BOSTON (AP) - With Beacon Hill’s focus zeroing in on the economy and taxes, Gov. Charlie Baker should be in his element.
During the 2014 election, Baker pitched himself as a careful steward of the state’s purse strings - a fiscally cautious, socially moderate New England Republican out of the mold of his onetime boss, former Gov. William Weld.
But while Weld enjoyed an economic wind at his back during the 1990s, Baker is looking at choppier weather in his run-up to a likely re-election campaign next year.
At first glance, the state’s economy seems robust with relatively low unemployment and a building boom that includes the recent relocation of General Electric headquarters to Boston.
From the Statehouse looking out, it’s a much different view, with revenues failing to keep pace with predictions and the state facing a budget hole in the $400 million to $500 million range for the fiscal year that ends June 30.
The latest blow came this month when S&P Global Ratings notched down the state’s bond rating, pointing to a failure to rebuild the state’s rainy day fund. The agency also cited what it called the state’s “tendency to experience revenue volatility, elevated debt levels, and below-average pension funded ratio.”
The downgrade wasn’t catastrophic, and Baker said the state has made progress in paying down long-term obligations, like the unfunded pension liability, and ending the practice of drawing down reserves to pay operating expenses.
Baker was also quick to note that two other ratings agencies - Fitch and Moody’s - have affirmed the state’s credit rating. Baker has proposed depositing $98 million into the rainy day fund in the new fiscal year.
Democrats hoping to replace Baker were quick to jump on the downgrade.
Jay Gonzalez, a top budget official under former Democratic Gov. Deval Patrick, said Baker “owes taxpayers an explanation and a plan for getting us out of the mess he created.”
Fellow Democratic candidate and Newton Mayor Setti Warren said the downgrade is the result of “a state government that has relied on budget gimmicks and fiscal sleights of hand.”
The Democrats found an even starker difference with Baker this week when House and Senate lawmakers gave the final OK needed to put a so-called “millionaire tax” question on the 2018 ballot.
Under the plan, individuals with annual incomes above $1 million would be subject to a 4 percent surtax. The surtax would apply only to portions of income over $1 million. The current income tax rate is 5.1 percent.
Supporters say it would raise an extra $1.9 billion each year for “quality public education, affordable public colleges and universities, and the repair and maintenance of roads, bridges, and public transportation.”
A spokesman for Baker said he “does not support tax increases on our hardworking families.”
The move gave Baker’s Democratic challengers another bit of running room.
In a joint statement, Gonzalez and environmental activist Robert Massie - another Democrat running for governor - called on Baker to support the tax hike, calling it “a reasonable, modest step toward solving some of our most urgent challenges.”
Warren also backed the measure, saying voters should “decide for themselves whether to ask people who make more than $20,000 a week to pay a little more.”
While Baker remains popular in recent polls, Democrats are hoping the state’s fuzzy economic outlook combined with Baker’s resistance to new taxes could help them chip away at that allure.
Democrats are also hoping the tax ballot question that could help drive Democrat and Democrat-leaning voters to the polls next year, giving an assist to the party’s ultimate challenger to Baker.
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