A Green Auditor?

Back in March, more than 200 elected officials from around the upper Valley gathered in Northampton for the annual Hampshire/Franklin Municipal Conference. Uppermost on the minds of many of the city councilors and school committee members, selectmen and town meeting members who came that day: the dwindling local aid coming back to their communities from the Statehouse, which has dropped by $700 million since 2009.

At the conference, they got the chance to bring their concerns right to the top, during a question-and-answer period with Gov. Deval Patrick. Among those who addressed Patrick was Nat Fortune, chairman of the Whately School Committee.

Taking his turn at the microphone, Fortune told the governor about the successful campaign he helped lead in Whately in 2006 to raise property taxes in order to keep the town library from shutting down—a campaign, he noted, that wouldn’t have been necessary if the state were the “equal partner” it needs to be under Proposition 2 1/2, which limits municipalities’ ability to raise property taxes to pay for local services. Fortune also expressed his disappointment with the governor’s budget proposal to provide “relief” to libraries, not by increasing aid from the state, but rather by allowing them to maintain their certification even if they’re forced to cut hours and staffing below limits typically required by the state.

“When did municipal relief for libraries become relieving our towns of those libraries?” Fortune asked, to applause from the crowd.

Patrick listened intently, nodding his head slightly throughout Fortune’s speech. When Fortune delivered his wrap-up line, the governor allowed himself a small smile and joined the crowd with his own, brief applause. “Great point, Nat,” Patrick said. “Um, where should the money come from?”

If Patrick was gambling that his question—in essence, a challenge to a small-town official to tackle the dense, $27 billion state budget and find some hidden pot of gold that Beacon Hill lawmakers had overlooked—would effectively end the conversation, he gambled wrong. Fortune, who had returned to his seat at the end of his comments, sprang back up to the microphone. “Oh,” he said, as if surprised by the opportunity Patrick had presented him.

Then Fortune took full advantage of that opportunity. How about the $1.7 billion in tax expenditures—exemptions and other tax breaks given in the name of economic development—granted by the commonwealth in the most recent fiscal year, he suggested to the governor? The $300 million in tax exemptions to corporations like Fidelity and Raytheon? The $150 million to the film industry? Or how about revamping the state’s income tax system, raising the rate but also quadrupling deductions allowed to families and their dependents, to relieve the pressure felt most keenly by low- and middle-income households?

As Fortune spoke, Patrick appeared a bit flustered, his earlier equanimity gone. The governor interrupted at a few points—noting that his administration supported a cap on tax breaks to filmmakers (“Yes, and thank you,” Fortune replied); joking that Fortune “has a bad attitude”—but Fortune pressed ahead. “That’s my suggestion. Thank you,” he concluded.

“Hire him!” a member of the audience called out to Patrick.

But Fortune’s got his eyes on another job: he’s running as the Green-Rainbow Party’s candidate for Massachusetts auditor. Fortune’s vision includes a major shakeup of the way the commonwealth does business: an end to corporate handouts that too often prove to be bad investments, a readjustment of the tax system that increasingly burdens the people least able to bear that burden, a serious commitment to public schools and local services. And, he says, if he and other Green-Rainbow candidates are elected this year, it will prove that politicians don’t need corporate support to succeed—and can’t count on it to protect them on Election Day.

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Off the campaign trail, Fortune is a physics professor at Smith College and the dad of two teenage sons. Indeed, he came to politics, he said in a recent interview, as a “concerned parent” at Whately Elementary School. Fortune was elected to the town’s School Committee in 2003; in 2006, he won an award from the Massachusetts Association for School Committees for an analysis he did of school funding.

Fortune’s first years on the School Committee coincided with dramatic cuts in state education funding, as lawmakers, citing budget pressures, backed away from the higher levels of funding that came with the Education Reform Act in the 1990s. In response, Fortune and his wife, Joyce Palmer Fortune (now a member of the Whately Select Board), led a successful Proposition 2 1/2 override campaign, persuading voters to agree to an increase in their property taxes to raise money for their schools and library. It was a position no one wanted to be in—”We were asking people who could least afford it to pay more taxes,” Fortune said—but it was necessary, he added, given the lack of financial support from the state.

Fortune joined the Green-Rainbow party in 2002, after years as a registered Democrat. (He did spend a short period, while an undergraduate at Swarthmore, as a Republican. Fortune said he registered Republican so he could vote in that party’s 1980 primary for John Anderson, whose energy policy proposals, which included a steep gasoline tax, he admired.)

