Massachusetts State Treasurer Timothy Cahill. Also see Denis Guyer, Andrea Nuciforo & Carmen Massimiano.

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thecahillreport.com
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"I don't seem to be getting anywhere from inside the party, so maybe I can be more effective outside the party. We'll see." -- Treasurer Timothy P. Cahill on 7/7/2009.
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"Boston celebrates St. Patrick's Day" - 2009.
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State Senate President Therese Murray, left, displayed a photograph of Massachusetts Treasurer Timothy Cahill as part of a joke aimed at Governor Deval Patrick, right.
(John Bohn/Boston Globe Staff)
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"Lottery winner"

Posted by Dan Wasserman, December 17, 2008, 2:58 P.M.
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"Cahill's slots"

Posted by Dan Wasserman, March 4, 2009, 5:24 P.M.
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The Heroes Among Us award is a program of the Boston Celtics, presented by the Mass State Lottery represented here by State Treasurer Timothy Cahill.
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News Article:
Treasurer issues warning on state finances
The Associated Press
Friday, November 30, 2007, 10:09:48 AM EST

BOSTON (AP) — State Treasurer Timothy Cahill says without some belt-tightening, the state could face a serious fiscal crunch in the coming months.
Cahill issued the warning after the state was forced to borrow $1 billion to make local aid payments to cities and towns.

While borrowing to pay bills is not unusual for the state, the amount was higher than a year ago and followed a report that tax collections were down 2.8 percent in October compared to the same month last year.

Cahill said Governor Deval Patrick and the Legislature should reduce spending and consider budget cuts.

The treasurer and Administration and Finance Secretary Leslie Kirwan planned to send a letter to lawmakers today outlining the state's current financial picture.

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Timothy Cahill
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News Article
Mass. borrows $1b as tax collections fall
By Andrea Estes, Globe Staff | November 30, 2007

The state is borrowing $1 billion to make its local aid payments to cities and towns at the same time that monthly tax collections have dipped, triggering a warning from state treasurer Timothy Cahill that the Commonwealth could face a severe revenue shortfall in the coming months.

The state routinely borrows to pay its bills, but the amount is significantly higher than last year and Cahill said the borrowing should send a message to the Legislature and the governor that they should curb spending and consider making cuts.

"Borrowing is like paying for groceries with your credit card," he said. "It's not the best way, but if you're expecting a windfall, it's okay. The question is: Are we going to get a windfall?"

Cahill said he's worried that tax collections in October were so weak - down 2.8 percent over October of last year - they could portend a dramatic decline when most people file their income tax returns in April. If the country falls into recession, he said, the state could be in even deeper trouble.

"We're not trending in the right direction. My job is to send out the warning signals. There are storm clouds out there and we have to be very aware," said Cahill, who, along with Administration and Finance Secretary Leslie Kirwan, will send a joint letter to lawmakers today describing the borrowing plan and the state's cash flow situation for the year.

House Speaker Salvatore F. DiMasi, who was briefed on the cash flow report earlier this week, called the borrowing "yet another troubling sign for the Commonwealth's finances in the year ahead.

"One thing is clear from everything we are hearing - we must be conservative in our spending," he said. DiMasi said he has asked Kirwan and the Department of Revenue for more detailed information on the state's fiscal situation and future revenue trends.

Kirwan downplayed the significance of the short-term borrowing, calling it "not in and of itself alarming. It's standard operating procedure," she said, because revenue comes in at a different pace than state spending.

But she said the factors that led to the increased borrowing - like a shortfall in lottery revenues - could mean the state has to use reserves to balance the books at the end of the year. She would not predict how much may have to be taken from the state's rainy day fund.

This year's budget, she said, is based on a projection of 3 percent growth in tax revenues. Collections are up 4 percent for the year, she said. "Clearly, if state tax revenues were to go down over the rest of this year, we'll have even greater financial challenges to deal with."

She said the administration has proposed ways of increasing revenues - including closing corporate tax loopholes - but has been unable to win legislative support.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, one of the state's leading fiscal watchdogs, yesterday predicted the state will have to use $300 million to $700 million in reserves to balance the budget at the end of the year because of increased health and pension costs and declining lottery revenues.

Next year, he said, the shortfall could skyrocket to $1.5 billion because of built-in, escalating expenses.

"All of this is predicated on a slow-growing economy," said Widmer. "But the danger of a national recession increases by the day, which would make this picture even worse. The situation is very serious today, but with a recession it would be dire."

According to Cahill, the state borrowed $200 million in October, $300 million in November, and will borrow another $500 million in December to cover its bills.

The state has never borrowed so much so early in the fiscal year, said Cahill. It is also the maximum amount the state can borrow for the short term by law and is the highest amount since the recession of fiscal 2003, he said. It will cost taxpayers $18 million in interest. Last year, the state borrowed $900 million.

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"Fiscal trouble afoot in Boston"
By Hillary Chabot, Eagle Boston Bureau
Saturday, December 01, 2007

BOSTON — Fiscal storm clouds gathered on Beacon Hill yesterday as two state financial officials sent a letter to lawmakers detailing $1 billion in loans needed to make local aid payments to cities and towns.

While the state often borrows money to pay its bills and then pays off the loans when tax money and other funds roll in, Cahill told The Boston Globe yesterday that the $1 billion loan is substantially greater than last year and should send a warning to the Legislature and governor.

"Borrowing is like paying for groceries with your credit card," he told The Globe. "It's not the best way, but if you're expecting a windfall, it's OK. The question is: Are we going to get a windfall?"

A Cahill spokeswoman did not return calls from The Eagle yesterday seeking comment.

The state borrowed a total of $900 million last year to pay for local aid to cities and towns, and the $1 billion loan marks an 11 percent increase.

Reason for concern

Most fiscal watchdogs on Beacon Hill agree that low lottery collections, combined with a dip in tax revenue, mean trouble for next year's budget.

"Overall, is there a concern? Absolutely," said Senate Ways and Means chair Steve Panagiotakos, D-Lowell. "Nationally, never mind statewide, it's possible that by the middle of '08 we're going to be in a recession."

He warned that poor lottery performance combined with an approaching national recession should trigger concern. "It's really not a question of if, but when," Panagiotakos said about a national recession. "I think we all should be proceeding with caution right now. If you look at the financial portents out there, it really is yellow lights everywhere."

Tax revenues above projection

However, Panagiotakos also cast doubt on Cahill's concerns about slow tax revenues. While October tax revenues are 2.8 percent below last year, they are actually above the 3 percent increase projected in the budget.

State Rep. Chris Speranzo, D-Pittsfield, said everyone is aware of the choppy waters ahead. Speranzo serves on the House Ways and Means Committee.

"It sounds as if there is a deficit between the projections in the budget and what they are collecting. Our most important obligation is our cities and towns, however, and we need to keep that commitment."

Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the state may have to use $300 million to $700 million in reserves to balance this year's budget.

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State officials detail $1 billion in loans to pay bills
By Hillary Chabot, The North Adams Transcript Statehouse Bureau
Saturday, December 1, 2007

BOSTON — Fiscal storm clouds gathered on Beacon Hill on Friday, as two state financial officials sent a letter to lawmakers detailing $1 billion in loans to pay off bills.

The money will go towards expected state lottery funding to cities and towns.

While Treasurer Tim Cahill pointed to the loan as proof of a bumpy financial year ahead in a published report, the letter — signed by Cahill and Administration and Finance Chief Leslie Kirwan — referred to the loan as expected.

"The projection also reflects a now-typical pattern of tightening in the commonwealth's cash position in the second quarter of the fiscal year," Cahill and Kirwan wrote in the letter.

The state borrowed a total of $900 million last year to pay for local aid to cities and towns, so the $1 billion loan isn't that much of a hike from last year.

A Cahill spokeswoman did not immediately return a call for comment.

Most fiscal watchdogs on Beacon Hill, however, agree that low lottery collections, combined with a dip in tax revenue mean trouble for next year's budget.

"Overall, is there a concern? Absolutely," Senate Ways and Means chair Steve Panagiotakos, D-Lowell, said. "Nationally, never mind statewide, it's possible that by the middle of '08 we're going to be in a recession."

However, Panagiotakos also cast doubt on Cahill's concerns about slow tax revenues. While October tax revenues are 2.8 percent below last year, they are actually above the three percent increase projected in the budget.

"It's really not a question of if, but when," Panagiotakos said about a national recession. "I think we all should be proceeding with caution right now. If you look at the financial portends out there it really is yellow lights everywhere."

Michael Widmer, president of the Massachusetts Taxpayers Founda- tion, said the state may have to use $300 to $700 in reserves to balance this year's budget.

Rep. Chris Speranzo, D-Pittsfield, said everyone is aware of the choppy waters ahead. Speranzo serves on the House Ways and Means Committee.

"It sounds as if there is a deficit between the projections in the budget and what they are collecting. Our most important obligtation is our cities and towns, however, and we need to keep that commitment."

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News Article:
"Volatile holdings part of state fund: SIVs add risk as communities seek to increase income"
By Ross Kerber, (Boston) Globe Staff | December 5, 2007

A state fund Massachusetts cities and towns use to temporarily invest their cash holds roughly $134 million in volatile "structured investment vehicles" - including four that face possible downgrades.

Yesterday, state Treasurer Timothy Cahill said he does not expect municipalities to suffer losses on their investments in the Massachusetts Municipal Depository Trust.

SIVs represent just a fraction of the fund's total assets of $5.6 billion, he noted.

In Florida yesterday, officials approved a bailout plan for that state's $14 billion investment pool, turning its management over to BlackRock Inc. and accepting the resignation of the fund's executive director.

Florida officials froze withdrawals from the pool last month after municipalities that invested in it grew wary of its holdings in a defaulted SIV and withdrew almost half of its $27 billion in assets.

SIVs also appear in Connecticut's cash portfolio and may lead to tens of millions of dollars in losses, an official there said yesterday.

These state investment pools resemble money-market funds for individual investors.

Mostly, they invest in US Treasury bills and other short-term securities that allow them to pay a slightly higher rate of interest.

But to increase their returns, many also invest a portion of their funds in "commercial paper," such as mortgage loans packaged into SIVs, or corporate debt backed by assets like real estate.

Cahill said the SIVs held by the Massachusetts trust have not defaulted, unlike those held by other states.

He also said no local government has objected to the trust's investments or sought to withdraw its money.

"The difference between us, Florida, and Connecticut is that we haven't been reaching for yield," he said. "We haven't taken added risk to get returns."

SIVs have also caused concern for retail money market funds that hold many of their securities, and companies like Wachovia Corp. have put up cash to make up for losses. Major investors, including Fidelity Investments and Bank of America Corp., are attempting to organize an $80 billion bailout fund to allow the SIVs to continue to operate.

Fidelity also manages the Massachusetts Municipal Depository Trust, an investment pool meant as a place for the state and municipal entities to earn interest on cash from tax collections and other revenue until they need it to pay their bills. The fund's returns have averaged about 5 percent a year recently.

This year, Fidelity has taken positions in six SIVs, Cahill said: Beta Finance Corp., Centauri Corp., Cullinan Finance, Dorada Corp., Links Finance, and Sigma.

On Friday, the rating agency Moody's Investors Service said it had placed four of them on review for possible downgrades. (Cahill said they hold only about $50 million of state assets.)

The investment vehicles, mostly operated by large financial companies such as Citigroup Inc., have come under close scrutiny lately.

Local officials in Reading and Concord have questioned Fidelity's holdings in SIVs. Concord's finance director, Anthony Logalbo, has about $25 million of the town's $100 million operating budget in the state fund on an average day.

Logalbo said he's not worried about that, partly because Fidelity has told him it has senior securities in the SIVs that would give its investments preference over other creditors holding subordinated debt in case of a default. "I'm satisfied that they're carrying out their fiduciary responsibilities," he said.

A Fidelity spokesman said he could not discuss Massachusetts as a client, but said:

"We believe the investments we have made on behalf of clients in SIV-related debt securities continue to represent minimal credit risk. We have a rigorous research process to approve debt securities for purchase in our money market portfolios, and we have been selective in this approval process."

In Connecticut, a similar cash fund, known as the State Short-Term Investment Fund, held about $400 million of its total assets of $5 billion in some of the same SIV. About $100 million was invested in an SIV known as Cheyne Finance, that has defaulted, forcing creditors into a restructuring process to recover money.

The state is likely to have to take losses as a result, said Larry Wilson, assistant treasurer, but the losses would be covered by a $52 million reserve. He said several towns withdrew money from the pool, but none of the pool's largest participants, including the state of Connecticut, have withdrawn cash.

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Ross Kerber can be reached at kerber@globe.com. Bloomberg News contributed to this report.

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"Mass. tax group sees big healthcare hit to employers"
December 7, 2007

Employers will spend an estimated $175 million more a year for health insurance under the state's healthcare reform law, according to a report released yesterday by the Massachusetts Taxpayers Foundation.

The increase in costs will include $150 million as more employees accept coverage and $24 million for new prescription drug benefits, according to the report, "An Analysis of the Essential Role of Employers in Massachusetts Health Care Reform."

The report also estimates that about 50,000 employees and their dependents will take advantage of their employer health plans because the new law requires everyone to have health insurance.

Michael J. Widmer, president of the business-backed budget watchdog group, said the study marks the first time someone has tried to estimate the costs of the new law to businesses.

"Employers are carrying a major responsibility in terms of healthcare reform," he said.

The report concluded with a warning that rising healthcare costs must be controlled or the new system could be jeopardized.

"The delicate balance of shared responsibility among government, employers, and individuals - and the broad consensus of support for healthcare reform in Massachusetts - assumes that health coverage will not become unaffordable for any of the parties, an assumption that will be constantly tested as more and more residents become insured," the report said.

MARTIN FINUCANE

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"Experts warn of fiscal fiasco"
By Matt Murphy, Eagle Boston Bureau
Friday, December 07, 2007

BOSTON — It's becoming a story all too familiar for Massachusetts cities and towns.
Rising health care and special-education costs, slow growth in new industries and a need to invest in public infrastructure have left communities strapped for cash and turning to residents for help.

The so-called "municipal meltdown," a moniker coined by the Boston public policy think tank MassInc., is a real threat to cities and towns hoping to avoid drastic reductions in services in years to come, according to experts.

But the solution is anything but clear.

"We have to figure out who the real villains are, and it's not us," said Sen. Steven Tolman, D-Brighton, referring to the state legislators, municipal leaders and unions. "We have to work together."

Tolman participated in a forum sponsored by MassInc. in Boston yesterday to discuss issues facing cities and towns raised by the cover story in the fall issue of CommonWealth Magazine, published by MassInc. Geoff Beckwith, executive director of the Massachusetts Municipal Association, Barbara Anderson, head of the Citizens for Limited Taxation, Amesbury Mayor Thatcher Kezer and Massachusetts Teachers' Association President Paul Toner also took part in the discussion.

Anderson, a fierce critic of wasteful government spending, said that Bay State residents no longer trust local government officials when they say their towns are in dire fiscal straits.

That lack of trust has built up over the years, said Anderson, pointing to the Legislature's refusal to reduce the state income tax, despite voters approving the reduction on a ballot question.

She also did not hesitate in blaming unions for soaking cities and towns, arguing that the state could send a strong message with a symbolic move to curtail police details on road projects that also would save cities and towns money.

"Until we take on the unions, we aren't going to be able to save ourselves from this fiscal meltdown," Anderson said.

Beckwith and Thatcher downplayed Anderson's spirited argument about wasteful spending, calling for a more generous pact between state and municipal government on local aid and a focus on new sources of revenue.

Local aid, when adjusted for inflation, has been reduced $621 million since 2002, according to Beckwith, while new revenue also has been slow to grow.

Beckwith said that cities and towns must be given more control from the state to control their own finances.

"We need to empower communities to do this," Beckwith said, of digging themselves out from under heavy financial pressures.

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"Usual state money woes"
The Berkshire Eagle - Editorial
Article Last Updated: 12/08/2007
Monday, December 10, 2007

Massachusetts communities are used to warnings about cutbacks in aid from the state, but while the red flags being flown now aren't surprising they are a source of frustration. Rising health care costs are part of the problem, and absent major reform along the lines of a government-backed single-payer program, that problem will only grow worse. Special education costs are climbing too, and the stricter guidelines needed to lower those costs aren't on the horizon either. While it is easy to scapegoat unions, as does Barbara Anderson, the head of Citizens for Limited Taxation, unions representing city and town employees will have to make the kinds of health coverage and pension concessions that are now routine in the private sector. We agree with Ms. Anderson that Beacon Hill should take on the police unions insisting that officers be present at road projects. That money wasted could better benefit struggling communities.

