fehrnstrom, Romney's communications director, asked the governor's budget team whether the Goodwill hall where Romney planned to serve turkey to the needy might be facing cuts.

"The safer bet is to have the Gov serve meals in NH," Romney's budget director, Thomas Trimarco, responded to Fehrnstrom in an email obtained by The Times. Romney spends some holidays at a family vacation home in New Hampshire.

By then, Romney had long established austerity as his default position. He had blocked retroactive raises for state university employees, resisted extensions of unemployment benefits and refused to sign a measure to sweeten the pensions of school nurses.

"While it is important to acknowledge nurses' contributions in the lives of our children," he wrote in a letter to the Legislature, "it is equally important that we not pass along new unfunded financial liabilities to those same children when they become taxpayers."

Romney's appetite for fiscal restraint had limits. He signed bills increasing pay and death benefits for National Guard members deployed in Iraq and Afghanistan. And his landmark healthcare law, which extended insurance coverage to all Massachusetts residents, costs the state tens of millions of dollars a year.

Romney also upset business leaders by agreeing to increase corporate taxes by $375 million a year. His justification was that companies had been exploiting obscure loopholes that needed to be closed. Corporate software that was downloaded from the Internet, for example, would no longer be exempt from the sales tax that applied to identical software when purchased in disc format.

Romney's $375 million in fee hikes were broader: The state raised the cost of elevator inspections, boat registrations, gun licenses and ice skating at public rinks. Fines for speeding tickets went up. A new fee was imposed on law school graduates for taking the bar exam. The cost of a marriage license jumped from $4 to $50.

A tax on gasoline, which the state called a fee, rose from half a cent to 2.5 cents per gallon.

All of the hikes were justified, Romney said, because many state fees had not gone up in decades, and they applied only to users of specific services.

As for Romney's tax cuts, budget watchdogs in Massachusetts have dismissed them as marginal. They included property tax exemptions for disabled veterans, a tax deduction for fire sprinkler installations, a tax break on renovations of historic buildings and a weekend reprieve from the state's 5% sales tax.

David Tuerck, director of Suffolk University's Beacon Hill Institute, a conservative think tank, called the tax breaks "fluff."

"This is all smoke and mirrors," he said.

Still, Brian Lees, a former Republican minority leader in the state Senate, said Democrats would have raised taxes more if Romney hadn't been applying public pressure on them to be more frugal. (Four months before Romney was elected governor, the Legislature had approved $1.2 billion in tax hikes to help weather the fiscal crisis.)

"He used the bully pulpit of the governor's office very, very effectively," Lees said.

Kriss, who was Massachusetts budget chief under Romney from 2003 to 2005, said Romney had shown "excellent conservative fiscal management." He acknowledged that state spending outpaced inflation under Romney, but attributed that largely to costs rising more rapidly in healthcare — a large share of the budget — than in other sectors.

He also objected to conservative groups' description of tax loophole closings as tax hikes, saying Romney needed to make sure no one was getting a free ride at a time of fiscal crisis. Romney deserves credit, Kriss said, for avoiding across-the-board tax hikes.

But Michael J. Widmer, president of the nonpartisan Massachusetts Taxpayers Foundation, said Romney was presenting "a decidedly incomplete and one-sided picture of what actually happened."

"There's a big gap," he said, "between the record and the rhetoric."

michael.finnegan@latimes.com

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