Fortune was drawn to the Greens by Jill Stein, the party’s gubernatorial candidate in 2002 (and again this year). Stein, he said, was the only candidate to address the issues he cared about, including the corrupting influence of corporate money in our political system, which leaves both Republican and Democrat lawmakers severely compromised. Green-Rainbow candidates, in contrast, pledge not to accept contributions from registered lobbyists or from corporate officers who employ lobbyists.

In 2004, Fortune ran for the 1st Franklin state representative seat; his platform called for strong public schools, a fairer system of taxation, and the adoption of instant-runoff voting, an electoral system that makes third-party candidates more viable. Fortune won 9.54 percent of the vote that year, which saw incumbent Democrat Stephen Kulik handily win re-election. Since then, Fortune has remained active in Green-Rainbow politics, winning the party’s nomination for auditor in 2006 (he withdrew his candidacy shortly after) and now running for that seat again. He’ll face Democrat Suzanne Bump and Republican Mary Connaughton in the Nov. 2 election.

“I’d hoped the Democratic party would act on my ideals and reflect the ones in its platform,” Fortune said of his decision to leave his former party. But those ideals, he said, are absent from our state government, despite the party’s long-time control over the Legislature (and, since 2006, the governor’s office).

“By all accounts we should be living in a Democratic agenda,” Fortune said. “I have to assume, with nothing holding them back, this is the best the Democratic party can do.”

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And that, Fortune makes clear, is far from good enough.

Like his fellow Green-Rainbow candidates, Fortune is banking on voters’ discontent with the current political system, in which big corporate money sets the agenda and frustrated residents watch their tax bills climb and their services dwindle.

“It seems we can keep dreaming up new ways to take money from people who don’t have it, and give breaks to the people who do,” Fortune told a crowd of supporters at an August Green-Rainbow reception held in Florence. “We are stealing from the poor to pay for the rich.”

Meanwhile, our tax dollars are being “siphoned off by insiders and special interests,” Fortune said. As a result, “it becomes ever harder to pay for the schools and the services we need and deserve to have.”

While it’s the Legislature and governor who make the laws that have created this mess, the state auditor, Fortune contends, is in a unique position to begin fixing it. As an elected official, the auditor doesn’t answer to the governor’s administration, but rather directly to the voters. And he or she has the power—indeed, the obligation—to investigate how tax dollars are spent, and the bully pulpit to expose places where it’s being spent unwisely, unfairly, inefficiently.

Historically, the auditor has played an important role in exposing corruption and fraud that wastes taxpayer money, Fortune said. “The problem is the legal waste, fraud and abuse is so much larger. &

“The state auditor is really the person who is your fiscal watchdog,” Fortune added. “I think it’s time to have a watchdog who actually barked.”

Fortune has a lot to bark about, starting with those corporate giveaways, the handouts and free passes given to big businesses in the hopes that they will return the favor by creating new jobs, investing in the state—or at least staying in Massachusetts rather than packing off for another state, another country.

In recent years, the commonwealth has allowed billions in tax deductions, deferrals and credits to large corporations—and, in some cases, created special laws to serve particular industries— in the name of economic development. This year alone, Massachusetts will spend a projected $1.7 billion in economic development tax expenditures, according to a December, 2009 report by the Mass. Budget and Policy Center, an independent research group that analyzes spending in the state. “Many of these are beneficial to moderate and low-income families, such as personal income tax exemptions for public assistance and Social Security benefits, deductions for dependent children, and exemptions from the sales tax for food and clothing,” the report noted.

But the majority of that $1.7 billion—64 percent, or $1.1 billion—is granted to corporations, in the form of breaks on the income and property taxes they would normally pay. That’s far more, the report pointed out, than the state appropriates for budget items that would presumably achieve similar goals, including economic development initiatives such as job training programs ($138 million) and higher education (about $1 billion).

Just what the commonwealth gets in return for those tax breaks is hard to determine. “The effectiveness of these tax expenditures is rarely examined in any detail and very little data is available to analyze,” the Mass. Budget and Policy Center report noted. That’s because, once they are granted, they remain in effect without the need for legislative approval, unlike appropriations for specific programs, such as higher ed, which get an annual public airing during the budget process.