SBRSD as state ward

When it rubber-stamped Sheffield's decision to change the formula for assessing its residents for school costs, the state Department of Education knew it might end up running a school district for the first time if there was no resolution of the dispute between Sheffield and the four other communities that make up the Southern Berkshire Regional School District. There was none, and the DOE is now in charge, though DOE officials appear unclear on what that entails. Unless it wants to be responsible for the SBRSD indefinitely, the state agency needs to abandon its passive approach and push for a resolution of the dispute.

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"Cahill Suggests Legalizing Gambling"
By Martha Bebinger, WBUR Newsroom
BOSTON - May 25, 2007 - TEXT OF STORY (In Part):

MARTHA BEBINGER: Treasurer Cahill says Massachusetts has to find a new source of revenue. Lottery sales are down and the state is losing jobs while spending commitments for the new health care law and biotech research are growing. Cahill says he doesn't want to just sit back and watch the Mashpee Wampanoag push for a casino.

...BEBINGER: ...House Speaker Sal DiMasi says on balance, Cahill's plan may not make sense.

...BEBINGER: DiMasi says he believes that the majority of house members remain opposed to casino gambling. DiMasi's point person on gambling, Representative Dan Bosley says that's one reason why a casino is not a "fais de complet" for Massachusetts.

BOSLEY: We fall in the trap of saying this is an inevitability, so let's get in front of it and make the best deal we possibly can, but I don't believe it's an inevitability. If people look at this, they'll understand that while some people from Massachusetts do go to Connecticut to game, most of the gamblers that would come to a new casino would be from Massachusetts, and we wouldn't make as much money as people think we would on casinos.

...BEBINGER: While much of the attention about a tribal casino has been focused on the Mashpees, a related but separate tribe, the Wampanoag's of Gay Head Aquinnah, also plans to renew a casino bid.

Both tribes have considered the possibility that they could open casinos now, based on a state law that allows nonprofit groups to run so-called "Las Vegas Nights." Gary Garrison, a spokesman for the federal Office of Indian Affairs says similar laws have been the basis for casinos in other states.

...The legislature, hearings on gambling bills, and possibly Cahill's plan, are scheduled for mid June.

http://www.wbur.org/news/2007/67443_20070525.asp

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EDITORIAL - (North Adams, Massachusetts) TheTranscript.com
"Don't bet on it"
Saturday, May 26, 2007

Now comes our illustrious state treasurer, Tim Cahill, with a proposal for the state to roll the dice and build a casino somewhere in Massachusetts before the Wampanoags do. It's a foolish proposition and one likely to shoot snake eyes with the Legislature upon arrival, thank goodness.

Some in Berkshire County are slavering over the idea, though, in Web blogs or in grocery-market conversations, feeling it would somehow be a panacea to employment woes around hereabouts — or perhaps a closer gambling mecca where they could feed their habit. Somehow they are under the delusion that state leaders would actually consider the idea of building a casino in the Berkshires, if indeed they pursue the idea at all.

Right. It would be way up there on the list of projects we are likely to see in our lifetimes, directly after the Pittsfield bypass and the tramway to Mount Greylock. We do bear in mind, of course, that Adams voters wholeheartedly backed the idea of a casino on Greylock a few years back — and we know what sway Adams has in Boston.

State Rep. Daniel Bosley, our stalwart North Adams Democrat, is already staunchly against the idea of the casino, rightly pointing out that the Wampanoags will build one soon anyway — perhaps in 2010, and the state would have a hard time competing — or, more importantly, getting any revenue at all from the tribe for the privilege of its building in Massachusetts.

Gov. Deval Patrick should tell Mr. Cahill to devote his energy to coming up with ways to shore up sagging state lottery revenues instead of playing long shots. The proper place for a casino in Massachusetts, if we must have one, is on Cape Cod, where tourists have already spoiled a once fabled vacation spot.

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"Larger state deficit predicted due to near-static tax revenue"
By Andrea Estes, (Boston) Globe Staff | December 14, 2007

State officials and fiscal analysts yesterday predicted relatively small increases of 2.4 percent to 4.1 percent in state tax collections next year, saying the rise will not be enough to close a projected budget gap for the 2009 fiscal year that could top $1 billion.

"What this says for the fiscal '09 budget is that the Commonwealth is in deep trouble," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, who is warning the shortfall could balloon to $1.5 billion because of spending increases that are built into the budget.

The slowing economy, stagnant corporate profits, and declining capital gains are sparking the state revenue dip, said several who testified at a State House hearing yesterday.

In addition, though poised to post its highest revenues ever, the state lottery will not be able to meet overly optimistic expectations built into the budget or continue to grow in the future, said State Treasurer Timothy Cahill. The lottery provides about $900 million to cities and towns, which have come to expect annual increases, said Cahill.

The officials and fiscal analysts appeared before a joint hearing of the Senate and House Committees on Ways and Means, who are working to come up with a revenue estimate that will guide Governor Deval Patrick and lawmakers as they put together next year's budget. Patrick is expected to unveil his budget plan on Jan. 23.

All the fiscal analysts predicted revenues would grow modestly in the next fiscal year, which begins July 1. In a budget of more than $20 billion, the differences among estimates were relatively minor.

Widmer had the most pessimistic projection - 2.4 percent growth from fiscal year 2008 to 2009 - while the Beacon Hill Institute, a conservative think tank, offered the most optimistic estimate, 4.1 percent.

The predictions of lower revenue led lawmakers to raise questions about potential new revenue generators, such as casinos, and the governor's proposal to close corporate loopholes.

Cahill predicted casinos could "produce a tremendous amount of revenue" for the state based on the spending habits of Massachusetts residents who, he said, spend far more on the lottery per capita than residents of any other state.

"I think they will be very, very successful," he said.

He acknowledged that introduction of casinos would hurt the lottery in the short term, siphoning off between 3 to 8 percent a year. But ultimately, he predicted, lottery players would return.

Cahill was asked whether the state should now sell the lottery to private investors to reap a huge windfall, a proposal recently floated by some Republican lawmakers. Cahill said interest has evaporated since last summer, when several investment firms were offering billions of dollars to buy or lease the lottery.

He suggested that the state instead look for ways to undo the built-in deficit that has been created by state employee health insurance and pension costs that are growing faster than revenues.

"We cannot pay for them indefinitely," he said. "It's not possible. We do not have the structure in place to support these programs at the level we desire."

Jonathan Haughton of the Beacon Hill Institute suggested the state raise the 23.5-cent-per-gallon gas tax and impose more fees on highway and bridge users, suggestions also made by a recent legislative Transportation Finance Commission.

Meanwhile, voters next fall could be asked to eliminate the most basic source of state revenue, the income tax.

Secretary of State William F. Galvin yesterday ruled that proponents of a ballot question that would repeal the state income tax had collected more than the 66,593 signatures required to send the petition to the Legislature. If lawmakers fail to vote on the matter before May 6, proponents can put the question on the Nov. 4 ballot by collecting 11,099 more signatures by July 3.

When it last appeared on the ballot in 2002, the measure was defeated, but received more than 45 percent of the vote.

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"Businesses to state: We pay fair share"
By Hillary Chabot, Eagle Boston Bureau
Tuesday, December 18, 2007

BOSTON — As fiscal watchdogs predict a lifeless 2.4 percent revenue growth next fiscal year, a pro-business group has told legislators to look elsewhere for additional cash.

Businesses have seen their state and local taxes hiked 45 percent in the past five years, according to a report released by the Associated Industries of Massachusetts. The report yesterday came before Beacon Hill policymakers vote today on a move to close corporate tax loopholes.

"The report ... should clear up any questions as to whether business is paying its fair share," said Richard Lord, president of AIM.

State officials and fiscal analysts predict a small revenue growth of 2.4 to 4.1 percent in state tax collections next year. The growth will not be enough to close a $1.5 billion budget deficit predicted by Gov. Deval L. Patrick's finance chief, Leslie Kirwan.

The state lottery, which is a main source of funding for cities and towns, also will not be able to meet projections in the current budget and is expected to continue sluggish growth.

"I think fiscal year '09 is going to be much more difficult than '08 in terms of balancing the budget, and the lottery just compounds it," said Michael Widmer, president of the Massachusetts Taxpayers Foundation.

Although Beacon Hill Institute proposed hiking the 23.5-cent-per-gallon gas tax or imposing more fees on highway users, alternatives such as closing tax loopholes for corporations and building casinos are under serious consideration by legislators.

Alan Clayton-Matthews, an economics professor at the University of Massachusetts Boston and a member of the panel of 15 examining the loopholes, supports closing them. The state could rake in $200 million by closing the combined reporting loophole, which would treat a parent corporation and its subsidiaries as a single entity, and the state would tax a portion of the combined national income.

Currently, businesses can open a subsidiary in a low- or no-tax state and transfer their assets there to avoid paying taxes. The combined reporting could bring in $200 million for the state.

Widmer said he is open to closing the loopholes but believes that the businesses cannot take additional taxes. He suggests cutting the tax rate for businesses.

"We're among the most costly states in the nation (to operate). It's a situation where many businesses are not able to compete, and that's costing us jobs," Widmer said.

The panel, made up of legislators and economic analysts, is set to report on whether legislators should close the loopholes today.

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"City would get $2.56M from proposed aid bill"
By Hillary Chabot, Transcript Statehouse Bureau
Thursday, January 3, 2008

BOSTON — Cities and towns would be in line to collect $450 million under a bill filed by House Minority Leader Brad Jones, R-North Reading.

The bill would take $450 million from the state s $2.3 billion rainy day fund and give it to communities to make up for the state lottery aid, which was capped for several years.

"We took money from cities and towns that we didn't need to take, and we should give it back," Jones said.

The bill would bring $454,000 to Great Barrington, $284,000 to Lenox, $4.74 million to Pittsfield, and $2.56 million to North Adams.

Michael Widmer, executive director of Massachusetts taxpayers association, believes an upcoming recession means the state might have to lean heavily on reserves.

"This would require taking money from the rainy day fund, but we're going to need those funds to weather the next recession which could be right around the corner," Widmer said.

Jones sent a letter encouraging local officials to contact House Speaker Salvatore DiMasi about the bill, but few officials have called the office, said DiMasi spokesman David Guarino.

House Ways and Means Chairman Robert DeLeo, D-Winthrop, argued against depleting the state's rainy day account to give one time cash to cities and towns.

"What happens next year? The answer: We either have to take another $450 million from the rainy day fund or hang cities and towns out to dry," DeLeo wrote in a letter sent to newspapers across the state.

DeLeo went on to criticize the minority party for "a political gimmick."

"Don't be fooled. When it comes to the 351 cities and towns across the commonwealth, we need to provide real help, not gimmicks," DeLeo wrote.

Jones attempted to send $450 million back to communities earlier this year as an amendment to a supplemental budget. The amendment was soundly defeated.

Rep. Robert Hargraves, R-Groton, thinks the refund is only fair.

"This isn't rocket science," Hargraves said. "We put towns in unfortunate straights and we didn't have to."

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"Eyeing rainy day fund"
The Berkshire Eagle - Editorial
Friday, January 04, 2008

A proposal to take $450 million from the state's "rainy day" fund to make up for lost lottery revenue is the kind of feel-good proposal that has gotten Massachusetts into economic problems in the past. It does, however, serve the purpose of drawing attention to the unreliability of gambling money as the state considers establishing three casinos.

House Minority Leader Brad Jones Jr. proposes taking the money from the $2.2 billion fund and distributing it to the state's communities to make up for lottery aid capped in 2003-05 to address a budget gap. Lottery revenue has been declining in recent years in spite of the introduction of new games, jeopardizing a revenue source for educational and social programs. House Minority Leader Robert DeLeo, a Winthrop Democrat, makes the obvious point that if the money is used once it will undoubtedly be used again as communities will face the same budget problems a year from now. Early indications are that few community officials have answered Mr. Jones' call to lobby legislators to dip into the rainy day fund, and what Mr. DeLeo describes as a "political gimmick" is unlikely to become law.

The rainy day fund should be used for financial emergencies, such as a major recession. Massachusetts isn't in a recession now, though if the United States slips into one, the Bay State is often the canary in the coal mine. Lost lottery revenue, however, does not constitute an emergency. It is a fact of life legislators and cities and towns must adjust to.

Lottery games prey on low-income residents, and while it isn't known if those buyers are kicking the habit or are now too poor to buy tickets, there is no denying that lottery revenue is declining. This comes as Governor Patrick is beginning a newly aggressive push to introduce three casinos into the state to bring in new revenue. The administration apparently assumes that these casinos will draw revenue equivalent to Connecticut's two giant casinos, but there is a limit somewhere to gambling dollars, and five casinos in the same region may find it. Should neighbors Rhode Island, New York, New Hampshire and Maine succumb to casino mania (only stalwart Vermont is keeping its head so far), the casinos will cannibalize one another, and join the lotteries as a revenue-generating disappointment.

Governor Patrick is thought to be considering the inclusion of the $800 million in licensing fees to be paid by casino developers in his next budget to pressure the Legislature to act on his bill, but such a political stunt may doom his proposal to oblivion. Mr. Patrick should consult his last four predecessors about their fortunes in picking fights with lawmakers.

Should legislators reject casinos, as we believe they should, they are obligated to consider needed alternative revenue sources. There is money to be made by closing corporate tax loopholes and merging the Highway Department with the Turnpike Authority. Beacon Hill's refusal to confront the state police union about its construction job perk is infuriating. Hiring lower-paid flagmen to monitor construction sites would alone account for most or all of the money Mr. Jones wants to remove from the rainy day fund.

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"New mayors, old problems"
By Keith O'Brien, (Boston) Globe Staff, January 3, 2008

Nearly a dozen new mayors and 27 incumbents are being sworn into municipal office this week with all the usual pomp and pageantry: parties and speeches, glad-handing and back-slapping, and, in some communities, inaugural balls.

But for most, the party will be short-lived.

Across the Commonwealth, cities and towns are considering laying off staff, cutting services, and preparing to make cuts to school sports programs as they struggle to close multimillion-dollar budget deficits in the coming fiscal year. Some municipalities are once again considering property tax overrides, even though voters in a majority of towns have rejected tax increases over the last two years.

And it could get worse, officials say, if a state budget deficit projected at more than $1 billion in fiscal 2009 gives communities even fewer dollars to pay for the services that people have come to expect.

"The writing on the wall, to me, is that we shouldn't be looking to the state for any additional aid, so it's a little sobering," said Tom Koch, who will be sworn in as Quincy's mayor next Monday. "It's a challenge to run local government without hitting the citizenry for increases in taxes, and that's always going to be a challenge, whether it's Quincy or Weymouth or Boston or wherever you go."

In Chelmsford, town officials may be forced to send firefighters and police officers packing. In the Lincoln-Sudbury regional school district, officials are threatening cuts in staff and in underclass sports. And in Gloucester, officials are staring at a projected $2.5 million shortfall in a budget of roughly $90 million.

"So what are you going to do?" asked City Council President Bruce Tobey of Gloucester. "You have to cut."

At a time when cash-strapped communities have become the norm, this year's financial outlook appears especially troubled. Since 2002, according to the Massachusetts Municipal Association, local aid from the state's major accounts is down $621 million annually. Attempts by communities to generate more revenue through Proposition 2 1/2 property tax overrides have more often than not failed to gain voter support. In the last two years, 138 communities have asked voters to approve property tax overrides and 71 of those efforts have failed.

These fiscal circumstances have left many communities squeezed, said Geoff Beckwith, executive director of the Municipal Association.

On the one hand, he said, communities have maximized their reliance on property taxes or exhausted voters' tolerance for more property tax overrides. And on the other hand, Beckwith said, the price of so-called fixed costs, such as fuel and road salt, keeps rising.

As a result, cities and towns across the Commonwealth have been forced in the last year to cut staff, trim library hours, and slash services once thought of as essential, such as school buses. Beckwith predicts that even more communities will be forced to make cuts this year, leaving newly inaugurated mayors with a tough job ahead of them.

"There are dozens of people raising their hands and taking the oath of office this week to step into the mayor's office for the first time or return to office," Beckwith said. "The common problem they all share is when they look out the front window of City Hall, they're looking at a pretty bleak fiscal landscape."

In Saugus, town officials had to cut $5 million in services last year to come in under budget. Though Andrew R. Bisignani, the Saugus town manager, said he expects to recover somewhat in fiscal 2009, problems remain.

Already, Bisignani said, the town has spent roughly $100,000 more than it budgeted for snow and ice removal.

"I'm nervous," he said about the year ahead. "There's just so much uncertainty."

In Chelmsford, a projected $3.3 million shortfall in the roughly $100 million budget for fiscal 2009 may force the town to lay off police officers and firefighters.

