After a victory that surprised the pollsters, Mitt Romney took control of a divided government plagued by budget shortfalls and an anemic jobs outlook, vowing immediate, hard action.
“We’ve used up virtually all our cash, borrowed all the banks will lend us, and we are still spending much more than we’re earning,” Romney said during a 20-minute inaugural address. “We are facing a financial emergency.”
The year: 2003.
The setting: Boston.
Romney’s first months as governor of Massachusetts are an interesting case study in how he might manage the budget woes that afflict Washington almost 10 years later. In Massachusetts, Romney walked into a $500 million budget shortfall, a larger $3 billion budget gap in the year ahead and an overabundance of skepticism from state Democrats.
Romney highlights that period today as proof that cutting taxes and public spending can reinvigorate the economy — a prescription the presumptive Republican nominee hopes to deliver to the American people.
“As president, I will rein in spending and balance the budget,” Romney said last month while visiting Florida.
A closer inspection of Romney’s record in Massachusetts shows a much more complex fiscal picture. Though Romney cut taxes and public spending in some places, he also forced businesses to pay millions more in corporate taxes a year, and raised dozens of fees that affected small businesses, gun owners, golfers and others.
Massachusetts’ fiscal house wasn’t just out of order at the beginning of 2003, it was near chaos. Although the economy was showing signs of recovery from the dotcom bubble and the 9/11 recession, the state government was struggling to pay its bills. Like Florida, Massachusetts lawmakers are required to pass a balanced budget. But despite $1.2 billion in tax hikes and $200 million in emergency spending cuts in 2002, Romney entered office on Jan. 2, 2003, with the state still deeply in the red.
In his first weeks on the job, Romney asked for and received unilateral power from the Democratic-controlled Legislature to make emergency cuts. By the end of one month, he whacked $343 million from the budget and asked the Legislature to cut a further $143 million. Just weeks after that, Romney proposed a state budget for the 2003-04 fiscal year that included almost $3 billion more in savings.
He proposed significant cuts to social programs — $6 million from a program to help teen parents, $7.5 million from legal aid programs for poor families, bigger cuts to hospital and nursing home providers.
He targeted Medicaid and education funding, including money for the state university system. He sought to shrink the cost of government, asking state employees to pay more for their healthcare, withholding aid to cities and towns, and consolidating departments.
But Romney’s response to Massachusetts’ fiscal crisis was more nuanced than simple belt-tightening.
Romney closed corporate tax loopholes, generating $174 million in the first year, according to the Massachusetts Department of Administration and Finance. (Other groups, like the National Conference of State Legislatures, estimated the figure as high as $280 million.)
Romney generated an additional $260 million in 2003 by raising fees.
• Raising the cost to register a firearm from $25 to $75. The Legislature upped it to $100. Romney agreed.
• The cost to file a property deed: up from $25 to $100.
• Season passes at a state golf course: up from $650 to $800.
• A license to sell beer or wine: up from $2,500 to $5,000.
But Romney supporters correctly note the differences between the situation in Massachusetts nearly 10 years ago and in Washington today.
“Look, he did take some from the reserve funds, looked at user fees and closed some tax loopholes, but that’s the only way a Republican is going to be successful here,” said Brian Lees, a Republican state senator who served as minority leader during Romney’s one term in office.