Democratic presidential front-runner Michael Dukakis's self-proclaimed management skills are...


BOSTON -- Democratic presidential front-runner Michael Dukakis's self-proclaimed management skills are being put to a crucial test by a sharp drop in revenues that was counted on to balance a $12 billion state budget.

The Massachusetts governor, who touts his budget-balancing skill on the campaign trail, says he will easily weather what he calls an annual juggling act, pointing out the state seeks 'reversions,' or appropriation givebacks, every year.


But he acknowledges major changes are needed in a fiscal 1989 proposal offered in January if he is to meet his state constitutional mandate to balance the budget.

Critics insist a 1988 revenue shortfall, ranging from $77 million up to $200 million -- and the need to order $233 million in reversions - reflects managerial shortcomings created by his repeated campaign absences.

The only area of agreement appears to be that no one thinks the problems represent an end to the 'Massachusetts Miracle,' an even bigger cornerstone of the Dukakis pitch.


Instead, the debate centers on the accuracy of forecasting revenue growth, which remains on the plus side because of strength in sales and personal income tax growth.

The forecast is complicated by a loophole in the state's corporate excise tax law that allows firms to reduce their tax liability by reporting the activities of out-of-state subsidiaries.

Dukakis says similar turmoil is being experienced nationwide, particularly in California and New York.

Suzanne Tompkins, a budget analyst for the business-backed Massachusetts Taxpayers Foundation, said bad forecasting is the heart ofthe problem.

State officials 'didn't know how severe their problem was going to be because they didn't anticipate, nor did anyone else, the very sharp dropoff in tax collections,' she said.

That compounded a problem that began in fiscal 1987, when Massachusetts sharply increased spending by using a $300 million surplus. That risk-taking was based on an economy that regularly bailed out budgetmakers by outperforming forecasts.

'They knew in the beginning (that 1988) was going to be a less rosy year,' she said. 'The big mistakes were made in the boom years when we increased spending more than we ought to have in view of what it costs to run the Massachusetts government.'


Tompkins divided blame between Dukakis and the Legislature, while giving the governor high marks for his recent actions to hold down spending.

'The embarking upon the effort to restrain spending was exactly the right thing to do,' she said.

State budget director Barbara Salisbury acknowledged that windfall revenue growth in past years did not prepare the state for the sudden drop in corporate collections.

But she said the overall size of this year's reversions mirror the $215 million from fiscal 1987, which was 'not a year when we needed reversions to balance the budget.

'Last year, we handed our targets to people .... and we didn't end up needing them. We didn't hear a peep from the advocates,' she said.

The change, she said, is primarily political.

'This year, I think that with the governor running for president, the advocates saw the stakes as being somewhat different,' she said.

'I think (they) wanted the governor to know they were watching the process and make sure the cabinet secretary plans for meeting those reversions wouldn't cause any pain,' Salisbury said.

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