Town Manager Paul Cohen said that the town does not want to cut staff, but that soaring costs leave officials no choice unless voters approve a property tax increase this year.

"We're very concerned," Cohen said. "We will address the shortfall. But unfortunately, addressing the shortfall will affect education and public safety."

In Gloucester, still more cuts are looming. Mayor Carolyn Kirk, who was sworn in this week, projects a $2.5 million shortfall for the city's upcoming budget, and she announced a hiring freeze in her inaugural address.

"I call it an austerity program," Kirk said. "The hiring freeze is part of that. But, also, I will be reviewing every expenditure over $100."

By saving pennies, Kirk said, she hopes the dollars will follow.

But Kirk and other mayors also say the state needs to do its part. Mayor Joseph Curtatone of Somerville, president of the Massachusetts Mayors' Association, wants the Legislature to approve several pieces of Governor Deval Patrick's Municipal Partnership Act.

That measure, among other things, would eliminate local tax breaks to phone companies and give cities and towns the right to levy meals taxes.

For Somerville, Curtatone said, those changes would generate an additional $1.8 million a year for its approximately $155 million budget.

But just as important as the money, said Mayor Thomas M. Menino of Boston, would be the stability that would come with the revenue. "We're not looking for a windfall," he said. "We just want to be able to determine our own destiny."

The Legislature has not budgeted based on Patrick's proposal. But Lieutenant Governor Timothy P. Murray said the administration plans to continue pushing for the changes this year.

Eliminating tax breaks to the phone companies alone would generate $78 million in revenue for communities, Murray said.

There is at least one other possible source of revenue in fiscal year 2009: money raised by the sale of casino licenses.

"That's on the table," said Murray, who would not say whether the administration would include casino revenue in its upcoming budget. "We haven't made a final decision," he said. "But we aren't ruling it out."

In the meantime, mayors will continue looking for ways to pay the bills. In Braintree, that process begins this morning, said Mayor Joseph Sullivan, who was sworn in last night as the town's first mayor. His first meeting, he said, will be with the town's finance team.

"There's not going to be any time to settle in," Sullivan said. "My agenda's already booked for the next several weeks."

-
Keith O'Brien can be reached at kobrien@globe.com.

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A Boston GLOBE EDITORIAL
"A crisis in cities and towns"
January 11, 2008

AS DISCUSSION topics go, municipal finance doesn't light up the room. But anyone who has called 911, driven on a town road, enrolled a child in school, or paid a property tax bill can't afford to ignore the growing fiscal crisis faced by local communities.

Mayors, selectmen, and other municipal officials speak of little else. Today, they will have the ear of Governor Patrick at the opening of the annual meeting of the Massachusetts Municipal Association. Despite distinctions of degree, nearly every city and town in the Commonwealth is struggling to provide reliable basic services to residents at a time when the costs of government outstrip the ability to raise revenues.

The MMA's weekend workshops will be a respite for some officials who must return home and face decisions about laying off teachers, closing fire stations, reducing library hours or raising fees to play high school sports. Many of these officials have fought losing battles to override Proposition 2 1/2, the state law that limits the amount of revenue a city or town may raise from property taxes. Most can't plan properly from fiscal year to fiscal year when dealing with so many uncertainties, including state lottery receipts, a key source of local aid.

Even when they are running at their leanest, most cities and towns rely too heavily on property taxes to meet rising costs of necessities ranging from road salt to employee healthcare. So Geoffrey Beckwith, director of MMA, is pushing hard for a revenue-sharing plan that would earmark 40 percent of the state's main revenue sources - sales, income, and corporate excise taxes - to cities and towns. This year, such a formula would add roughly $790 million to the state's $6.4 billion distribution of education and municipal aid. But a fixed formula isn't likely to go over well with Beacon Hill leaders who value their own budget flexibility.

If legislators can't guarantee a fixed percentage for local aid, they should at least give cities and towns a fighting chance. For years, the MMA and its members have been seeking state approval to raise their own revenues, through local option taxes on meals and other sensible proposals. But some governor or legislative leader always goes weak in the knees. Last year, Patrick raised hopes with his plan to eliminate property tax loopholes for telephone and telecommunication companies. But he couldn't sell it to the Legislature. A bill did pass allowing local workers to join the efficient group health plan offered to state employees. But it requires union approval. That's an anemic solution. Cities and towns need the same tools the state employs to control healthcare costs without negotiating every co-pay increase at the collective bargaining table.

Beacon Hill needs to listen. This isn't mere sniveling on the part of town criers.

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"Patrick touts municipal relief proposals at gathering of local officials"
January 11, 2008, 11:01 AM
By Matt Viser, (Boston) Globe Staff

He feels their pain. Governor Deval Patrick told city and town officials today that he understands that they're experiencing tight fiscal times. And he offered a solution: his municipal relief legislation.

Speaking at the annual meeting of the Massachusetts Municipal Association, which represents the state's 351 cities and towns, he offered some of his harshest criticism yet of the Legislature as he urged local officials to lobby their state representatives to act on his bill.

"So far not one of the revenue options has been heard for a vote in the Legislature. Not one!" he said, shouting into the microphone. "That is not acceptable. It ought not be acceptable to you, and you have to show up and make that point!"

Patrick's Municipal Partnership Act includes proposals that would allow communities to raise more revenues through, among other things, meals taxes and telecommunications taxes.

Patrick also took a swipe at the administration of former Governor Mitt Romney, who trimmed state aid to cities and towns in order to close a state budget gap.

"Our budget will not be balanced on your backs," he told the crowd gathered at the Hynes Convention Center in Boston. "The strategy of the previous administration of shifting state fiscal hardships to cities and towns is no solution. That time is over, it's over. And it's not coming back."

A report issued yesterday by a state budget watchdog group found that city and town governments, who have slashed programs and services or raised taxes in recent years because of tight finances, are likely to face even greater challenges over the next several years.

"The finances are being relentlessly squeezed year by year," said Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation.

Patrick also defended his proposal to license three resort casinos in Massachusetts, saying it would help revitalize the state economy by supporting a new industry.

He reiterated his arguments that expanded gambling would not change the character of the state; that Massachusetts residents spend $900 million to $1.1 billion at Connecticut casinos; and that "for well over 90 percent it is harmless entertainment."

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"Report: Gloomy local budgets ahead"
By Hillary Chabot, Transcript Statehouse Bureau
Monday, January 21, 2008

BOSTON — There is a fiscal storm brewing, and state officials are hoarding the umbrellas.

A report recently released by Beacon Hill financial watchdog the Massachusetts Taxpayers Foundation details a gloomy budget season ahead for cities and towns in the Bay State and asks state lawmakers to give municipalities more tools to boost their budgets.

"The overall picture is that costs are growing more quickly than revenues, and with limited increases in state aid, cities and towns are being squeezed, Michael J. Widmer, president of the taxpayers foundation, said. "Without a more dependable revenue stream and decisive action to address health care costs, there will be an acceleration of the cuts in programs and services that have already impacted a large number of communities."

Skyrocketing health insurance costs, combined with a growing aversion towards Proposition 2 1/2 overrides, means municipalities are already facing shrinking budgets.

"We've not only had to raise more property taxes, we've also depleted our reserves while the state's have grown by $600 million," said North Adams Mayor John Barrett III.

Many cities and towns, showing slow new growth, have raised their property taxes to the limit without triggering an override.

"The property tax is the worst form of taxation. It's the most regressive, and it's difficult for people to absorb," said Lowell City Manager Bernie Lynch.

And there is little appetite for overrides. A total of 81 overrides were passed in the Bay State in 2004, bringing in $39 million, but only 53 were passed in 2007, allowing cities and towns to pick up $37 million.

"People are fed up with rising property taxes," said Rep. Jamie Eldridge, D-Acton.

The dwindling sales of the state lottery means municipalities are facing an even larger squeeze, Widmer said. While local aid was boosted by 8.1 percent in 2007, lottery sales are slowing. The Legislature appropriated $920 million in lottery funds for municipalities in 2007, but the lottery was only able to give out $802 million.

The larger issue is whether the state is going to try to identify any kind of new revenue source for cities and towns, Widmer said.

"That's the overarching question no one wants to discuss, because they can't provide money to city and towns within current arrangements," he said.

Gov. Deval Patrick said he plans on using casino revenue and closing the corporate tax loopholes in his budget, scheduled to be released on Jan. 23, but Widmer said those aren't enough.

Many municipal leaders point to Patrick's Municipal Partnership Act, which allowed cities and towns to decide whether they want to increase the meals tax or move municipal employees to the Group Insurance Commission. But many of those initiatives, except for the insurance commission, have stalled in the Legislature.

"There have to be those tools put out there in terms of new revenues and in terms of controlling costs," Lynch said. "At the end of day, we need to recognize the realities of reduced services or more taxes."

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"State leaders debate using rainy day fund"
By Matt Murphy, Berkshire Eagle Boston Bureau
Saturday, January 26, 2008

BOSTON — As the state and national economy slides toward recession, Massachusetts political leaders face the difficult decision of deciding if and when to dip into the state's hefty store of reserves.

Gov. Deval L. Patrick this week proposed a $28.2 billion budget that does just that, relying on $369 million from the state's rainy day fund to balance a budget that includes a number of other one-time revenue sources.

This move has prompted criticism from some fiscal conservatives and budget watchers who suggest it might be too early to draw from the well while state revenues continue to grow, albeit at a much slower rate than in years past.

"It's one-time money, a one-time thing when we're projecting state revenues to continue to grow. Obviously, if we hit an economic downturn, if indeed it is raining, then we can talk about the rainy day fund," said Steve Poftak, research director at the Pioneer Institute, a Boston-based think tank.

Since 2004, the state has steadily built up its rainy day fund from $641 million to the third-largest reserve fund of any state in the nation, trailing only California and Alaska with $2.36 billion in the bank.

The budget also includes more than $400 million in revenues from casino-licensing fees and closing business loopholes. Those two initiatives face an uncertain passage by the Legislature.

Patrick's budget proposal calls for modest 3.5 percent increase in spending. Only four-tenths of that spending is on new programs and initiatives. The rest comes from increased health insurance costs, debt obligations, salaries and other fixed expenses, according to the administration.

"If we didn't propose any of those new revenue sources, we would be left with the only option of pulling more from stabilization," said Cyndi Roy, a spokeswoman for Patrick.

The challenge, therefore, falls to the Legislature. Without new casino or corporate tax revenue, House and Senate leaders will likely have to choose between new taxes, deep cuts in spending, or and even bigger draw from the rainy day fund.

"I assume we will have to use more stabilization money than the governor has proposed," conceded state Rep. Daniel E. Bosley, a North Adams Democrat and leading opponent of Patrick's casino gambling plan.

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"Mass. treasurer pushes $600M plan to repair decaying bridges"
By Ken Maguire, Associated Press Writer, January 29, 2008

BOSTON --Lawmakers gave tepid support Tuesday to state Treasurer Tim Cahill's proposal to recycle a financial model used for the Big Dig in the late-1990s to come up with the $600 million needed to repair 10 of the state's most damaged bridges.

Cahill's proposal, announced Tuesday, comes a week after the Patrick administration said it would not include any revenue-generating ideas -- increasing the gas tax, for example -- in its yet-to-be-filed transportation reform legislation.

The treasurer's plan involves immediate borrowing against future federal transportation funding commitments to Massachusetts. He says hundreds of millions of dollars would be saved by locking in today's construction costs.

"What we're trying to do is avoid a future Minnesota incident, where you have a major bridge that goes over a body of water that breaks down, and that causes loss of lives and significant loss of business," Cahill told an audience of business executives Tuesday morning.

Last Aug. 1, the Interstate 35W bridge plummeted 60 feet into the Mississippi River in Minneapolis, killing 13 people and injuring 145.

The 10 bridges were identified as structurally unsound in a recent report by a transportation finance commission, which also said the state faces a $15 billion deficit in transportation infrastructure maintenance over the next 20 years. Without a source of funding, it could take up to 10 years to fix the bridges, Cahill said.

Cahill's plan would need approval from the Legislature and the federal government.

"This is an interesting and unique proposal from the treasurer and one we had already been considering," said David Guarino, spokesman for House Speaker Salvatore DiMasi, pledging it would receive "a full analysis in the House."

A spokesman for Senate President Therese Murray said she hasn't had time to review the proposal. Sen. Steve Baddour, co-chairman of the Transportation Committee, did not return a call.

Gov. Deval Patrick, whom Cahill said wasn't briefed before the announcement in a breach of Statehouse protocol, said he's open to looking at any suggestions, including Cahill's, to help bring in the money needed to repair the state's crumbling transportation infrastructure.

"It's not a new idea and we are certainly interested in working with the treasurer," Patrick said.

Rep. Joseph Wagner, a Chicopee Democrat who is Baddour's co-chair, said there are downsides to Cahill's plan. Because of a 20 percent match of state dollars to federal dollars, there would be less state money available to pay for other projects.

Wagner cautioned that Cahill shouldn't identify specific projects because lawmakers not affected by the plan would have less incentive to support it.

"Generally speaking it is an idea worth exploring," he said. "The details are better left to the Legislature and the executive branch."

Last week, Transportation Secretary Bernard Cohen told the legislative committee that the administration's bill to create a single, massive transportation agency -- dubbed MassTrans -- won't be filed until late February, and that it won't contain revenue-generating proposals.

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said Cahill's plan doesn't address the long-term need for new revenue.

"This wouldn't produce any additional money," said Widmer, who was a member of the transportation commission. "This would put these bridges at the top of the priority list and likely create longer delays for other bridges and highway renovation projects, because there's no new money."

Among the 10 Massachusetts bridges is the Fore River bridge, connecting Weymouth to Quincy. It was torn down 10 years ago and a temporary bridge put in its place. But the temporary bridge is good for only five more years, and the cost of a permanent replacement is $160 million.

"A permanent solution needs to be addressed," Cahill said.

It will cost at least $20 million to repair each bridge, Cahill said. The Interstate 95 bridge over the Merrimack River between Newburyport and Amesbury will cost $132 million to fix.

The other eight bridges, with their estimated repair costs:

-- Chelsea St. bridge, Chelsea, $120 million;

-- Route 113 bridge, Groveland, $75 million;

-- Route 9 bridge, Shrewsbury, $50 million;

-- Turner Falls bridge, Gill, $35 million;

-- Route 12 bridge, Leominster, $25 million;

-- Route 116 bridge, Chicopee, $24 million;

-- Beach Road bridge, Oak Bluffs, $30 million;

-- Interstate 95, Lexington, $21 million.

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"Mass. pension fund fires Goldman Sachs"
By Reuters, February 6, 2008

Goldman Sachs Group Inc. was fired as a stock-picker by the Massachusetts state pension fund yesterday after delivering lackluster returns and reorganizing some of its investment groups.

Trustees for the state's $53.7 billion pension fund voted to pull back the $1.2 billion that Goldman's Asset Management unit had invested in US stocks for the pension fund.

"We had an unimpressive visit with GSAM and recommend that they be terminated," Stan Mavromates, the pension fund's chief investment officer, told trustees at their regularly scheduled meeting, where they later voted.

The Massachusetts fund, which pays benefits to roughly 51,500 retirees and ranks as one of America's best performing public funds, will transfer the money to State Street Corp.'s State Street Global Advisors unit until fund officials select a replacement.

Pension fund staff did not like Goldman's plans to merge the team that specializes in quantitative research for traditional funds with a team that did similar work for hedge funds.

Goldman did not immediately return a call for comment.

At the same time, performance was lackluster, with Goldman returning only 2.86 percent for the pension fund's accounts, while the benchmark Standard & Poor's 500 index (excluding tobacco) gained 5.29 percent last year.

Pension fund staff traveled to New York in early January to meet with fund managers personally, Mavromates said. The meeting with Bob Jones and Mark Carhart, cochief investment officers for equities, did not go well. "We feel very uncomfortable with the changes GSAM is making and we didn't want to wait around for them," Mavromates said.

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"Towns face budget gaps"
By Ryan Hutton, North Adams Transcript
Thursday, February 7, 2008

ADAMS —Town Administrator William Ketcham warned the Selectmen Wednesday night that if Governor Deval Patrick's casino proposal does not pass, the town will be short $328,000 for the 2009 fiscal year.

"Patrick's budget proposal basically flat funded the towns," he told the board. "However, included in the governor's budget was gaming revenue and the legislature hasn't acted upon the casino legislation yet."

Ketcham said that if the town did not receive the $328,000 promised in Patrick's flat budget, at least that much would have to be cut. He said a number of the town's initiatives and improvement projects would have to be cut to make up the difference. However, he said not all was gloomy for the 2009 budget.

