A Brief Financial Overview of The Romney Administration (2003-2007): From Debt To SurplusGetting the state in financial shape was an absolute priority for Mitt Romney. When Mitt entered into office in 2003, he was a left with a massive deficit of approximately $3 billion. However, he was able to balance the state budget for each year of his administration and got the state out of debt by implementing a mixture of aggressive reduction in the size and cost of government along with bold strategies to spur economic growth.
By 2005, Mitt Romney had a budget surplus of $1 billion and by the time he left office in 2007, he left the state had a $ 2 billion surplus.
The Financial Picture On Mitt's First Day In OfficeIn order to understand how Mitt a $3 Billion deficit into a $2 Billion surplus for the state of Massachusetts, we have to understand what the financial picture looked like on the very day he assumed the office of Governor.
When Mitt Romney walked into the Governor's office on January 2, 2003, the state's financial health was not looking good:
Assuming office midway in the fiscal year, Romney's team inherited a fiscal meltdown requiring immediate steps to close a potential $650 million shortfall. Worse, budget writers for the incoming governor discovered the projected deficit for the following year was exploding - from $2 billion to $3 billion in a $23-billion budget.Now that we know what the financial picture looked like on the first day Mitt Romney took office, let take a chronological tour of how Mitt brought the state back to financial health.
2003-2004In order to confront the immediate problem of the state's shortfall of $650 million, Romney had to act fast and petitioned the state legislature for help:
Upon first taking office in 2003, Romney got the legislature to give him emergency powers to cut spending without their permission and, if elected president, he has said he will ask Congress to give him authority not to spend all the money they authorize in the federal budget.What powers did Congress give to Romney?
Under the measure, Romney can reduce funding for any state program, except for the 14 percent of the state budget which supports constitutional officers, the Legislature, inspector general, comptroller and the judicial branch and debt service.Mitt Romney then proposed a $22.858 billion spending plan for Fiscal Year 2004 which introduced major spending cuts and a restructuring of government to make it more lean and efficient.
The expanded fiscal authority, which extends through June 30, gives the governor the power to reduce the $5.5 billion set aside for local aid and the $950 million for public higher education, which includes the University, state college and community college systems.
2004-200518 months later, during the summer of 2004, Mitt Romney had some good news for the state of Massachusetts; the spending plan he proposed worked. He announced that by the end of the fiscal year of 2004, the state would have a surplus of approximately $500 million dollars. However, when the final figures came out in the fall of 2004, the surplus was actually $724 million with a total of $1.2 billion in reserves.
Mitt Romney also announced his budget plan for the Fiscial year of 2005 with $22.402 billion in spending plans and which kept the state budget's in balanced without raising taxes. Mitt Romney also used his veto power to reject $108.5 million in earmarks proposed by the Democratically controlled Congress.
Now that the state was out of the red and into the black, the Democratically state controlled Congress wanted to go on a spending spree by dipping into the rainy day fund. Mitt Romney used his veto power limit their spending binge. He also enacted a stimulus plan focus on revitalizing the state's infrastructure with a supplemental spending bill costing the state around $439 Million. As a reward for reducing the cost of administering food stamps, making the distribution of those stamps faster and more efficient, the Federal Government awarded the state of Massachusetts $1.25 million award for getting food stamps to needy families more quickly than any other state in the nation.
2005-2006In January of 2005, Mitt Romney began the new year by instituting welfare reform which required recipients to go back to work. He also proposed a $23.22 billion spending plan, reduced the income tax from 5.3%. to 5% and filed a 93.7 supplemental spending bill to fill up the money that was used for snow and ice removal. In March, Standard & Poor’s raised the state’s credit rating one notch, from "AA-" to “AA”.This was good financial news since it has impact on the interest rates the states pays for its bonds. The change in credit rating also helped to improve the financial health of Massachusetts. By 2005, the state had a surplus of nearly $1 billion.
2006-2007Mitt Romney proposed a $25.19 billion budget for the fiscal year of 2007 and announced that the state was projected to have a surplus of $2.3 billion in its rainy day funds which is the highest level in state history. Mitt's aggressive style of reducing spending, maintaining fiscal responsibility, administrative and structural reforms helped the state rake in $1.924 Billion in January alone and got a total in $10.385 billion in year to date collections which broke the state's record in collecting revenue.
Having spent the previous two years nursing the state's budget from red to black, Mitt Romney decided to go ahead with welfare reform. Having a budget surplus of $1 billion in 2005 allowed Mitt Romney to confidently to unveil his health care plan in 2006.When Mitt Romney introduced his health care plan on Beacon Hill, he made sure that his proposal wouldn't undermine all his hard work of whipping the state into financial shape.
Thus, when his plan was presented, it was estimated to cost less than 1.5% of the state budget.
In fact, the common complain that RomneyCare has ruined the state financially is simply not true. In 2009, Mitt Romney explained how his healthcare plan stayed within the budget and helped Massachusetts save money:
"The plan that I proposed was a “break even” plan, meaning it didn’t cost the state any additional funding. The legislature decided to make it a more generous plan than the one that I proposed, and as a result the cost which they forecast for this last fiscal year was $725 million, as I recall. The forecast for next year is about $723 million, so it’s pretty much on plan. The net cost to the state is about $350 million."In July, he proposed a $25.249 billion budget and reduced spending by $573 million in the form of vetoes to keep the state's budget in the black. The linked article makes the following note:
"With Romney’s vetoes, the growth from FY 06 to FY 07 is kept at 5.6 percent, as opposed to 7.5 percent under the Legislature’s budget."Later that year in November, Mitt Romney withheld $450 million from the Democratically controlled congress after they transfered that money from the rainy day fund with the intent on spending the rainy day savings.
The Financial Picture At The End Of Romney's Term In 2007As explained above, when Mitt Romney left the Governor's office at Beacon Hill, he left the state with a $2 Billion surplus for the state. And that is an impressive turnaround.
The Financial Picture After Mitt Romney Left Officenow back in debt with a $1 Billion state deficit and potentially facing a 1.5 or 2 billion dollar deficit. What's even more amazing is that Governor Deval has been receiving $7 billion in federal stimulus funds for the las two years and Massachusetts is on the fast track to being $2 billion in debt in the near future. When that happens, Govenor Duval will have taken the state back to the same level of debt before Mitt Romney became Governor of Massachusetts. What Duval has done hasn't improved the state financially but regressed back to the same old problems.
That is a very clear indication of poor financial leadership.
ConclusionsGetting out of debt requires discipline of reigning in spending. Most states don't have a revenue problem. They have a spending problem. And the facts are clear that Mitt Romney fought with a state congress that was controlled by Democrats on reigning in spending and preventing them from raiding the rainy day fund when there was a surplus in the state's treasury. It clearly demonstrates that Mitt Romney doesn't play games when it comes keeping government financially healthy.
However, Mitt Romney's impressive record of getting the state out of debt is even impressive when you look at the before and after pictures. Before Mitt Romney came to office, the state's debt was $3 billion dollars and now its $1 billion dollars since he's left. The $2 billion surplus that is tucked in between two episodes of major debt demonstrates that Mitt Romney was a unique leader in Massachusetts' financial history. It provides a nice comparison and contrast which helps show how capable and effective Romney is when it comes to financial responsibility.
And this amazing story of Mitt Romney's record in reining in government debt is important to keep in mind for 2012 given Obama's record, or lack thereof, in controlling spending.
However, Mitt Romney's ability to turn Massachusetts's $3 Billion debt into a $2 Billion surplus is not the only impressive accomplishment of his singe term of that state. Tomorrow, we will take a look at Mitt Romney's record on taxes and fees.