The Secret to Massachusetts’ High Credit Rating
Massachusetts has the highest credit rating it’s ever had. Its secret? Discipline.
As Massachusetts’ secretary of finance and administration, Jay Gonzalez has had a major role in helping the state achieve its highest credit rating ever. That’s a remarkable achievement when you consider that it occurred in a massive and deep recession. Indeed, in fiscal 2009 Massachusetts experienced the biggest drop in revenue -- both in dollars and in percentage terms -- that it had ever seen.
Gonzalez took an unusual route to becoming point man for Massachusetts’ fiscal transformation. After getting his undergraduate degree in government from Dartmouth, he graduated from Georgetown Law. That left him with $80,000 in student debt, so instead of going into government, he went to work at a Boston law firm where he specialized in public finance. He’d just made partner when he began fundraising for Deval Patrick’s campaign for governor of Massachusetts. After Patrick won, Gonzalez was surprised to find himself offered a position in the new administration as assistant secretary for capital finance. He accepted the job, and in October 2009 he was promoted to his current position.
The steps Gonzalez and his colleagues in Patrick’s administration took to get Massachusetts on a stable financial footing did not amount to some “Miracle on the Charles.” This extraordinary result was achieved by very ordinary means. When Gonzalez describes how Massachusetts managed its money in very tough times, you hear the basics: Working collaboratively with the Legislature, public employees and other players to develop sound financial policies, and then having the fiscal discipline to stick with them. For example:
• The capital budget went from being three Excel spreadsheets with no policy or transparency to a detailed five-year capital plan on the state’s website.
• A comprehensive debt affordability policy was developed that stands as one of the best of any state government.
• A long-term fiscal policy assures that the budget is structurally balanced by projecting long-term tax revenue, while budgeting only the sustainable portion of that revenue.
• Revenue in excess of the sustainable portion is put into the state’s rainy day fund, which is now the largest of any state’s except for Alaska and Texas.
• The state’s workforce has been cut by 8 percent, while historic concessions from public employee unions have resulted in forgone wage increases and furloughs that together have saved $267 million.
• Five transportation agencies have been consolidated into one with a savings of $125 million.
• Comprehensive pension reform has shaved $5 billion off the state’s unfunded pension obligations.
It shouldn’t be surprising that state officials in Massachusetts are proud of what they’ve done and that they don’t miss opportunities to let the world know about it. The reality is that public officials need to engage in a great deal of positive communication about their accomplishments. That’s simply the nature of the political process.
So those of us who are trying to figure out what’s really going on must separate the bluster from the basic facts, and the best way to do that is to look for third-party verification. One of the last places you’d expect to find that is from officials of major cities within a state, given the natural tension between state and city governments. At a recent Governing event in California, for example, the city manager of Sacramento described the relationship between that state and its cities as “war.”
In that context, consider this: At the end of a long interview with Meredith Weenick, the chief financial officer of Boston, I asked whom else I should talk with while I was in town. Her immediate response? “Jay Gonzalez -- I have a ton of respect for him. Really smart. He’s doing exactly what we need the state and the government to do.” For third-party verification, it would be hard to top that.
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