"We are in comparatively good shape next to other towns," Ketcham said. "Our tax rate has stayed low at $15.78 (per $1,000 valuation) per household. We are putting $750,000 of free cash into the budget to reduce the tax rate and the long delayed capital maintenance items are in and I'll be requesting appropriations of $98,000 from free cash to handle that."

The big variable in the coming budget season will be the amount of state aid based on the gaming revenues. Ketcham said that if the funding remains level, there will be about $1.6 million in the town's free cash account, $400,000 of which are fiscal 2007 taxes that weren't processed until 2008.

"There is actually more money out there than the books show," Ketcham said. "There are a lot of important projects going on in the town, the community development of Park Street and Summer Street and so on. It's a good time, if the budget stays level, to put some money into making the town better and more attractive to business."

Selectman Edward MacDonald said he was not pleased with the way the governor was handling the budget nor the position it put towns like Adams in.

"I don't understand how you can do a budget and not have money there, like having a phantom budget," he said. "You can't appropriate what you don't have and you can't figure in a gambling bill that doesn't exist. I don't think the bill has even been filed yet and a shortfall this big can give us major problems. You can't overcome revenue gaps like this. Really, we're caught in-between a budget with tighter numbers and one where the numbers don't exist."

Selectmen Chairman Joseph R. Dean Jr. pointed out that the reason Patrick handled the budget the way he did was all about political maneuvering.

"Well, the legislature hasn't passed it yet," he said. "This is going to put pressure on the legislature to pass it or force us to lose the money."

MacDonald pointed out that with the level funding, the town has cut its total budget by 25 percent over the last five years.

"We've cut everything we can from the budget and there's nothing left to cut," he said. "The governor is giving the legislator two choices, approve the legislation or raise taxes to make up for it."

In other business, the Selectmen announced that the state Department of Conservation and recreation will be acquiring 292 acres of land near McGrath Road, just east of East Road, as an expansion of the Savoy National Forest. They also announced that the Zoning Board of Appeals is looking for alternate members and the Board of Health needs nearly 300 volunteers to be part of the town's Medical Reserve Corps. The Corps is a volunteer position that would be called upon in the event of a town-wide emergency or mass inoculations. Selectman Joseph C. Solomon commended the merchants on Summer Street for forming a merchants association to give input on the renovation of Summer Street. The associations first meeting will be on Feb. 27 at 6 p.m. at The Grill on Spring Street.

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"Cahill says redesign would lower school cost: Treasurer, Newton mayor are at odds"
By Ralph Ranalli and Rachana Rathi, (Boston) Globe Staff, February 22, 2008

State Treasurer Timothy P. Cahill warned Mayor David B. Cohen of Newton yesterday that extensive design changes would have to be part of any meaningful plan to save money on the most expensive high school project in Massachusetts history.

The warning came in a bluntly worded letter in which Cahill accepted Cohen's request for help in holding down the soaring cost of building a new Newton North High School.

The project has come under increasing fire since Cohen announced last month that its estimated price tag had risen from $141 million to more than $186 million in six months and that the final cost likely could go even higher.

Last week, the mayor sent Cahill a letter inviting state officials to Newton to give their "suggestions on how we could save money on this important project."

In his response yesterday, Cahill raised questions about the timing of Cohen's request for help from the state School Building Authority, which is committed to paying $46.5 million of the project's cost.

The letter included a long list of documents Cahill is asking the city to provide before scheduling any future meeting.

While saying that he and the authority's executive director, Katherine Craven, would be happy to meet with Newton officials, Cahill pointed out that the agency has already been working for three years "to accommodate Newton's selected design for the high school project."

Over that time, the city has considered but rejected a number of cost-saving measures, including renovating the existing building and opting for a simpler design over the complex, zig-zag-shaped structure envisioned by renowned architect Graham Gund of Cambridge.

More recently, the city declined several other smaller cost-saving design changes, including scaling back the school's multilevel theater into a single-level auditorium and using polished concrete blocks instead of brick for the exterior.

While Cohen said recently that he was willing to revisit some of those smaller decisions, Cahill wrote that the time for minor adjustments to the project had already come and gone.

"Given the timing of your correspondence and the fact that the pouring of the foundation for the newly designed school is imminent," Cahill wrote, "I would caution that the opportunities for significant cost savings may no longer be available unless you and the city agree to make changes to the proposed design of the school, which may be extensive."

That sentiment appears to put the two sides significantly at odds. Cohen has said repeatedly lately that any savings from major design changes would be offset by the cost associated with delays in building the project.

The mayor has also rejected any suggestion that construction of the new school be delayed, even temporarily, and crews began pouring concrete this week.

City spokesman Jeremy Solomon said yesterday afternoon that the city would provide the extensive project documentation requested by the treasurer in his letter, but he called Cahill's suggestion of major design changes "a big question mark."

"I am sure the treasurer knows the ramifications of changing the design at this stage in the process," Solomon said.

Opponents of the current plan said they were encouraged by Cahill's offer to help.

"I only wish his invitation would have been accepted sooner," said Alderman Ken Parker, who has backed scrapping the Gund design and has formed a committee to explore a possible run for the mayor's office.

"But I'm optimistic that we can get this project back on track. We need a high school project we can afford, not one that will force us to lay off police and firefighters."

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"A cautionary school funding tale"
The Berkshire Eagle - Editorial
Monday, February 25, 2008

Pittsfield Mayor James Ruberto has put the possibility of a new high school on the agenda for the current term, and with both schools aging and the city's population having declined from the days when two schools, Pittsfield High and Taconic, were absolute necessities, the discussion is worthwhile. There is certainly much to be said for putting all of the programs and services that the city's high school students require under one roof. Happily, Pittsfield has the community of Newton to serve as an example of how not to approach this issue.

In contrast to Pittsfield, Newton is a wealthy community, but with its $141 million Newton North High School now projected to cost $186 million and likely to go higher, residents are concerned and state Treasurer Tim Cahill, custodian of the state School Building Authority, has weighed in on the need to cut expenses. The Authority, which has spent the past couple of years digging out from under past construction debts, is committed to paying $46 million of the project's cost.

The state's prodding aside, city officials declined to consider making design changes to save money, among them proposals to reduce a multilevel theater to one level and replace aesthetically pleasing brick for the exterior with concrete blocks. With the foundation for the new school to be laid imminently, the city is apparently poised to go ahead with much of the financing for the school uncertain, which should worry taxpayers.

We assume the state will not reward Newton for its extravagance and refusal to compromise by writing it a check for even more money out of the School Building Authority fund. It will become necessary to once again shut down access to the fund if schools are allowed to deplete it through excessively costly projects. Concerned Newton alderman Ken Parker told The Boston Globe Friday that the community needs a new school, but "not one that will force us to lay off police and firefighters." No community in the state should ever get itself into such a bind when building a new school that an extreme remedy along those lines would even be considered.

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A Boston Globe Editorial: Short Fuse, February 25, 2008

"Newton North: Redesign is a dead end"

The City of Newton should offer a polite "no thanks" to state Treasurer Timothy Cahill's offer to help reduce costs on the Newton North High School project. At more than $180 million, the new building will be unnervingly expensive. But as Cahill pointed out in a letter, cost savings can probably be achieved only by significant changes in the design. These will reduce educational and extracurricular programs offered at the school. And a redesign would delay construction for years and produce additional costs. If the city wants to go this route, it can make the cuts itself. If it wants a high school with the same range of activities as the existing Newton North, it should be prepared, with limited state aid, to foot the bill.

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"House, Senate leaders agreed to 4.4 percent local aid hike"
The Boston Globe Online, March 10, 2008

BOSTON—Legislative leaders have agreed to a 4.4 percent increase in aid to cities and towns.

more stories like thisSenate President Therese Murray and House Speaker Salvatore DiMasi say the $223 million increase will bring the total amount of state aid to local communities to $5.26 billion for the fiscal year starting July 1.

The agreement comes nearly four months before the start of the new fiscal year.

It's intended to help cities and towns craft their own budget.

The increase also comes despite lagging lottery revenues.

Cities and towns had been promised $935 million in lottery aid, but the lottery is projecting only $811 million in revenues. The state will make up the difference under the plan.

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"State's fiscal picture dims: Cuts, tax hikes may be on table"
By Matt Viser, (Boston) Globe Staff, March 26, 2008

As the sputtering economy sends shocks from Wall Street to Main Street, the reverberations are being felt on Beacon Hill, where key officials acknowledged yesterday that the signs are bad and the future may be even worse.

Income tax revenues are expected to shrink as the recession takes hold, worsening an anticipated $1.3 billion budget deficit. Municipal officials, heavily dependent on state aid, say their budget problems have already risen to crisis proportions.

State health program faces crucial fiscal choices. A12.

State Treasurer Timothy P. Cahill said yesterday that, yet again, he must borrow hundreds of millions in short-term notes to pay the state's bills - like a consumer using a credit card to make a mortgage payment.

All of this is set against the fact that the state already has the high est per capita government debt in the country - and now will be forced to borrow even more to keep a deteriorating transit system and its aging college campuses from completely crumbling.

"Every taxpayer and tollpayer in Massachusetts is overburdened at the same time as our infrastructure is about to implode," said Senator Mark C. Montigny, Senate chairman of the Joint Committee on Bonding, Capital Expenditures and State Assets and a New Bedford Democrat. "We are headed for a much more dangerous time than people realize. We've got all these nasty variables converging at the same time."

Governor Deval Patrick is readying a major economic speech in which he will discuss the effect on the budget, although it has not yet been scheduled, his aides said. House budget writers are beginning to craft a detailed budget for fiscal year 2009, and they will have to choose between raising taxes and fees and cutting programs.

"This has been the most difficult budget I've had to deal with," said Representative Robert A. DeLeo, a Winthrop Democrat who is in his fourth year as chairman of the House Committee on Ways and Means. "It's been further exacerbated by looking into the future."

Patrick submitted a $28.2 billion budget proposal in January that avoided large-scale cuts and included several spending initiatives and money-generating proposals - including $124 million from his ill-fated proposal to license three casinos, a plan that the House killed last week.

Moving forward, while few are talking about serious program cuts, a big increase in the cigarette tax, tightening corporate tax loopholes, and digging into the state's rainy day fund are apparently the most viable means of balancing the next budget.

Officials also are looking at gas tax increases, higher and more widespread highway tolls, and the less tangible possibility that an array of economic stimulus plans, including the promise of a $1 billion shot in the arm for the state's biotech industry, will pay off with new jobs and investment.

As House and Senate leaders start focusing on the details, they are working under an even bleaker scenario than when Patrick drew up his plan. Following a stream of negative news caused by the nation's crisis in debt markets, a report last week released by MassINC said the state is at a financial "point of reckoning."

"We're just teetering on the precipice," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a nonprofit budget study group that is funded by businesses. "I haven't heard any real ideas."

Cahill said he will be forced to borrow $400 million by Monday to fulfill the state's obligations, including local aid and pension payments. The state has occasionally had to borrow before to meet short-term cash shortages - including $600 million in 2006 and $1 billion in 2007 - but never this late in a fiscal year.

"This to me is a wake-up call," Cahill said. "I'm hopeful that it's going to be a message to everyone in the [State House] that we've got to get spending under control. It's not just enough to look for new revenue sources."

The state will be able to repay the loan by the end of April - once income tax receipts start to come in - but the shortfall will cost about $3 million in interest payments, Cahill said. That is the equivalent to the full annual tax bill of about 2,200 taxpayers.

Leslie Kirwan, secretary of administration and finance, did not offer a complete explanation of why the state is coming up short of cash. "I would be very cautious about saying it's a spending problem. We do not believe there is a significant issue on overspending," she said.

Budget cuts are definitely on the table in the Senate and the House.

"It's more than tight," said Senator Steven C. Panagiotakos, chairman of the Ways and Means Committee. "The bottom line is spending is going far ahead of revenue growth. Every area is an area to cut."

House Speaker Salvatore F. DiMasi six weeks ago sketched out a set of budget priorities, ignoring the governor's use of projected casino revenues. Instead, he is proposing raising $152 million by increasing the state's cigarette tax by $1 a pack, which would give Massachusetts the second highest cigarette tax in the country, behind New Jersey. DiMasi also plans to use $427 million from the rainy day fund and, without indicating which areas he would target, wants to cut state spending by $100 million.

Massachusetts carries the highest per capita public debt burden in the country, which places limitations on its ability to borrow more money. To free up more borrowing power, the state has started using longer-term bonds, which allows more money to be borrowed at one time. The Patrick administration also is borrowing more per year for capital expenditures - increasing a self-imposed limit from $1.25 billion last year to $2 billion annually by 2012.

Fiscal watchdogs say those policies will work only if the state economy grows.

Patrick and DiMasi have both backed a plan to tighten the corporate tax codes, but they have significant differences over how deep corresponding reductions in corporate tax rates should be, so the savings remain in doubt.

At the local level, 50 communities so far are considering property tax or debt exclusion overrides - in addition to 109 communities that sought them last year. Communities have also increasingly relied on raising fees and fines to fill their coffers.

"It's a tough year," said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association. "There aren't a lot of revenues. The overall economic downturn certainly could not come at a worse time."
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Matt Viser can be reached at maviser@globe.com.
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"Patrick's promises at risk in budget: State is facing $72m shortfall; Tax revenues are expected to shrink"
By Matt Viser, (Boston) Globe Staff, April 3, 2008

A list of programs at the core of Governor Deval Patrick's agenda, including campaign promises to boost spending on early education and increase local police funding, are in jeopardy under a budget proposal currently being drafted by House lawmakers.

House budget writers said yesterday that they are facing an additional $72.6 million shortfall in next year's budget, the result of new calculations on debt payments and labor contract agreements. That means that paying for everything on Patrick's list of new social and educational spending could be at risk.

"When you have a budget with the deficit we are talking about, any discussions relative to expansions are limited," said Representative Robert DeLeo, a Winthrop Democrat who chairs the House Ways and Means Committee. "Just trying to level-fund programs is a difficult enough task, without talking about expansions."

Lawmakers are focusing on the budget as the economy sputters and income tax revenue is projected to shrink as the recession takes hold. Patrick is expected to deliver a major address on the economy next week, and the House will unveil its budget by mid-April.

Losing some of his pet projects to House budget cuts would be a political blow to Patrick, who has made a major effort to increase funding in several areas, particularly education.

"These investments are vital to creating long-term economic growth and activity," said Kyle Sullivan, the governor's press secretary. He said the administration would work with the House and Senate to try to preserve those initiatives.

A point of negotiation is expected to be corporate taxes. Patrick's proposal to change the corporate tax codes by closing off what he calls loopholes would produce $297 million in new revenue next year from businesses. House Speaker Salvatore F. DiMasi has embraced the same changes, but wants a deeper reduction in corporate tax rates than Patrick has proposed. His proposal would bring in an additional $204 million next year.

DeLeo declined to say which of the governor's programs would be targeted, but he said all 96 programs costing an additional $213 million that have been proposed by the governor are on the table. Those programs include $45.8 million for community first initiatives, which fund programs for the elderly and disabled; $15 million to fund an additional 892 prekindergarten classrooms; and $4 million for local policing.

"Quite frankly, I'm just trying to keep the programs we have now," DeLeo said. "It's difficult to talk about building upon those. We're just trying to keep our head above water."

Patrick, DiMasi, and Senate President Therese Murray have been assuming that state revenues will grow 3.8 percent next year, and they have not adjusted that estimate even with a gloomy economic forecast.

But many believe that estimate will not hold up in a weakening economy.

"It would be wise for the three leaders to take a new look at the revenues . . . given that we're now apparently in a recession," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, which is studying whether that forecast is still accurate.

Even if the state economy stays at current levels next year, budget writers would have to come up with $750 million, Widmer said.

"Can things become worse?" DeLeo said. "My feeling is yes. And I think it will get worse before it gets better."

The state is still on a sound footing for the remainder of this fiscal year, which ends June 30, state officials said. State tax collections are up $372 million over projections so far in the current fiscal year, according to figures released yesterday by the Department of Revenue.

Patrick submitted a $28.2 billion budget proposal in January that avoided large-scale cuts and included several spending initiatives and money-generating proposals, including $124 million from his ill-fated proposal to license three casinos, a plan that the House killed two weeks ago.

Two months ago DiMasi sketched out a set of budget priorities, ignoring the governor's use of projected casino revenues.

Instead, he is proposing raising $152 million by increasing the state's cigarette tax by $1 a pack, which would give Massachusetts the second highest cigarette tax in the country, behind New Jersey.

DiMasi also plans to use $427 million from the rainy day fund and, without indicating which areas he would target, wants to cut state spending by $100 million.
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Matt Viser can be reached at maviser@globe.com.
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"Patrick announces midyear budget cuts: Officials aim to trim $350m in spending"
By Matt Viser and Frank Phillips, (Boston) Globe Staff, April 5, 2008

With concern growing about the state's financial outlook, Governor Deval Patrick announced midyear budget cuts yesterday and asked department heads to brainstorm other ways to trim their spending.

