Massachusetts voters may have the opportunity to weigh in on initiatives to eliminate tolls on two major state highway systems and reduce the state sales tax if the measures gain enough signatures to place them on the November 2010 general election ballot.
A portion of toll revenue and sales tax receipts currently is used to back outstanding debt.
The Center for Small Government, the organization spearheading the movement to reduce the state sales tax to 3% from 6.25%, is using both volunteer and professional services to help collect the 66,593 signatures needed to get their initiative on the ballot. Citizens Against Toll Roads is using volunteers to get its message out to residents.
The Center for Small Government said that it does not have a complete signature count but that its signature goals are on target. The organization has been successful in obtaining the necessary signatures for prior ballot initiatives, including one last year that sought to eliminate the 5.3% state income tax. That measure failed at the polls, 70% to 30%.
Citizens Against Toll Roads so far has approximately 4,125 signatures, according to Spencer Kimball, the organization's director. It also needs 66,593.
The state attorney general's office this month said the deadline for submitting initiative petitions is Dec. 2.
Michael Widmer, president of the Massachusetts Taxpayers Foundation, which researches fiscal policy, said the sales tax initiative could make it to the 2010 general election ballot and could be popular with a majority of voters.
The legislature last year increased the sales tax to 6.25% from 5% to generate additional revenue, with $260 million of new sales tax receipts going to support the Massachusetts Turnpike Authority and the Massachusetts Bay Transportation Authority.
Bob Bliss, spokesman for the state's Executive Office of Administration and Finance, said reducing the sales tax to 3% would cost the state roughly $2.5 billion per year in revenue.
While losing that much revenue would require program and service reductions, that's less than the potential $12 billion the state could have lost if voters had approved ending the income tax. The smaller effect of a rollback in the sales tax on the state's budget in comparison to eliminating the income tax could appeal to voters, Widmer said.
"We just increased the sales tax and so people are annoyed," he said.
But reducing the sales tax would be a problem for the state as it continues to tackle sluggish revenue.
"Yes, it would have serious additional impact on the state budget and state programs," Widmer said. "But nonetheless I think it's obviously far less dramatic than the $12 billion [in income tax revenue]. So in the end, I think it would be a close contest."
A portion of sales tax revenues secures nearly $4 billion of outstanding Massachusetts School Building Authority debt and another $3.4 billion of MBTA debt. The MBTA receives 20% of sales tax collections while the MSBA will begin receiving a full 20% in fiscal 2011 after six years of a gradual phase-in of the revenue stream.
According to the Center for Small Government, a lower 3% sales tax would still maintain debt-service coverage on the MSBA and MBTA bonds while also supporting the state's yearly $160 million and $100 million allocation to the MBTA and MassPike, which will cease to exist at the end of October.
MassPike's two main roadways, the Western Turnpike and the Metropolitan Highway System, will be overseen by a new agency called the Massachusetts Department of Transportation beginning Nov. 1.
The organization believes that when governments have less taxpayer revenue to work with, that forces agencies and departments to run more efficiently.
"The fundamental premise is that government in general is the most ineffective way to use money for anything," said Kamal Jain, one of the original signers of the 3% sales tax movement. "It's a highly inefficient organization because it has no profit motive, it has no fundamental bottom line. It has no feedback mechanism for the costs of its activities and services and it's working with someone else's money."
Lawmakers in June approved a $27.4 billion fiscal 2010 budget that included about $2.4 billion of spending cuts, $1.2 billion of federal stimulus funds, and $1.3 billion of new revenue. Like many states, revenue collections have fallen during the past year. Cutting the sales tax would necessitate further expenditure cuts.
"The sales tax is helping to support the operating budget and already we've had major cuts in programs across all state government," Widmer said. "And we're going to have additional cuts even without this ballot question, probably as early as next month for fiscal 2010 and then additional cuts in fiscal 2011 because of our desperate fiscal situation."
In looking at the toll elimination plan, Citizens Against Toll Roads director Spencer Kimball said ending tolling on the Western Turnpike, the state's main east-west roadway, and the Metropolitan Highway System, which runs throughout the greater Boston area, is possible as MassPike could sell off land and building facilities that it owns in order to pay down roughly $2.2 billion of debt outstanding.
"In actuality they own apartment complexes, parking garages, so those are avenues for them to be able to sell and put money away in a trust," Kimball said.
In addition, he said leasing service plazas and selling airspace rights would generate revenue to maintain the roadways. Kimball's great uncle, Phillip Kimball, a former state representative from Springfield, filed in 1951 the legislation that created MassPike. Since then, Kimball believes the authority has mismanaged the toll revenues. In particular, east-west motorists pay for the costs of the untolled Central Artery Project in Boston.
"It was never intended to be a full-time, money-making machine for the state," Kimball said. "The tolls were supposed to be gone."
The initiative calls for the agency responsible for the $2.2 billion of debt, which on Nov. 1 will be MassDOT, to set aside funds in trust, by April 1, 2011, sufficient to pay down the debt. Tolls would then end at the start of 2012. The plan would also end tolling on tunnels and prohibit all future tolling.
Widmer questions that MassPike has the capability to pay down the debt all at once and said tolls are also needed to keep the roads in good repair. In addition, the state's Executive Office of Transportation disputes the claim that MassPike is capable of selling assets to defease outstanding debt.
"While [MassPike] has a valuable collection of assets, the vast majority of those assets are used every day in our transportation system and are not available to be liquidated," EOT spokesman Adam Hurtubise said via e-mail.
"As people are aware, [MassPike] has tried, and continues to try, to dispose of excess land it no longer needs and to lease land where and when possible to raise revenues to support the enterprise. Most recently, it sought proposals to securitize the lease revenue on the service plazas on the Western Turnpike and received proposals that fell short of the true value of those assets."
Kimball said he has tried to obtain a list of MassPike's assets.
Sen. Mark Montigny, D-New Bedford, sought that information as well when lawmakers were crafting legislation to reform MassPike.
"They've given us some information," said Paul Lehnus, an aide to Montigny. "They'll say, 'We think we could sell this much off or that much,' but it's changed every time. I don't think we really trust any of their numbers."
