The Big Bill

In Massachusetts, there is an ongoing disconnect between enjoying the good things in life and paying for them.

Every summer, while vacationing in the Cape Cod area, I get the chance to catch up on what is happening in the Bay State. There are always the fortunes of the Red Sox to follow, but this year baseball got edged off the front pages by two revelations dealing with heavy lifting (a body-builder story) and the public purse (the Big Dig).

The two stories are interconnected. Both illustrate advanced cases of political myopia. The bodybuilder, who was competing last May for a national title, was a Boston fireman who had just been found to be "permanently and totally disabled" -- too weak to even pick up a clipboard as a fire inspector. He was collecting a disability pension at 72 percent of his salary plus health care for a lifetime.

Scandals surrounding fire fighters' disability claims are long-standing and tolerated by the public. A recent study of more than 100 suspicious disability cases in Boston in the past six years indicated a potential cost to taxpayers of $25 million. But, the parochial political culture in the city has stymied reform. Both the fire fighters and their supervisors are in the same union, which runs the fire department as a fiefdom. So, it is the Boston taxpayer who gets to do the heavy lifting and whose muscles appear most developed between the ears.

The second story about the Boston Artery also is reflective of an ongoing public disconnect between enjoying the good things in life and paying for them. The Big Dig is the largest municipal public works project ever undertaken. It started out as an elaborate underpass of major highways beneath the heart of the city. The original cost as estimated in 1983 was $2.35 billion, with the feds chipping in about $2 billion and the state putting up only about $350 million. What a deal.

As the project got underway, lots of not very good things happened. Costs spiraled and federal aid shrank. Years behind schedule, the Big Dig saw its price tag balloon to $15 billion by the time the project was completed in 2005. The cost overruns fell to the state to pick up, which it did by diverting state gas tax revenues and by borrowing to cover the gaps. The project was turned over to the Massachusetts Turnpike Authority to run and the authority is now awash in I.O.U.s. Over the next 30 years, the debt repayments plus interest will amount to $14 billion, or nearly the cost of the project.

That it costs a lot to borrow money for 30 years is not the news. Rather, it is the state's resoluteness in not raising taxes while enjoying the fruits of the spending. The pleasure-prone Bay State has used its credit card to pass the costs on to future taxpayers. Massachusetts has the second-highest level of state and local debt in the nation (slightly edged out by Alaska) at just under $14,000 per capita in 2006. Where it once carried the label of "Taxachusetts," it now ranks 26th among the states in state and local revenues as a percentage of personal income, unlike the early 1970s, when it was usually 2nd or 3rd.

A year ago, a special Transportation Finance Commission created by the legislature found that the state, which has been diverting funds from other transportation projects to pay for the Big Dig, faced a huge deficit in meeting its infrastructure needs. (The deficit figure was about $15 billion -- about the same amount as the debt service due on the Big Dig bonds.) It fingered what has been a problem in Massachusetts as well as in most every state: the gas tax, which is 23.5 cents per gallon. It has not been raised since 1991. The commission recommended an increase to 45 cents per gallon, which would be enough to make up for the ravages of inflation on the gas-tax dollar over the past 16 years. But, with gas prices then hovering at $3 per gallon, the governor and the legislature found the solution unbearable.

A year has passed since the commission's recommendations were waved off. Now the state finds that years of not addressing the need to raise revenues has placed it in a precarious position. But wait, there is always the credit card. So, the state continues to borrow heavily to do its highway work, with about 80 percent of the construction work being debt-financed. Even so, projects throughout the state's 11,000-mile system have had to be slashed and sidetracked to meet debt service payments for the 7.5 miles of Big Dig roadway. Well, that's a problem for the next generation to solve, along with financing those bountiful pensions. And that, folks, is how "Taxachusetts" turned itself into "Debtachusetts."

John E. Petersen was GOVERNING's Public Finance columnist. He was a Professor of Public Policy and Finance at the George Mason School of Public Policy.