"We really are unsure what will happen to revenues for the remainder of the fiscal year," said Leslie Kirwan, secretary of administration and finance. "Doing this is a reflection of caution, as much as the uncertainty we are facing with storm clouds on the horizon."

Administration officials believe they can save $200 million by using various tactics, including tightening controls on spending and not filling job vacancies.

Another $150 million in reductions could come through so-called 9C cuts, which allow the governor to eliminate programs. Kirwan said there are no plans to make the 9C cuts, but department heads are being asked to prepare for them in case budget conditions worsen.

Revenue projections have been coming in higher than expected, despite widespread worry about the faltering national economy.

But state budget watchers warn that the picture won't be clear until the end of April, when the bulk of residents' state income tax returns are filed.

In the meantime, several higher-than-expected costs are straining the state budget.

Enrollments in the state-subsidized healthcare program, for example, continue to far outpace projections. The state expected to sign up 136,000 residents for Commonwealth Care, which would have cost $472 million, Kirwan said.

Instead, nearly 180,000 residents are expected to join the program this year, with costs rising as high as $650 million.

Snow- and iceremoval costs also hit a record high this year, $105 million, three times the cost last year.

The budget cuts announced by the administration yesterday would apply to the current fiscal year, which ends June 30, but debate will soon turn to next year's budget, which begins July 1.

Patrick submitted a $28.2 billion budget proposal in January that avoided large-scale cuts and included several spending initiatives and money-generating proposals, including $124 million from his ill-fated plan to license three casinos, a proposal that the House killed two weeks ago.

Two months ago, House Speaker Salvatore F. DiMasi sketched out a set of budget priorities, ignoring the governor's use of projected casino revenues.

The Senate has not yet filed its budget proposal.

Senator Richard R. Tisei, the minority leader, called yesterday for Patrick to resubmit his budget, because it is unbalanced without the casino revenue. He cited state law that requires the governor to make amendments if funding projections change.

"I . . . am deeply troubled by your insistence to rely on speculative revenues in your budget recommendations," Tisei wrote in a letter sent to the governor yesterday.

Patrick aides said the governor had no intention of revising his budget.

"We are not planning to file an amended budget," spokeswoman Cyndi Roy said.

"We don't believe we are required to," she said. "We put forward our proposal, and we look forward to working with the Legislature on theirs."
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Matt Viser can be reached at maviser@globe.com.
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"Deep cuts loom across state: Expenses outpacing revenue and state aid Fewer cities, towns seeking override votes"
By Eric Moskowitz, (Boston) Globe Staff, April 6, 2008

In Canton, middle school students idle in vast study halls because electives have been pared and teachers have been laid off. In Shirley, selectmen recently removed 103 light bulbs from Town Hall and may switch off some streetlights to reduce electric bills. And in Brookline, where single-family homes regularly fetch $1 million, officials are seeking the first override in 14 years to avoid layoffs and the mothballing of a fire engine.

Across Massachusetts, cities and towns face the prospect of deep cuts in what appears to be the grimmest fiscal year since 2003. Local revenue and state aid can't keep up with such rapidly rising expenses as employee health insurance, heating oil, and even street paving. School costs, like special education requirements, are sapping local budgets. And now beleaguered residents are seeing home values dip even as taxes continue to rise.

Town and city officials face a difficult choice: cut staff and programs, or ask voters to override Proposition 2 1/2 and approve still higher property tax bills. In Beverly, for example, officials tried to avoid a tax hike by drafting a budget that would cut 61 full-time positions and close two elementary schools.

"It's very difficult medicine, and something we'd all rather avoid, but we're on our own," said the city's mayor, William F. Scanlon Jr., an ex officio member of the school board. "The state can't help us, and we have to find a way to live within our means."

In Canton, meanwhile, officials who saw a $3.95 million override fail narrowly last year are trying again this year, asking voters to approve a larger tax increase, about $4.5 million, even as the economy has worsened. The alternative, they worry, could cause services to erode and do long-term harm to the community.

"Things fall apart a lot faster than they're built up," said John Bonnanzio, outgoing chairman of the School Committee. The schools would receive about $3.5 million from the override, which would be spread over three years, to restore some of the past cuts and forestall new ones.

About half of the school districts in Massachusetts are planning some reductions next year, and one in four expect the most visible cuts, like teacher layoffs, program reductions, or steep fee increases, said Glenn Koocher, executive director of the Massachusetts Association of School Committees.

The last statewide budget crisis occurred five years ago, when Mitt Romney slashed local aid to address a deficit in one of his first official acts as governor. At that point, communities had had a decade to recover from the previous recession and reap the benefits of a booming late-1990s economy. But now the communities' budgets haven't caught up to where they were before the last crisis. State aid had increased somewhat in the last few years, but the 351 cities and towns combined this year still receive $566 million less from the state than they did in fiscal 2002, adjusting for inflation, said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association.

The state budget for next year is unlikely to provide enough aid to towns and cities to avoid widespread local cuts, Beckwith said. Governor Deval Patrick's casino proposal failed, knocking out a potential revenue source. However, his proposed budget includes a local aid boost for schools in the coming year.

Other longer term measures to help cities and towns financially may not be in place to help for the new budget year, which starts July 1. House Speaker Salvatore F. DiMasi, for instance, wants to help communities restrain insurance costs by buying into the plan for state employees without needing local union approval.

Proposition 2 1/2, passed by voters in 1980, puts officials in a bind by capping the increase in a community's annual tax levy at 2.5 percent, not counting taxes on construction and other new growth, though voters can override the limit. But with a looming recession, the same residents who are eschewing home repairs and car purchases may be reluctant to approve overrides.

Last year, 76 towns sought overrides to balance operating budgets, less than half of which passed. About 50 are expected this season, a sign not that fewer face budget problems but that many officials are now resigned to cut without trying overrides, to avoid the divisiveness they often cause. This year, eight communities have sought operating overrides; five have failed.

"More and more communities are going to hit the wall," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation. "It's not a pretty picture, and it's going to get worse before it gets better."

Brookline was able to avoid both cuts and overrides for years in part because of new taxes generated from home and condo renovations. The town also increased parking fees and fines, and saved money by making municipal buildings more energy-efficient. This year, though, the town needs a $2.1 million override to balance the budget and prevent cuts, said Betsy DeWitt , a Brookline selectwoman and cochairwoman of the Yes for Brookline override coalition. Add in overdue road and sidewalk maintenance - a backlog that developed during a five-year stretch in which paving costs roughly doubled, she said - and the figure becomes $3.6 million, she said.

Without the money, officials project, the town would have to shed three teachers, four police officers, all school library assistants, the equivalent of 2.8 school social workers, the fourth-grade instrumental-music program, and the use of one of the town's seven fire engines from May through August, among other cuts.

Brookline officials have used the override proposal to add new spending as well as to prevent cuts of current programs. They have presented voters with three choices: no override, a $5.4 million override or a $6.2 million override.

The $5.4 million would avoid cuts and add 20 minutes to the school day, and the more expensive option would do that while also extending foreign-language instruction, currently available at one elementary school, to all elementary schools.

"We in Brookline have people willing to come here and live with one less bedroom so their kids can go to Brookline schools," DeWitt said. "We owe it to those people to keep the standards up."

Roger Blood, cochairman of the Brookline Coalition Against Unfair Taxation, said supporters have unfairly bundled new spending with the package. "They invoked the old override campaign playbook of 'You get an override passed by scaring the dickens out of voters about what will get cut and who will get pink slips,' " he said.

In nearby Newton, the failure of a $12 million override on May 20 could mean the loss of 83 school employees plus cuts to the police, fire, and public works departments, said Jeremy Solomon, a spokesman for Mayor David B. Cohen. The taxes on the median home (valued at $690,800), currently about $6,701, would rise an estimated $165 without the override and $538 with it, said Elizabeth Dromey, the city assessor.

Layoffs would cause some elementary schools to squeeze 28 students in a class, compared with an average of 20 1/2 now, Jeffrey Young, superintendent of the Newton school system, told officials at a presentation in February. It would also mean education cuts at the same time Newton is in the final stages of approving a new high school, the cost of which has ballooned to $197.5 million.

Swampscott, which has about one-sixth the population of Newton, opened a new high school last year at the same time it was closing an elementary school and imposing more than 30 layoffs. More layoffs are needed this year, in part because utility costs for the new high school are $1 million more than the old one, said David P. Whelan Jr., chairman of the School Committee. Swampscott has no appetite for an override, he said, so the school board is cutting instead, with technical education at the high school and band at the elementary school slated to go.

The district still provides a strong education in core college-prep classes at the high school, Whelan said, but cuts and expanded class sizes are eroding the overall school experience.

"We're unable to provide a well-rounded education for kids at this point, and we're not going to be able to do it anytime soon without additional funding," he said.

In Canton, Galvin Middle School principal Thomas LaLiberte said, students who could take art or music every other day a few years ago now have specialty subjects once every six days. Most of the 714 students in the school have at least one unstructured study hall a day, with up to 90 students gathering in the cafeteria at once, he said.

In neighboring Randolph, voters rejected four overrides in recent years, forcing the elimination of dozens of teachers, about half the high school's academic offerings, and most freshman and junior varsity sports.

"With all due respect to our next-door neighbors in Randolph, they're a prime example of what happens when benign neglect sets in," said Bonnanzio, the Canton school official.

But that changed last week, when Randolph voters approved a nearly $5.5 million school question, making the town one of three - along with Dartmouth and Natick - to override Proposition 2 1/2 this year.

Although the money at best will restore staff and program offerings to about three-fourths of what they were five years ago, it's a good start, said Larry Azer, chairman of the School Committee.

"This is the first time I've been on the School Committee and not had to make cuts," said Azer, now beginning his sixth year. "It's kind of a new feeling for me. I like it, though."
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Globe correspondent Connie Paige contributed to this report. Eric Moskowitz can be reached at emoskowitz@globe.com.
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"Cahill: Bridge plan too costly: But Patrick's $3.8b proposal gains key backing"
By Matt Viser, (Boston) Globe Staff, April 10, 2008

CAMBRIDGE - State Treasurer Timothy P. Cahill yesterday disagreed with the governor's $3.8 billion plan to repair 411 bridges across the state, saying the proposal would excessively mortgage the state's financial future, and suggested the bond amount be cut by half.

"We're not going to break the bank to do it," Cahill, who is in charge of managing state debt, said in an interview. "This is big and it's big on top of a lot of other big proposals. It may not be the time to take on something this large."

Despite Cahill's reservations, the proposal picked up key backers immediately, including House Speaker Salvatore F. DiMasi, Senate President Therese Murray, and organized labor. Legislative support is crucial because it will require passage of a special bond bill.

Governor Deval L. Patrick officially unveiled yesterday the proposal to accelerate bridge repairs across the state, which administration officials believe would spur the economy and allow the state to fix its infrastructure at a lower cost than if it waited.

"By acting now, we can cut that deficient bridges backlog in half in eight years, avoid construction inflation, and create thousands of jobs," Patrick told academics, students, and business and political leaders yesterday during an economic address at MIT's Sloan School of Management. "Our plan to address deficient bridges will have shovels in the ground and people at work in 90 days."

A Globe story published yesterday, citing preliminary draft documents distributed by the administration this week in advance of the speech, said the governor expected the initiative to create 23,000 construction jobs. The administration yesterday avoided using that figure publicly, with one aide suggesting the estimate was "10,000 to 15,000 jobs" and others saying they preferred to use "thousands."

Overly optimistic job-creation estimates bedeviled Patrick's ill-fated proposal to license three casinos around the state.

In his speech yesterday, Patrick outlined the general sketches of his plan but avoided specifics, an indication that the final price tag - and how that would affect the job estimates - is under negotiation. Administration sources said the governor is willing to accept a lower number than $3.8 billion in borrowing.

To pay for the bridgework, Patrick would increase the state's bonding capacity. The state currently has a self-imposed limit for newly issued bonds of $1.5 billion a year, which is scheduled to increase to $2 billion a year in 2012. In order to pay for the projects sooner, the Patrick administration would frontload $2.8 billion that the state would otherwise spend from 2014 to 2028, and spend the money over the next eight years instead.

The state would also refinance $366 million in outstanding debt from 20 years to 30 years, freeing up another $1 billion now but costing more over the long run because the state would be paying interest for 10 additional years.

The strategy makes sense, administration officials said, because the state will save money by putting construction out to bid sooner, before inflation drives the prices up. Administration officials suggest that the state would save $1.8 billion over 20 years, based on a 7 percent inflation rate.

But Cahill and other fiscal watchdogs argue that Patrick's plan would add to a state debt burden that is already the highest per capita in the country.

There are several other major bond projects before the Legislature, including $2 billion targeted for higher education and $1.4 billion for environmental projects. In addition, a $3.5 billion transportation bond bill that the House passed Tuesday would help fund 397 additional bridges.

Cahill estimates that the $3.8 billion bond would require $3.2 billion in interest payments, putting the overall cost for the governor's bridge proposal at $7 billion, a figure the Patrick administration did not dispute.

Cahill unveiled in January his own plan to fix 10 bridges that are most in need of repair, which he said would cost $700 million, and he added yesterday that he supports the goal of the governor's plan. But the treasurer, after a briefing from administration officials, said he advised Patrick late Tuesday afternoon against the $3.8 billion plan.

"We have been tempted too often to figure out how to get dollars now that have repercussions for the future. We're borrowing against the future," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "That's a significant downside to the proposal."

DiMasi applauded the plan yesterday, and when asked whether the state could afford the bonding, said, "Yes, I think we can."

The speaker, who often tweaks the governor even when he is complimenting him, also said the borrowing plan should have been put forward earlier - instead of Patrick's failed casino gambling plan.

"This is the kind of focus that I thought we should [have been] taking in the last three or four months instead of other issues that were dominating the landscape at the time," DiMasi said.

Murray left the speech without addressing reporters, but later put out a statement saying "by taking action now, we can start to make up for decades of neglect." Her spokesman said she supports the governor's proposed price tag of $3.8 billion.

The debate over fixing bridges is occurring at a time when the state has been struggling to find enough sources of new revenue to keep existing services and fund several ambitious spending programs.

In his 25-minute speech yesterday, Patrick used optimistic rhetoric to calm fears of a looming recession and outline several initiatives that could help the state prepare for rocky economic times, including the creation of 16 regional districts throughout the state where his administration will help streamline permitting for new developments.

The state's Department of Housing and Community Development would create a $20 million fund to purchase, redevelop, and sell foreclosed and vacant properties.

"We must continue to take actions that will keep the Commonwealth's economy moving forward," Patrick said. "Government alone cannot create new jobs, but we create conditions that foster a culture of opportunity."
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Matt Viser can be reached at maviser@globe.com.
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JOAN VENNOCHI
"Treasurer has eyes for a move up"
By Joan Vennochi, (Boston) Globe Columnist, April 13, 2008

STATE TREASURER Timothy P. Cahill is honest about his ambition and always has been.

During an interview in 2005, I asked whether he planned to run for governor. "Someday," he answered. "Someday" sounds like it's getting closer. Asked the same question in 2008, he said. "If there's an open seat, I would consider it . . . I think I can do the job."

Just over 15 months into his first term, Governor Deval Patrick is putting out word there will be no open seat. "There's no question that the governor is going to finish out his term and that he is running for reelection," said Doug Rubin, the governor's chief of staff.

But that's not the final word in Massachusetts, given the governor's recently announced $1.35 million book deal and close ties to presidential candidate Barack Obama. Patrick said he wouldn't take a Cabinet position if Obama wins the White House, but that doesn't stop those eager to ascend from considering the possibility of a change of heart.

There's already speculation that whether or not Patrick seeks reelection, Republican Charles Baker, the chief executive of Harvard Pilgrim Health Care, will do what everyone knows he wants to do - run for the Bay State's top office. Noting that it takes two years to prepare for such a run, Cahill said that uncertainty on the Democratic side about Patrick's ultimate decision "may give an advantage to a Republican."

However, Cahill said he would not challenge Patrick in a primary. "For a Democrat to run against an incumbent Democrat, there's no upside for me," he said. ". . . I would hope I wouldn't do it, no matter what condition or shape he [Patrick] is in. Even if you're successful, you split the party and it comes back to kill you."

Patrick is coming off a week of political victories, including approval from the House of Representatives for $392 million in tax increases for smokers and the state's biggest corporations. At the same time, a new poll conducted by Survey USA for WBZ-TV shows weakening in Patrick's approval rating. Of 551 registered voters who were surveyed, 49 percent said they disapproved of the job Patrick is doing as governor; 41 percent said they approved.

