Massachusetts budget problems, a peripheral issue in the 1988...


BOSTON -- Massachusetts budget problems, a peripheral issue in the 1988 presidential campaign, takes center stage this week when a legislative committee opens hearings on the financial woes facing Gov. Michael S. Dukakis.

The House Ways and Means Committee will sift through conflicting opinions Monday about the health of the economy that Dukakis dubbed 'The Massachusetts Miracle' as he traveled the country as the Democratic presidential nominee.


A slowdown in revenue collections and higher-than-expected spending has forced the borrowing of $1.675 billion in short-term notes since the start of the fiscal year.

The crunch is compounded by a shift from a semi-annual to quarterly payment system for state aid to communities and the decision to temporarily forego the sale of longer-term bonds and notes and pay for capital construction projects through the budget.

The cash flow problems have exacerbated doubts about the stability of an $11.8 billion budget approved in July amid concerns about a sharp revenue dropoff blamed on 1986 federal tax reform and a corporate tax loophole.

Those difficulties were quickly grabbed by President-elect George Bush, who during one campaign stop held up a Boston Herald headline declaring the financial picture was 'a mess.'


State officials insist revenue collections are close to their projections, while Republicans searching for a 1990 gubernatorial campaign issue continue to blame the problem on Dukakis's mismanagement.

'We are only $6 million behind out of $2.5 billion in revenues projected. We're as close to being on track as you can get,' said Michael Lelyveld, a spokesman for Administration and Finance Secretary Frank Keefe.

Lelyveld said short-term borrowing is a standard tool for states and Fortune 500 corporations to get through lean periods. He complained much of the budget controversy was blown out of proportion by the presidential campaign.

'It is a cash management tool and reported, if at all, as a business brief,' he said. 'Now that the burden of presidential politics is off this story, we should see it in the way it is.'

House Minority Leader Steven Pierce of Westfield strenuously disagreed.

'They were wrong then. They are wrong now,' he said. 'The people engaged in presidential politics were the Democrats who were trying to cover this up until after the election.'

The GOP leader named a bloated bureaucracy -- with 10,000 new state employees in the last four years -- and unchecked growth as the culprits, and has proposed cutting between $148 million and $168 million in spending.


Moody's Investor Services, one of the Wall Street agencies that boosted the state's bond rating in September, remains cautiously optimistic Massachusetts bonds are a good investment.

'We have not identified any underlying economic weakness and the revenues would appear to be pretty much on budget,' says Moody's vice president Claire Cohen.

'I think that when it's analyzed more clearly as to why the disbursements have been higher than expected, then we'll be a little bit more comfortable,' he said.

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