Mitt Romney Used Fees To Close Budget Gap As Massachusetts Governor
WASHINGTON -- Mitt Romney's boast that he closed a $3 billion budget gap as Massachusetts governor without raising taxes is a cornerstone of his White House campaign, a way to highlight his pitch for lower taxes and leaner government in a race where federal budget deficits and the slumping economy are hot issues.
What he rarely mentions is how he did it. The presumptive Republican nominee and Democratic state lawmakers raised hundreds of millions of dollars for cash-strapped state coffers by approving new and higher fees on everything from marriage licenses to real estate transactions to gun licenses.
The dozens of fee increases were a way for Romney, a former venture capitalist, to boost state revenues and ease the budget squeeze while technically sticking to his pledge not to raise taxes.
"It was a grab bag of fee increases across the board to close the budget deficit," said Michael Widmer, president of the nonpartisan Massachusetts Taxpayers Foundation, a business-backed fiscal watchdog group.
Romney's handling of the fiscal crisis when he took over as governor in 2003 is a guide to how he might act on his promises for lower taxes and reduce the federal deficit if he's elected president. He has sketched a broad, fiscally conservative vision during the primaries but has yet to specify how he would pay for it.
Romney says the increased fees during his governorship can't be considered tax increases because they were charges for specific services. He "never favored, never advocated for and never signed a tax increase into law," said Romney campaign spokeswoman Andrea Saul.
In remarks last June, Romney recalled how he tackled the budget gap: "The expectation was that we'd have to raise taxes. But I refused. I ordered, instead, a complete review of all state spending, made tough choices and balanced the budget without raising taxes."
There are varying estimates on the size of the fee increases.
Romney and the Democratic-run Legislature raised about $350 million annually in additional fees during Romney's first two fiscal years as governor, said Widmer. Romney has said the fee increases were about $240 million in fiscal 2004.
A National Conference of State Legislatures study put the figure even higher, saying Massachusetts in 2003 imposed more than $501.5 million in fee hikes, more than any other state. New York, with a far larger budget, was a distant second with $367 million.
Among the fee increases the study found: Marriage licenses went from $4 to $50, driving permits from $15 to $30, deed-recording fees from $25 to $100 and mortgage-recording fees from $36 to $158.
Romney wanted to make blind people pay a new $10 fee for a state certificate of blindness and $15 for a photo identification card, but the Legislature scrapped those proposals.
Romney's proposal to raise the firearms registration fee from $25 to $75 sparked controversy. The Gun Owners' Action League, which represents individual gun owners and gun clubs across Massachusetts, branded the move a tax increase.
"Anytime we have to pay a fee for a civil right, it's a tax increase as far as we are concerned," said Jim Wallace, the league's executive director.
The Legislature eventually increased the fee to $100, though it later extended the validity of the licenses from four to six years.
The libertarian Cato Institute took a swipe at Romney's handling of the budget squeeze in its 2006 fiscal report card on governors.
"Romney will likely also be eager to push the message that he was a governor who stood by a no-new-taxes pledge," the report card said. "That's mostly a myth. His first budget included no general tax increases but did include a $500 million increase in various fees."
A Boston Herald editorial in 2003 scolded Romney's "over-reliance on new and higher fees" during his first 100 days as governor while praising his overall performance.
Romney's fee increases were driven by a desire to boost state revenues and there was no real analysis of the cost of the services being provided, Widmer said.
Romney, playing up his business management skills, has said he erased the state's budget gap primarily by cutting government waste and reducing nonessential state spending. But Widmer said Romney also relied heavily on boosting state revenues. Widmer said it's the only thing Romney or any other governor could have done in the face of such a budget deficit.
"I don't fault him for having a balanced approach," said Widmer. "But his portrayal of that, both then and now, doesn't reflect the full reality. There's a sense of fiscal wizardry and management reforms. The real picture is very different. There's no magic at work here."
Romney inherited a budget deficit of about $3 billion when he took office.
A spike in revenues in his first year in office helped cut that deficit nearly in half. The additional money came from a $1.1 billion package of tax increases approved by the Legislature the year before he took office.
Romney did not raise the state's income or sales taxes during his four-year term as governor. But he raised an additional $350 million to $375 million annually for three years by closing what his administration called business tax "loopholes," Widmer said.
Many businesses considered Romney's closing of such "loopholes" to be corporate tax increases.
"It was a great marketing strategy on the governor's part," said John Regan, executive vice president of government affairs for Associated Industries of Massachusetts, which represents 7,000 employers. "But these were mostly tax policy changes to increase revenues for the state."
The Romney camp says the loophole closings weren't tax increases, they were about tax enforcement. They "ensured that businesses and other entities in the Commonwealth did not evade the spirit of the law," Saul said.
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By ANDREW MIGA 05/02/12 05:40 AM ET Associated Press