Cahill, 49, of Quincy, was elected state treasurer in 2002, after serving as Norfolk County treasurer. His predecessor, Shannon O'Brien, ran unsuccessfully for governor in 2002, and Cahill said he understands that a bid for the corner office is "a huge step up."

But signs of a politician laying the foundation for a bid for higher office are plentiful. They include ubiquitous television appearances and public critiques of the current governor.

After Patrick failed to win legislative support for a plan to bring casinos to Massachusetts, Cahill criticized Patrick the next night on New England Cable News for failing to reach out to supporters such as himself.

As Patrick celebrates the second anniversary of a law expanding healthcare coverage, Cahill is challenging the state's ability to pay it. "We may not be able to cover everyone," he recently warned.

This past week, after Patrick proposed a $3.8 billion plan to repair 411 bridges across the state, Cahill said the plan would excessively mortgage the state's financial future. "The governor's plan depends on revenues growing. . . . It's more likely revenues will go down," he said.

As far as Patrick's overall approach to the state budget, Cahill said he is "somewhat frustrated" by what he called "a massive plan to spend more money, to borrow more money." He also said "this isn't the right time" to raise revenues by increasing taxes on business.

Rubin, who previously served as Cahill's chief of staff and campaign adviser, said the treasurer's comments do not trouble him. Specifically addressing Cahill's warnings about the bridge repair plan, Rubin said, "He approves of the concept, he just has some concerns about the size of it. That's not overly critical. It shows a willingness to work with us and we are willing to work with him on those details."

Memo to Rubin: Cahill, who first ran on the slogan "Tim for Treasurer" is working on his next campaign. It's "Tim for Governor."
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Joan Vennochi's e-mail address is vennochi@globe.com.
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"House leaders unveil $27.9 billion budget"
Thursday, April 17, 2008, By DAN RING, dring@repub.com
The Springfield Republican Newspaper Online

BOSTON - House leaders yesterday unveiled a $27.9 billion state budget that nearly doubles spending for a subsidized health care program, seeks to raise taxes to help eliminate a projected shortfall and cuts the governor's proposed expansions in certain programs.

The House Ways and Means Committee approved the spending plan for the fiscal year that starts July 1. Spending would be up about 4.4 percent from this year.

The budget helps close an estimated $1.3 billion spending gap by using $427 million from reserves, cutting $109 million from this year's budget and incorporating $550 million in new taxes including $396 million approved last week by the House.

It counts on $166 million in proposed tax increases including restoring the 5 percent sales tax on the purchase of aircraft and aircraft parts and stepped up enforcement to reel in more tax revenues.

Rep. Robert A. DeLeo, D-Winthrop, said the $109 million in cuts are spread through 86 line items.

"The biggest thing this budget does is constrain spending," said DeLeo, chairman of the House Ways and Means Committee.

The House also slashed $180 million from the budget filed in January by Gov. Deval L. Patrick. The cuts were from programs for allowing senior citizens to choose home care over nursing homes, hiring municipal police, extending the length of the school day and programs to combat street gangs.

The House hiked the University of Massachusetts budget to $493.2 million, up 5 percent from $469 million this year. The Amherst campus usually receives half that amount.

Because of unexpected, skyrocketing enrollment, Commonwealth Care, which provides subsidized health care for low- and moderate-income people, is scheduled to receive $869 million, up 84 percent from $472 million this year.

Also yesterday, Patrick filed a supplemental budget for the current fiscal year that includes an additional $153 million for the $472 million budgeted this year for Commonwealth Care, part of the state's near-universal health care law.

The House Ways and Means Committee released the fiscal year 2009 budget yesterday. The full House will begin debating possible changes to the bill on April 28.

The House will send its budget to the Senate, which will approve its own version. In June, a House-Senate compromise will be sent to the governor, who can veto line items.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation in Boston, questioned if the state can afford the spending proposed by House leaders given that the state could be headed into a recession.

"It is a level of spending that is not sustainable and may put us in a worse predicament down the road," Widmer said.

The House budget seeks to save $51 million by requiring most state employees to pay a 20 percent share of health care premiums. Most employees currently pay 15 percent and the state pays 85 percent.

Albert H. Norman, executive director of Massachusetts Home Care in Greenfield, criticized the House for cutting the governor's proposed $46 million initiative for home care to $15 million at the most.

The governor's proposal would have offered home care to about 15,600 elders and disabled people, complying with a 2006 law that gave people an "equal choice" between home care and a nursing home.

The House is proposing $1.17 billion spending increase over this year, but much of that money is eaten up by increases in Medicaid, Commonwealth Care and general education aid for cities and towns.

While the two other major state aid accounts received level financing, state aid for education, called Chapter 70, rose by $223 million, or 6 percent, to $3.9 billion.

Medicaid, a program that helps pay for health care for the poor, elderly and disabled, is proposed to increase to $8.5 billion, up $300 million.

The governor asked for $15 million in anti-gang grants that benefit many communities including Chicopee, Holyoke and Springfield. The House proposed $11 million, or no increase.

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"State treasurer calls Mass. casinos ‘inevitable’"
By Christine McConville, Thursday, May 22, 2008, www.bostonherald.com, Business & Markets

Massachusetts State Treasurer Tim Cahill said earlier today that someday, somehow, casinos will open for business in the Bay State.

“It just seems inevitable,” he told a group of Boston-area business leaders at a Greater Boston Chamber of Commerce breakfast meeting.

“It’s an issue that is not going to go away, because they are part of so many states around the country,” he said.

But, he added, “It is important to do them right, because if we do it wrong, the state has a legacy of gambling.”

To that end, he’s been keeping a close eye on Singapore, where two massive casino projects are under way.

A few years ago, leaders in that very traditional Southeast Asian country agreed to build the casinos after realizing they were losing valuable tourism dollars to nearby countries that allowed gambling.

“The Singapore government understood that it was missing an opportunity,” Cahill said.

Singapore’s billion-dollar casinos are all-inclusive resorts. One targets business travelers, and the other, vacationing families.

And, Cahill noted, the casinos’ revenues will get funnelled into the government.

“I think they’ve been done right,” he said.

Cahill said he also likes components of Connecticut’s two all-inclusive casinos, which provide visitors with an array of services in off-the-beaten-path locations.

“They have limited exposure,” he said.

But he also said that because Native American Tribes control the casino revenues, Connecticut doesn’t reap the economic benefits that other states do.

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"Bigger pensions drawing protests: Lawmakers' initiative could cost $6b or more; Critics say state, towns can't afford increase"
By Matt Viser, (Boston) Globe Staff, May 28, 2008

Massachusetts lawmakers are proposing bigger pensions for state and municipal employees that could cost $6 billion or more, according to some estimates, triggering a chorus of complaints from fiscal watchdogs and local leaders who say the money is not there to pay for it.

The union-friendly, election-year maneuvers by the House and Senate would increase the annual cost-of-living adjustments that retirees receive as part of their pensions.

The individual numbers are seemingly small, a boost of about $120 a year more for every retiree, which advocates say is well-deserved. But multiplied by over 100,000 former teachers and state workers in the state's pension system as proposed by the House and by 86,000 municipal retirees as envisioned in a Senate amendment, it would add up fast, say critics.

"It's a tremendous gesture, but the money doesn't exist," said Mayor Scott W. Lang of New Bedford, who says he would have to lay off six current employees to make it work for the city's 1,721 retirees. "I have absolutely no qualms whatsoever of bumping that to meet the inflationary needs, but there's no funding. Without the funding it's illusory."

Over the next several weeks, the provisions will be the subject of negotiations in House-Senate budget conference committee meetings, which largely takes place behind closed doors.

The state is considering the new spending as it is already raiding its rainy-day fund, raising some taxes, and looking for cuts to balance the budget while repairing crumbling roads and bridges. It also comes as pension payments are being pared back by corporations across the nation.

But advocates and lawmakers who drafted the legislation say Massachusetts' public retirees deserve to have their pensions updated. "They should receive a cost of living that more adequately reflects inflation," said Representative Frank Hynes, a Democrat from Marshfield and chief advocate of the House legislation.

"It's $10 a damn month; that's all it is," said Ralph White, president of the Retired State, County and Municipal Employees Association of Massachusetts.

The legislation, which was added as amendments to the budget, would still have to be approved by all members of the House and Senate, who are running for reelection this year.

If it passes, it would present a major test for Governor Deval Patrick. Patrick campaigned in 2006 against passing laws for special-interest groups but also counts unions among his key supporters. Patrick, through his spokesman, said the issue is in conference committee and has yet to come to his desk.

The pension increase for state employees alone would cost between $3.8 billion and $8 billion over 20 years, according to the Pioneer Institute, an independent nonpartisan think tank. A separate Senate amendment allowing municipal retirees to opt in would cost cities and towns at least $2 billion, according to the Massachusetts Municipal Association.

Proponents said those numbers were inflated, although they did not have firm estimates of their own. White said the increase from the pension increases would be as little as $1 billion.

Several outsiders criticized state lawmakers for adopting the changes as part of budget deliberations but without an in-depth analysis or hearings.

"This should not even be discussed until there's an understanding of the cost and a complete exploration of how this will be paid for," said Geoff Beckwith, executive director of the Massachusetts Municipal Association, which represents cities and towns and is mobilizing local officials to oppose the measure. "This is not a cart before a horse; this is the freight train before the process."

Public employee pension and healthcare costs have been at the center of debate over Proposition 2 1/2 tax override votes in communities across the state. But Senator Marian Walsh, a Democrat from West Roxbury who led passage of the legislation in the Senate, said that "this has been a very open, transparent discussion."

Cities and town officials, she stressed, would have to vote before the pension increases took effect for municipal employees.

State pensions in Massachusetts are adjusted nearly every year by the Legislature, which controls the state pension system. Local officials control municipal pension systems, although changes are limited without state approval.

The Legislature designates a flat dollar amount to use in calculating annual pension increases; since 1997 the dollar amount has been the first $12,000 of a pension.

Since 2000, the Legislature has granted a 3 percent increase each year, calculated on that $12,000 base. The result has been a flat $360 boost every year for every retiree with a pension of more than $12,000.

The budget amendments, which cleared the House and Senate this month by unanimous votes, would raise the base amount to $16,000. With the same 3 percent bump on that new base amount, the flat fee for every retiree would rise to $480, a 33 percent increase.

Because the average pension for state retirees is about $22,000, the shift would mean almost every employee gets the maximum increase. To pay for the pension boosts, state lawmakers are using an approach that State Treasurer Timothy P. Cahill called risky for state credit ratings.

The state is currently on track to fully fund its pension system - meaning that if everyone retired at the same time, the state could afford to pay everyone's retirement - by 2023. To pay for the pension boosts, legislators want to stretch that goal to 2026, which lawmakers say would give them longer to pay off the added expense.

"It's the wrong thing to do," said Cahill, who supports the pension increases but fears that the Legislature's approach will put the state's credit rating in jeopardy.

He has urged lawmakers to fund the increases through state budgets, which would add at least $110 million to each of the next three state budgets, rather than pushing the payments off.
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Matt Viser can be reached at maviser@globe.com.
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"No to pension hikes"
The Berkshire Eagle - Editorial
Thursday, May 29, 2008

State and municipal employees may well be deserving of the pension increases being discussed on Beacon Hill, but that doesn't make them a good idea. In fact, given the state's many financial responsibilities and the weakness of the economy, those increases simply can't be justified.

The increase being floated is $120 a year per employee, which Ralph White, president of the Retired State, County and Municipal Employees Association of Massachusetts, observes in the Boston Globe is "$10 a damn month, that's all it is." It's also, as Mr. White goes on to acknowledge, as much as $1 billion, though other estimates are far higher. The House proposes the increase for more than 100,000 former teachers and state workers, and if roughly 86,000 municipal retirees are included, as proposed in the Senate, the cost for cities and towns could be another $2 billion. Financially strapped communities would almost certainly have to lay off some current employees to pay the higher pension costs of former employees should they adopt the state's proposal.

Pension plans are being reduced and eliminated in the private sector, which makes it difficult to argue that taxpayers should pay more for the pensions of state and municipal workers. With the state scrambling to fund repairs to its road and bridge infrastructure while maintaining educational and social programs, it is impossible to make that argument.

To make matters worse, some on Beacon Hill want to pay for the increases by pushing back the year the state will fully fund its pension system from 2023 to 2026. Treasurer Tim Cahill, who supports the pension increases, says this will jeopardize the state's credit rating and maintains the increases should be funded through the next three budgets. Neither approach is acceptable. This proposal smells like election year politics.

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A (Boston) GLOBE EDITORIAL
"Mortgaging the future"
May 29, 2008

STATE AND LOCAL retirees haven't had an adjustment to the cost-of-living formula in their pensions since 1997. They deserve a reasonable increase, but the state won't provide the money and municipalities can't afford it. The Legislature was wrong to resort to an accounting ploy that would burden a future generation of taxpayers.

The raise would amount to an extra $120 annually on top of the $360 raises that are routinely given each year. The new increase for state retirees and teachers would cost $110 million annually. Rather than appropriate the money, the House (with Senate concurrence) proposes to stretch out the time needed to fully fund the state pension plan by three years, to 2026. That is fiscally irresponsible, as state Treasurer Tim Cahill has rightly noted. To delay would increase the cost of paying off the pension liability and raise eyebrows at bond-rating agencies, which determine how much the state pays to borrow money. Cahill favors a raise using existing revenues.

Last week, the Senate performed its own bit of pension mischief. It approved a budget rider that would encourage cities and towns to provide cost-of-living increases for their own retirees. Local pension boards would have to approve them, as would another local governing authority.

Senator Marian Walsh of West Roxbury says she merely wanted to open a conversation on the issue, but, without further state aid, any discussion will quickly turn contentious. Unless local officials want to offend their retirees and their current workforce (the retirees of the future), cities and towns would have to find the money by stretching out their own pension funding, cutting services, or seeking a property tax increase.

If the Legislature wants to give local retirees a raise, it should provide the money directly. But the state can't afford that. There isn't even room in the budget for the extra $110 million for state retirees.

The decision to fully fund the state and local pension systems was made in 1988, one of the most fiscally responsible actions the Legislature has ever taken. There may be reasons to adjust the completion date depending on the returns on pension-fund investments, but the Legislature needs to resist delaying the date just because it has found immediate uses for the money. Other states, notably New Jersey, have raided their pension funds with dire results.

The House-Senate conference committee ought to remove these amendments from the budget. If they remain, Governor Patrick should use his line-item veto to excise them. The leaders of Massachusetts shouldn't fob off to the future, or to local officials, a burden they couldn't bear themselves.

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"Pension headline doesn't add up"
The Boston Globe - Letters, May 30, 2008

RE "BIGGER pensions drawing protests" (Page One, May 28): Give me a break.

The headline says bigger state pensions could cost $6 billion or more. That does look awful - scary in fact. But one has to read the article to find out that's the total for 20 years.

Actually, one also discovers, it's probably less than $4 billion, just talking about state employees and the state budget. Over the next 20 years the budget will probably average $30 billion, so we are talking about $4 billion on a total of $600 billion, or 0.7 percent of the budget.

The article says the governor campaigned on not serving special interest groups but state retirees are not a special interest group. The state is their sole source for their pension, which they paid for through hefty payroll deductions, and their sole employer.

All of this brouhaha for $10 per month for somebody on a fixed income?

PHILIP MAHLER
Rutland, Massachusetts

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New England in brief
The Boston Globe, May 30, 2008
BOSTON

"Mass. to borrow up to $1.27b for housing"

Massachusetts will borrow as much as $1.27 billion over the next five years to make housing more affordable across the state. Governor Deval Patrick signed the state's biggest-ever housing bond authorization bill in a ceremony yesterday at an affordable housing complex in Allston. The legislation gives the state permission to borrow the money over five years. The bonding authority includes $500 million to update state-owned public housing developments. Another $220 million will support the state's Affordable Housing Trust Fund. The rest of the bonding authority will be spread across other housing programs. (AP)

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"Bill would raise cap on campaign gifts"

As the legislative season winds down and fall campaigns start to percolate, the Legislature's Joint Committee on Election Laws is poised to advance a bill raising the $500 cap on individual campaign contributions, the first increase since 1994. The bill would bump that cap to $750 and tie it to future inflation. A preliminary version of an omnibus political finance package would also increase fines and penalties associated with campaign finance violations and tighten disclosure requirements on the duties that consultants perform for candidates. (State House News Service)

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"Treasurer accused of inaction on Pike: Lieutenant governor counterattacks after criticism of bailout"
By Casey Ross, (Boston) Globe Staff, July 17, 2008

Lieutenant Governor Timothy Murray yesterday accused state Treasurer Timothy Cahill of failing to help devise a financial bailout for the Massachusetts Turnpike Authority, despite knowing of its looming debt problems almost three months ago.