“Tax expenditures represent a growing share of our economic development resources,” the report continued, noting that while the overall state budget has steadily shrunk, funding for economic tax expenditures has grown an average of 4 percent a year since fiscal 2002. “These tax expenditures represent a trade-off—for every dollar the state fails to collect due to a tax break, it has one fewer dollar to devote to another priority. … And because most of these tax breaks continue year to year, the cumulative cost over the lifetime of these tax breaks is much greater.”

 

Fortune is deeply critical of an economic development policy so dependent on corporate handouts. He questions the fairness of a system that rewards certain industries—pharmaceuticals, financial services, movie-makers—with tax breaks, but not others. And he calls it a “travesty” that the government is willing to grant such major tax breaks to companies in the hope of persuading them not to leave the state.

“I’m opposed to paying extortion money, in the first place,” Fortune said. “We’re paying these companies for the pleasure of their company, so they don’t leave us”—a scenario that smacks of an unhealthy relationship.

And, Fortune added, just how healthy can these businesses be if they insist they need these tax breaks to survive? “I’d rather see us invest in jobs that would benefit the commonwealth as a whole,” he said. If that money were used to hire laid-off librarians, teachers and firefighters, he noted, it would improve the quality of life and services in communities across the state. “These are the things that everyone benefits from,” Fortune said; they also support the quality of life that corporations look for when they’re deciding where to settle. “I assure you that would be a far better investment of our money,” he said.

Especially galling to Fortune are the many examples of companies that accepted tax breaks, then failed to produce the jobs they promised, and even cut existing jobs—with no penalty from the state. In March, the Boston Globe reported that since 1994, the commonwealth has given away hundreds of millions in state and local tax breaks to more than 1,300 programs under the Economic Development Incentive Program, designed to boost job creation.

In some cases, a Globe analysis found, that’s just what they did. “But far too often taxpayers have not come close to getting their money’s worth,” wrote Globe reporter Todd Wallack. “Hundreds of the projects delivered fewer jobs than promised, and some companies actually slashed employment. Many firms won subsidies for projects they were set to build without state assistance; in some cases, incentives that were approved long after the projects were under way or complete. And many got generous packages though they agreed to create only a handful of low-paying jobs.”

One particularly damning example cited by the Globe: Nortel Networks, a Canada-based maker of telecommunications equipment that in 2000 received more than $2 million in tax breaks—which are in effect until 2014—on a promise to expand its workforce from 2,200 to as many as 3,000 employees. Instead, Nortel has slashed its workforce to just 145 people, according to the Globe.

Fortune adds to that list perhaps the two most notorious cases of corporate tax breaks gone bad: Fidelity Investments and the military contractor Raytheon, both of which enjoyed major tax breaks in the 1990s but nonetheless went on to slash thousands of Massachusetts jobs.

“We shouldn’t sink money in holes in the ground for promises companies may not keep,” Fortune said. Indeed, he noted, it’s hard for the state—not to mention taxpayers—even to know whether those promises are kept or broken. As the Globe article pointed out, administrators of the Economic Development Incentive Program cannot say exactly how many jobs it’s helped to create, and the program does not require participating companies to offer outside data to support their claims of job creation, but rather operates, in the words of the commonwealth’s deputy inspector general, under an “honor system.” (A new law will allow the state to go after lost tax revenue from companies that failed to fulfill their promises to create new jobs, although the law will only apply to new tax incentive deals, and will not be applied retroactively to those granted in the past.)

EDIP is not the only state program that makes questionable decisions in the name of economic development, added Fortune, pointing to a recent report by current Auditor Joe DeNucci on the Mass. Technology Development Corp., a quasi-public agency that funds start-up tech firms. According to DeNucci’s report, released in August, MTDC “overstated the amount of in-state jobs created through its investment activities” by including in those figures jobs created in other states. While 18 companies tracked by MTDC in 2008 reported creating a total of 575 jobs, 124 of them were not actually in Massachusetts, DeNucci found. In addition, the report noted, MTDC did not independently verify the figures, which were provided to the agency by the companies.

“This money is supposed to be working for us,” Fortune said. Instead, it’s being spent on corporate support programs with dubious track records, while lawmakers insist the commonwealth just doesn’t have the money for local services, the public schools and libraries and other programs that the working and middle class rely on most.

“When they say there’s no money, they mean there’s no money for us,” Fortune said. As auditor, he promises a dramatic reshifting of those priorities.

 

Author: Maureen Turner

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