With Massachusetts facing an estimated $3 billion state budget shortfall for FY 2004, many are left wondering how we got to this point, especially considering the budget surpluses of the past decade. The workshop reviewed some basic facts about the Massachusetts state budget: total spending in fiscal year 2003 equaled $23.2 billion dollars. The three largest areas of spending are education (23%), Medicaid (23.6%) and human services (19.4%), followed by public safety (8.5%), debt services (6.3%), local aid to cities and towns (5.6%) and other miscellaneous costs (13.6%). Revenue comes to the state from three major funding sources, the largest source (68.5%) are taxes (income, sales, etc.), paid by both corporations and individuals. Federal aid comprised 18.9% of Massachusetts' revenue pie in 2003, and miscellaneous charges such as licensing fees, lottery and college charges brought in 12.5%.

There are many myths about the state of the economy in Massachusetts. One is that taxes here are much higher than in other states. The fact is that since 1990 there have been 45 substantial tax cuts that add up to a reduction in revenue of about $3 billion annually. Another myth is that it was huge increases in spending in the last ten years that created the deficit. However, Massachusetts ranks 45th out of 50 states in the share of personal income devoted to state and local spending, and state spending has fallen from 9.4% of income in 1991 to 9.1% in 2002. There were two areas of substantial spending increases over the last decade: education (mainly due to the Education Reform Act of 1993) and health care (mainly due to rising costs of Medicaid). However, the increase in spending in these two areas grew at a slower rate than the economy and it paled in comparison to the $3 billion in tax breaks given away during the same time period. Another myth is that Massachusetts's government is bloated with excess and waste. There are 516 state workers for every 10,000 people, rank-ing Massachusetts 42nd in the country for public employees per capita, and only three states pay a lower share of their income on wages and benefits for public employees.

A more important reason for the budget crisis are the 45 tax cuts that the Massachusetts legislature and voters have passed in the past decade, with large corporations and the wealthy reaping much of the benefits. Some of these tax breaks aided specific companies, such as Fidelity and Raytheon Corporation, whose combined annual tax breaks average about $200 million. Also, fifteen of the 50 largest public corporations in Massachusetts paid less than $500 in taxes last year, as compared to the $2,795 paid by the median family in Massachusetts. These tax breaks have also benefited high-income families disproportionately. The top 5% of families in Massachu-setts spend 7.9 percent of their income in state and local taxes in Massachusetts. The top 1% pays 6.8 percent of their income, while the bottom 20% pays 9.3 percent of their income in taxes.

Some of the most severe cuts in services are $500 million from Mass Health, $39 million from the Department of Public Health, $227 million from school aid and class size reduction programs, $40 million from MCAS review, $175 million from colleges and universities, $35 million to early education and child care, $185 million in aid to cities and towns, and $27 million from housing programs. This portion of the cuts totals $1.2 billion. If the state were to restore the income tax rate to what it was just four years ago, 5.95%, it would raise an additional $1.1 billion in revenue and would make cuts to essential programs like these unnecessary. The majority of the money raised by the increase would be from those who make more than $100,000. Those who earn $50,000 would pay an additional $209 and a family making $25,000 would pay an additional $47.