In unusually heated criticism, Murray said Cahill, the state's top financial officer, signed off on the outlines of a plan to rescue the Turnpike Authority in April, only to then criticize it this week when details were reported.

"He's been informed about this since April. He had plenty of time to come forward with ideas, and we have not heard from him," Murray said.

"What is reckless in this situation is to do nothing . . . because the turnpike could end up facing a $200 million payment that would fall on the backs of the toll payers."

Murray's comments came one day after Cahill harshly criticized the Patrick administration's plan to essentially act as a cosigner on the Turnpike Authority's crushing $2.4 billion debt, which would allow the authority to use the state's higher credit rating to refinance the debt.

The plan is aimed at lowering interest costs on an $800 million portion of the debt that is tied up in complex loans that have gone sour in recent months, putting the authority at risk of tens of millions of dollars of unanticipated costs.

In a story in the Globe yesterday, Cahill said the administration's plan "borders on fiscal recklessness," arguing that it puts taxpayers at risk of paying the Turnpike Authority's debt while failing to improve oversight of its financial management.

Yesterday, Cahill acknowledged that he signed off on a financial disclosure statement April 16 that included details of the Patrick administration's plan to back the Turnpike Authority's debt. He said his objections this week are due to changes in the plan that would substantially increase the amount of debt to be supported by taxpayers.

"The suggestion in the [disclosure] statement was a much smaller exposure of $800 million, and now we're talking about almost $2.5 billion," Cahill said. "It's a full-scale bailout with no responsibility."

Top aides to the governor said the move to back the authority's full debt load is due to circumstances that arose late last month, when an insurance company backing the bonds had its credit rating downgraded.

If the company, Ambac Financial Corp., suffers another downgrade, the Turnpike Authority could be forced to make an immediate debt payment of $179 million, a sum officials have said the authority cannot afford.

The tensions between Cahill and the Patrick administration contributed to widely divergent reactions to the rescue plan on Beacon Hill.

The House of Representative approved the plan unanimously Tuesday, with a top lawmaker saying it is a prudent financial step. "We think it makes sense," said State Representative Joseph Wagner, a Chicopee Democrat and cochairman of the Legislature's Committee on Transportation. "This is a safeguard for everyone involved."

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said the administration's proposal does not solve the Turnpike Authority's underlying financial problems and could lead to huge losses for the state.

"There are all sorts of things happening that no one ever expected in the larger credit and financial markets," he said. "I don't know how we can guarantee the state is not going to be on the hook for this."

State senators are scheduled to hold a hearing today on the debt proposal.

Senate President Therese Murray signaled initial support for the administration's plan yesterday. "The consequence of not doing anything, and the specter of defaulting, would have too severe an impact on toll payers," Murray, a Plymouth Democrat, said in an e-mailed statement. "The Senate intends to take this up."

The lawmaker in charge of today's hearing, Senator Mark Montigny, Democrat of New Bedford, said he intends to push for changes in the Senate version of the bill that would require state authorities to obtain approval for complex financial transactions from the governor's financial executives.

"The crisis we're in right now means these reforms are more necessary now than they've ever been," he said. "It's a symptom of a much bigger problem with quasi-independent authorities like the turnpike."
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Casey Ross can be reached at cross@globe.com.
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Treasurer Tim Cahill is moving to create a model school program, which he said help rein in the escalating costs of school building projects across the state. (DAVID L.RYAN/GLOBE STAFF)
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"Treasurer wants limit to designs for schools: Cahill seeks to pare rising building costs"
By James Vaznis and Rachana Rathi, (Boston) Globe Staff, July 18, 2008

State Treasurer Timothy P. Cahill, trying to head off what he calls "Taj Mahal" high schools, said yesterday that he wants cities and towns to begin using off-the-shelf building designs that could cut school-project costs by 30 percent.

The goal, Cahill said, is to shave tens of millions of dollars from the cost of building new schools, which have reached as high as $197.5 million for the new Newton North High School, a lightning rod of discontent over the escalating price tags for such projects.

"I'm trying to think like a taxpayer," Cahill, who oversees the state School Building Authority, said in an interview with the Globe, adding later that communities are putting together a "wish list of what we want, not what we need or what we can afford."

Building prototype schools is popular in other parts of the country, particularly in fast-growing Florida and the Southwest. It is viewed as a quick, less expensive way to put up schools, while providing reassurance that the design has been well tested.

As chairman of the School Building Authority, Cahill has the power to create what he is calling a model school program, which has been sought for the last five years by Inspector General Gregory Sullivan. Sullivan said the Legislature gave Cahill the power when it set up the authority, which has $2.5 billion to spend on school construction.

Cahill said that towns that have suitable sites and refuse to use the cheaper designs might not receive state funding or would be told they can renovate their school but not build a new one.

But some architects and school leaders question whether New England's rolling hillsides, marked by such construction obstacles as wetlands and rock outcroppings, can ever be conducive to a one-size-fits-all approach.

"In Massachusetts, there are no prototypical sites or prototypical communities," said George Metzger, a principal with HMFH Architects in Cambridge, arguing that most designs would have to be substantially modified to fit a site. "I'm skeptical it would save any money, and we could lose the character of our community-based school systems."

Sullivan acknowledged that only about 50 percent of sites might be compatible, but he said any savings are worth pursuing in an age of school construction cost overruns.

"I consider it to be one of the most significant financial reforms in Massachusetts over the last 25 years," Sullivan said. "It could save hundreds of millions of dollars over the next decade."

In recent months, Cahill has stepped up his criticism of the project in Newton, where costs have risen from $104 million to $197.5 million, and planned projects in other towns. He disclosed the model school program in a previously arranged interview that took place on a day he continued to clash with Governor Deval Patrick's administration over its proposed bailout of the Massachusetts Turnpike Authority.

The program would be designed for high schools with 900 to 1,300 students, he said, and would work best on construction sites that do not have problematic wetlands, ledge, or environmental contamination, all factors that can drive up construction costs.

The designs would be based on high schools built over the last 10 years. The buildings would be between 170,000 and 240,000 square feet, depending on enrollment, and would include a gymnasium, an auditorium, science labs, and energy-efficient systems. No field houses or swimming pools would be allowed. If communities want those things, Cahill said, they would have to be built as separate buildings that would not qualify for state reimbursement.

Roughly four designs would be chosen, and the architects of the winning designs would automatically work with any school district that selects the design. That could be a financial windfall for those architects, while leaving other firms with little work.

Cahill and Sullivan already have their eye on one model school: Whitman-Hanson Regional High School, which opened three years ago and cost $49 million. Cahill said that school would cost about $69 million in today's dollars. The school features a lecture hall, state-of-the-art science labs, and a stately stone-and-red-brick facade with arched windows and columns.

Cahill said 21 architectural firms, including the firm that designed Whitman-Hanson, have expressed interest in submitting model school designs.

About eight high schools are on the fast track for state construction funding approval, and the idea is most likely to be tested in Norwood, where the cost to build a new high school has swollen to $100 million, up from $80 million when the project was first conceived a few years ago. The opportunity to participate in the model school program and save money appears to be easing opposition to the project, which involves knocking down a decades-old high school that is beloved by many residents for its clock tower and stately columns.

"We were against demolishing Norwood High, but if it has to go that way, the model school program seems like a good way to go," said Frank McKeown, chairman of the Common Sense Committee, a local advisory group. "It would save us a lot of money."

Paul Samargedlis, chairman of Norwood's School Committee, said, "It's such a good thing the state is doing, you wonder why wasn't it instituted years ago."

For skeptics, the answer to that question is a lack of flat land.

"The good sites are all built on," said Duncan McClelland, a principal of Flansburgh Architects of Boston, which designed the new Lawrence High School and intends to submit a model school design. "It may be more difficult than people realize, but we are certainly willing to give it a try."

McClelland said the basic core of a high school is fairly standard. State school design standards dictate the size and quantity of everything from classrooms to administrative offices, the cafeteria, and the gymnasium.

Metzger said that he tried a prototype design for four elementary schools in Haverhill, but that each had to be significantly altered because of the varying sites they were built on. His firm has not decided if it will apply for the state program.

Cahill said his agency will provide districts with slightly more reimbursement money if they opt to build a model school. Reimbursement ranges between 40 to 80 percent, depending upon a community's wealth.

If the model school program proves successful, Cahill said, he intends to expand it to middle schools and elementary schools.

Cahill said his job is to hold the line but not shortchange the students.

"That's just life, and you have to adjust to it," Cahill said of not giving communities everything they want. "We don't have the money. We are living within our budget and giving people options."

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A State House hearing room was packed yesterday as a joint House-Senate committee took testimony on a Patrick administration plan to shore up the Massachusetts Turnpike Authority. (DAVID L. RYAN/GLOBE STAFF)
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"Cahill calls for turnpike overhaul: Says bailout plan must include changes"
By Eric Moskowitz, (Boston) Globe Staff, July 18, 2008

State Treasurer Timothy P. Cahill continued to clash publicly with officials of Governor Deval Patrick's administration yesterday over the administration's proposal to throw the troubled Massachusetts Turnpike Authority a financial lifeline by guaranteeing the authority's debt.

Cahill, who has objected to the plan all week, said during a State House hearing that he believes the administration is acting recklessly. He called for unspecified changes to be imposed on Turnpike Authority operations if the deal moves forward.

"To bail out the Turnpike and not change anything about the operation, not put any reforms, I don't think the public - and rightfully so - would stand for that," Cahill said after the hearing.

The Patrick administration and the Turnpike Authority continued to call the plan a relatively risk-free move for the state, as well as the only option on the table to save an agency that is on the brink of insolvency. On Wednesday, Lieutenant Governor Timothy P. Murray hit back at Cahill, saying Cahill should have acted earlier to protect the authority's financial health.

Cahill appeared to pick up an ally yesterday in state Senator Mark C. Montigny, the New Bedford Democrat who presided over the contentious hearing where the competing viewpoints were aired.

"I think this is ill considered, ill timed, and I think it is about as bad as it gets," Montigny, cochairman of the Joint Committee on Bonding, Capital Expenditures, and State Assets, said after the 3 1/2-hour hearing. "It is the worst of both worlds for the taxpayer and the tollpayer."

Budget watchdog Michael Widmer, president of the Massachusetts Taxpayers Foundation, also blasted the administration's plan.

"This is one of the most irresponsible proposals I have seen seriously considered by the Legislature in my 16 years," said Widmer, whose organization is backed by business. "We are just heading off a cliff, Thelma and Louise, with a smile on our face."

Widmer called for a gas-tax increase and new tolls to help the Turnpike Authority meet the terms of its Big Dig-related debts.

Montigny said he would try to delay consideration of the proposal in the Senate so that lawmakers could have more time to ponder its implications.

But whether he will be successful remains unclear. Senate President Therese Murray said earlier this week that she wants to debate the plan in the Senate and is concerned about the consequences of a financial failure of the Turnpike Authority. Senator Steven C. Panagiotakos, chairman of the Senate Ways and Means Committee, said yesterday that he has concerns about the plan and will review the administration's proposal next week.

On the table is a proposal, already approved by the House, that calls for the state to serve as cosigner for $2.4 billion of Turnpike Authority debt. That would help the authority, which is a quasi-public agency dependent on toll revenues, to take advantage of the state's strong credit rating to refinance loans. If the plan fails, the authority could owe millions in new interest, as well as a roughly $200 million penalty payment to investment bankers.

Lawmakers and officials debating the plan said they also were concerned about the long-range impact on state finances of total Big Dig debt, which includes $7 billion in interest payments expected to drive the total cost of the $15 billion project to $22 billion, figures that were reported for the first time yesterday by the Globe.

Alan LeBovidge, executive director of the Turnpike Authority, said he had heard no viable alternatives to the state guarantee plan, from Cahill or other critics.

"If we get a letter tomorrow from somebody that said, 'Hey, I'm an investment banker; here's what you can do,' we'd do it," LeBovidge said. "We're not out there to waste people's money. We want to minimize the cost."

The bailout's proponents also said that having the state guarantee the turnpike's debt would be unlikely to affect the state's credit rating. Even Cahill has acknowledged that it may not hurt the state's rating.

"No one has to bear these costs," said Jay Gonzalez, state undersecretary for administration and finance. "Even with the guarantee, there is no expectation that the Commonwealth would have to pay any of the Turnpike Authority's loans."

Montigny's cochairman on the debt committee, Representative David L. Flynn of Bridgewater, defended the House's support of the bailout. "I don't know anything else [that can be done], except the responsible actions taken to pledge the credit of the Commonwealth to . . . stop the bleeding," Flynn said.

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"Hurry up and wait"
"The North Adams Transcript" - Editorial - TheTranscript.com
Tuesday, August 5, 2008

State Treasurer Tim Cahill and Katherine Craven, executive director of the Massachusetts School Building Authority, would like us to believe that new school-building projects across the state are on the fast track. In reality, the authority is moving at less than a snail's pace to get new schools built or badly deteriorating ones renovated.

In the summer of 2007, readers may recall, Mr. Cahill and Ms. Craven ballyhooed the revamped authority's grand plan to invest $2.5 billion "over the next five years" to help school districts get the building assistance they so badly needed.

"This reformed program is not only the largest grant program in the commonwealth but it offers a fiscally responsible blueprint for future school construction and provides a strong foundation for our children," Mr. Cahill gushed in a news release.

Fast forward to August 2008, one year later, and Mr. Cahill is still touting the "progress" of the authority while, as yet, not one project has been funded. He now states in a news release: "Over the next five years, the MSBA will collaborate with municipalities to equitably invest up to $2.5 billion in schools across the commonwealth."

OK, so he must have meant "over the next six years" in his original announcement a year ago. And why is it now "up to" $2.5 billion, when before it was the full amount?

That aside, both the North Adams and Adams-Cheshire school districts were fortunate to be among the 88 projects that made the first cut for funding -- out of 423 potential projects from 162 school districts.

The bad news is, as reported in the Transcript last week, the approval system is so complicated and cumbersome that school officials have no idea when (or if) projects might happen. Alfred Skrocki, Adams-Cheshire superintendent, offered a guess of two years before the approval process in his district can be completed and another 1 1/2 years before construction would be finished. That's a 3 1/2-year wait for a district using a middle school that could be closed for public safety reasons at any time and that has a crumbling elementary school in Cheshire that isn't even in the funding pipeline.

North Adams has a potentially wonderful plan to close the woefully out-of-date Silvio Conte Middle School and return its middle-schoolers to "neighborhood" elementary schools. The city's feasibility plan is nearly complete, and it has hired a project manager. The hold-up? You guessed it. No one has heard back from the School Building Authority.

Mr. Cahill and the authority deserve plaudits for paying off more than $10 billion in debt from their predecessor, the overly ambitious and badly managed Massachusetts School Building Assistance Bureau. They also have made it clear that overpriced, pie-in-the-sky projects, such as a $151 million high school in Wellesley won't fly. Bravo.

But so far, the new plan for funding seems to be all too much about process and not nearly enough about construction. As time passes -- and a full year has already -- prices climb. The authority needs to get moving and approve those reasonably priced projects that have merit in communities where districts have done their homework. Otherwise, the five-year plan that has become a six-year plan will become a seven-year plan or worse, while the need for school building improvements across the commonwealth will only mount higher and higher.

That is neither fiscally responsible nor providing a strong foundation for our children.

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"Lottery vendor paid $132,000 to Cahill ally: Treasurer steered tens of millions to a ticket maker"
By Frank Phillips, (Boston) Globe Staff, August 14, 2008

The Massachusetts State Lottery's largest vendor paid in excess of $132,000 in consulting fees to one of state Treasurer Timothy P. Cahill's closest friends and political confidants, at the same time Cahill steered tens of millions of dollars in contracts to the national firm, according to records and officials.

Cahill first decided in August 2004 to renew a $21 million contract with Georgia-based Scientific Games, which had been sharply criticized for the quality of the scratch tickets it produced, even after Cahill's top aides recommended that he spread the work around more among multiple vendors, say people with direct knowledge of the process. Cahill, in his role as state treasurer, oversees the Massachusetts Lottery Commission.

Cahill has since given Scientific Games three one-year extensions worth over $30 million in additional state payments.

As Scientific Games was successfully vying for its contract renewal and subsequent extensions, the company was paying Thomas F. Kelly $3,000 a month in a consulting arrangement that began in November 2003 and continues today, according to records obtained by the Globe and confirmed by people involved in the payments. Kelly is Cahill's Quincy neighbor, a chief political fund-raiser, and a longtime friend.

While there is nothing overtly illegal about Kelly's role, it again serves as an example on Beacon Hill of political friends appearing on the payrolls of companies who are trying to win lucrative contracts with the state. The Globe has reported on friends of House Speaker Salvatore F. DiMasi working on behalf of a software company and a consortium of ticket brokers as they tried to win contracts and push legislation beneficial to their cause.

Kelly, who is not registered to lobby for Scientific Games, did not return repeated calls to his Boston office. If he tried to influence the outcome of the contract with Cahill or his aides, he would be required to register as a lobbyist with the secretary of state's office and report his payments.

Cahill declined repeated requests for an interview. In response to written questions submitted to his office, Cahill's spokeswoman, Francy Ronayne, said Cahill was not aware of Kelly's financial relationship with Scientific Games.

Ronayne said that Kelly never spoke to Cahill about the two-year renewal of the instant games contract in August 2004 or the three one-year extensions he and the commission approved. In her statement, Ronayne also disputed assertions that Cahill was getting advice at the time to scale back Scientific Games' share of the state lottery business.

The payments to Kelly were initially made through the Boston public relations firm, Regan Communications, which was hired by Scientific Games to coordinate an aggressive media campaign in the company's battle to remain the primary lottery vendor. Part of Cahill's decision in renewing the firm's contract in 2004 was whether to cut back on Scientific Game's 80 percent share of the contract work to service the state's $3.4 billion instant game market.

As Regan conducted his media push, a debate was unfolding inside Cahill's office in the State House, and some of his most senior aides were urging him to scale back on the Scientific Games contract, say people who were aware of the discussions.

Those people, who talked on condition of anonymity, said that Cahill aides - including the Lottery's executive director at the time, Joseph C. Sullivan; First Deputy Treasurer Doug Rubin; and the lottery's director of sales, Paul Sternburg - felt that more competition among key vendors would boost lottery revenues.

The idea was that if more vendors were allowed to create scratch tickets, the games would be more creative and appealing to the public. Those aides also pointed out that Scientific Games was facing criticism in Massachusetts, particularly in Boston Herald reports, over the quality of its scratch tickets and the sluggish performance of several of its games.

The aides recommended splitting the $24 million contract more evenly among several vendors, instead of renewing the contract with Scientific Games, the world's biggest supplier of instant lottery tickets with over $1 billion a year in revenue.

Ronayne said Cahill's decision was based entirely on the recommendation of the lottery's procurement team.

"The only influence on the commission's unanimous decision was the findings of the RFP [request for proposal], which proved Scientific Games to be an industry leader with a proven track record of excellence," she said in a statement e-mailed to the Globe.

Kelly's role during the process is unclear. Invoices that Regan Communications sent to Scientific Games, recently obtained by the Globe, describe Kelly as providing "grass-roots services." An executive with Scientific Games, Thomas Hodgkins, described Kelly in an e-mail yesterday as a "nonlobbyist consultant" hired for his "understanding and insight on the lottery and gaming markets" in Massachusetts.

Regan Communications, owned by Boston public relations executive George Regan, said in a written statement that Kelly was hired at the suggestion of Theodore Aleixo, Scientific Games' veteran State House lobbyist and a former state senator, to provide information on the various proposals on Beacon Hill to expand legal gambling in Massachusetts. The firm said Kelly was specifically barred from lobbying on behalf of the gaming company.

According to the Regan invoices, Regan paid Kelly's company, CanAm Consultants, $3,000 a month, then billed Scientific Games for the payment. Regan also billed Scientific Games $5,000 a month for its own services. Since June 2007, Scientific Games has paid Kelly directly. Hodgkins, who asked that the Globe inquiries be sent to him by e-mail, did not respond to a question as to whether Kelly's monthly retainer remained at $3,000. If it did remain at $3,000 a month, he would have collected $170,000 by now.

Kelly has no apparent gambling expertise. A top deputy to state Treasurer Robert Q. Crane in the 1980's, he is an influential but little-known figure in state political circles, best known for his sometimes controversial work marketing investment firms to public pension funds.

In 2005, Inspector General Gregory W. Sullivan uncovered what he called "a secret arrangement," in which Kelly and a colleague received $2.8 million in hidden fees charged to the Middlesex Country Retirement System for an investment they arranged and that lost $35 million.

In the private sector, Kelly is still heavily dependent on public officials, and he regularly raises money for political candidates. Two people with direct knowledge said Kelly frequently asked Scientific Games' officials during the contract renewal process to hold a fund-raiser for the treasurer.

Three months after the Lottery Commission gave the firm the work, Scientific Games' chief executive, A. Lorne Weil, hosted a fund-raiser in Manhattan at the Water Club, a pricey restaurant on the East River. Campaign reports show that Weil and his associates raised nearly $20,000 for Cahill's campaign committee at the Oct. 26, 2004 event.

Hodgkins did not respond to questions about his firm's fund-raising activities for Cahill. Ronayne, Cahill's spokeswoman, said the treasurer did not know of any role Kelly played in setting up the fund-raising event.

Kelly has been a Cahill insider since the treasurer was elected treasurer of Norfolk County in 1996. Kelly is a one of several top fund-raisers for the treasurer, say those familiar with Cahill's political operations.

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The Boston Globe, Business, E3, August 7, 2008

“Massachusetts pension system dropping stock pickers”

“Bloomberg News”

The Massachusetts state pension fund pulled $2 billion in assets from Legg Mason Inc.’s Bill Miller and four other firms as part of a plan to shift all US equity assets from managers who actively pick stocks to buy and sell.

The board of the $50.6 billion pension fund approved the switch at a meeting yesterday, citing “inconsistent performance”, said Francy Ronayne, a spokeswoman for state Treasurer Timothy Cahill. The money was assigned to portfolios run by State Street Corp. and three hedge funds that are designed to track the investment performance of indexes, or baskets of securities.

“We’ve determined that active managers add no value over long periods of time,” Michael Travaglini, director of the Massachusetts Pension Reserve, said.

The fund kept $2.4 billion in “enhanced” Standard & Poor’s 500 portfolios run by Janus Capital Group Inc. and Pacific Investment Management Company. It also left $1.3 billion in actively managed small company funds.

Active fund managers select holdings according to individual research and investment styles. Index-fund portfolios are determined by the composition of market indexes.

“Public pension funds in recent years have made an effort to increase their diversification and this is certainly a part of that,” said Keith Brainard, research director at the National Association of State Retirement Administrators.

Miller is chairman of Legg Mason Capital Management, a Baltimore-based unit that invests in companies considered cheap when measured by sales or profit. His $9.7 billion Legg Mason Value Trust, famed for beating the Standard & Poor’s 500 index for 15 years, has trailed the benchmark for three years. Massachusetts’ $637 million account with Legg Mason was down 35 percent in the year ending June 30.

The pension fund will move about $1.5 billion to a portfolio at Boston’s State Street Global Advisors that tracks the Russell 3000. The Russell 3000 has declined 12 percent this year.

The plan will also shift about $540 million to funds that invest in other hedge funds.

Other stock managers dropped were Gardner Lewis Asset Management, where Massachusetts’ account dropped 5.7 percent in the past year; NWQ Investment Management, down 18 percent; Mazama Capital Management Inc., down 29 percent; and Ariel Investments, down 20 percent.

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The Boston Herald, Op-Ed, Page 8, August 3, 2008

“Test: How to tell if you are a moonbat”, By Howie Carr

I do not own the word “moonbat”, but I have had custody of it for a good long while now, and there are a couple of misconceptions I would like to clear up.

First, a moonbat is not something you want to be, even in Arlington, where they have begun selling T-shirts that say, “Menotomy Moonbats”. Hey moonbats, lost the bat logo. Truth in advertising requires you to put on the front of your moonbat shirts a photo of State Senator Jim Marzilli, your hero, the perv in a Prius, with these words underneath:

“Sen. Marzilli Groped Me and All I Got Was This Lousy T-shirt.”

Instead, try to redefine the word itself into a positive. As one Arlington moonbat told the Arlington Advocate, “A ‘moonbat’ is someone who is willing to be a little bit of a dreamer.”

His dream, our nightmare.

Second, despite what you may have heard Friday morning on the Fox News Channel segment that I was on, there is no such thing as a “right-wing moonbat.” Some Air America type was just trying to give me the needle. Right-wing moonbats? That is an oxymoron, like “sober judge” or “law-abiding illegal alien.”

Whoever says “right-wing moonbat” is full of guano.

For those who came in late, moonbats are trust-funded, medicated, middle-aged, white-guilt-ridden blogging lefty losers who inflicted Deval Patrick upon the working people. The moonbats now yearn to elect Senator Barack Obama, a Deval on steroids.

If you are a guy with a ponytail, chances are you’re a moonbat – if you have a wide-brim leather hat too, the odds rise to 100 percent. If you are a woman and you bring knitting to public meetings, consider yourself positively ID’ed.

Like most people, I know ‘em when I see ‘em. But if you are wondering whether or not you are a moonbat, here are some of the most obvious traits:

You refer to the current national administration as the “Cheney-Bush regime”.

You’ve used the word “Halliburton” at least once in the last 10 minutes.

The biggest issue in the state: gay marriages.

The second biggest issue in the state: the pressing need for more bicycle paths.

You take part in the weekly anti-war protests on the town post office with all the other grandmothers, or should I say the women who would be grandmothers if they hadn’t had so many abortions 30 years ago.

You are the only one on your block who still has the Globe delivered.

You believed the National Enquirer totally when they busted Rush Limbaugh.

You don’t believe a word of the National Enquirer now that it is busting John Edwards.

Your car contains at least three of the following bumper stickers: “Redefeat Bush”, “1-20-09”, “We ARE a Family and We Vote”, “Kerry-Edwards”, “Free Mumia”, “9/11 Was an Inside Job” and “Got Hope?”

You miss your favorite old bumper stickers: “Free Leanord Pelletier”, “War is NOT Healthy for Children and Other Living Things” and “Re-elect Marzilli”.

You scoff at people who believe in God, bug just as fervently believe that there is a “scientific consensus” about global warming.

You’d never admit that the reason you don’t care about Obama’s plans to tax the middle class back to the Stone Age is because your dad down in New York put all your trust funds into tax-free municipal bonds.

You still watch Channel 2 and listen to NPR.

If you live in Newton, you cannot figure out why Mayor Cohen is not running for re-election.

You will never vote for state Treasurer Tim Cahill again after he sold out the Democratic Party by saying he wanted to be a “friend of the taxpayer”.

You think someone should nominate Arline Isaacson for a Nobel Prize.

You have both of Barack Obama’s books, and you have been meaning to get around to reading them, but…

You have not uttered the word “Christmas” since 1983, lest you offended someone.

Forget vegetarian, you would like to be a vegan, except for that no ice-cream thing.

And finally, you are definitely a moonbat if you have realized that the next bumper sticker you put on your Prius is going to say, “Free Jim Marzilli”.

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"Vendor details fees to Cahill ally: Lottery firm paid $24,000 this year for lobbying work"
By Frank Phillips, (Boston) Globe Staff, August 22, 2008

Under pressure from Secretary of State William F. Galvin, the largest vendor for the Massachusetts Lottery reported yesterday that it paid $24,000 in lobbying fees for the first six months of this year to Thomas F. Kelly, a major fund-raiser and political ally of state Treasurer Timothy P. Cahill.

The company, Scientific Games International, still faces questions over the nature of fees it paid Kelly in previous years through a public relations firm. Scientific Games has been paid more than $30 million by the lottery to develop instant games and print tickets since Kelly first began working for the firm in November 2003.

"All the facts are not clear yet," Galvin said, citing Kelly's work for the firm in the previous four years. "We still need to review the situation for full compliance."

Kelly and Scientific Games face fines and penalties for late lobbying disclosure filings. Galvin's office has yet to calculate the extent of the delinquency, so the amount has not been set.

The payments from Scientific Games to Kelly raise questions because of his close relationship to Cahill, who over sees the lottery in his job as treasurer.

The Globe reported last week that Cahill, rejecting recommendations from top aides, had steered the lion's share of a $24 million state lottery contract to Scientific Games and approved three one-year contract extensions for the company at a time when the firm was paying anywhere between $132,000 to $170,000 in undisclosed fees to Kelly.

Cahill said yesterday that the decision by the Lottery Commission to award the contracts to Scientific Games in the past four years was based on competitive bidding and not on his relationship with Kelly.

"No personal or political associations I have with anyone have ever or will ever influence the business of the State Lottery and its mission to return hundreds of millions of dollars to the cities and towns of Massachusetts," Cahill said in a statement released yesterday to the Globe.

Last week Cahill said through a spokesman that he knew nothing of Kelly's work for Scientific Games.

In its communications to Galvin's office, Scientific Games continued to insist that Kelly was not hired as a lobbyist and has not been instructed to engage in any lobbying activities.

"Nonetheless, given what we understand to be your guidance during our telephone calls, we will amend our 2008 registration to include Mr. Kelly as a lobbyist, notwithstanding our continuing intention not to use him in that capacity," Thomas Hodgkins, vice president for government relations at Scientific Games, told a lawyer in Galvin's lobbying division.

The company has said that Kelly is consulting for the firm by keeping it informed of proposals at the State House for expanded gambling, issues that could affect lottery ticket sales.

The firm's initial payments to Kelly were $3,000 monthly retainer fees that were funneled through Regan Communications, the Boston public relations firm that was leading a media campaign for Scientific Games in its battle to remain the primary lottery vendor.

It began paying Kelly directly in June 2007, instead of through Regan Communications. Its lobbying reports filed this week indicate that Kelly's monthly retainer rose to $4,000 a month.

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"State facing budget woes as local aid payment due"
By Matt Viser, (Boston) Globe Staff, September 25, 2008

State Treasurer Timothy P. Cahill said yesterday that the state must take dramatic steps - borrowing at a higher interest rate than usual and tapping the state's rainy day fund for $310 million - to make sure it has enough cash to make local aid payments due next week to cities and towns.

The extraordinary moves are a direct result of the troubled credit markets roiling Wall Street, and they portend more dire decisions looming for state lawmakers, Cahill said. The turmoil arises as state revenues are decreasing, making access to credit even more important.

"This is no longer a Wall Street issue, this is a Main Street issue," Cahill said. "I don't want to be constantly beating a dead horse. But it's a crisis. A full-blown crisis. We have to slow down or cut spending."

Cahill warned that some major-ticket items might have to be curtailed, including some of Governor Deval Patrick's priorities, such as expanding prekindergarten classes, repairing bridges, and increasing healthcare spending.

Administration officials did not dispute Cahill's assertion that the situation is serious but said they are still working on potential cuts in the $28.2 billion budget, which is not even three months old. The administration has not ruled out seeking legislative approval to reduce the $5.3 billion in education and other categories of local aid the state pays to cities and towns, as former governor Mitt Romney did in 2003.

"It's too soon to speculate how deep we're going to have to go," Patrick told reporters at the State House yesterday. "I think it is clear that we are going to have to do some trimming of the budget, and we have some plans for that."

Patrick would not rule out raising fees or instituting layoffs, saying there are various plans that administration officials are exploring, depending on how bad the financial situation gets.

"The numbers we have are preliminary. They are nonetheless concerning," he said.

The most immediate need is $1.3 billion in quarterly payments that are scheduled to go out to cities and towns next week. Municipalities use the money to fund everything from teachers to trash collections.

Cahill said it appears likely that cities and towns will get their local aid payments - preventing layoffs and cutbacks in municipal budgets - but he said he has had to jump through a complex set of financial hoops to make it work. Cahill and other state officials characterize the borrowing maneuvers as common ways to make payments before all of the tax revenue comes in. But the state usually is not this strapped this early and facing interest payments this high.

The state yesterday borrowed $51 million in a short-term loan from investors, at an interest rate of 6 percent for a practice that normally charges 2 percent interest. In order to make local aid payments, the state still needs to borrow up to $349 million in similar loans before next week. State officials fear a similarly high interest rate.

"This stuff is unheard of," Cahill said. "It's like going to the loan shark for money."

The state is also planning to use $310 million from the state's rainy day fund. The state had budgeted for such a drawdown but had expected to take the money out in December.

To continue paying bills, the state would try in early October to borrow $750 million, taken against future revenues, Cahill said.

"We support those efforts," said Leslie Kirwan, Patrick's secretary of administration and finance. "It's a challenging situation, predominantly the result of an unprecedented market, so this shouldn't be a surprise."

Senior state lawmakers have been scrutinizing the state's financial picture, and their concern was heightened last week when the administration said that tax collections for September are running $200 million less than September 2007.

Patrick, who can unilaterally impose cuts to about two-thirds of the state budget, has also asked the Legislature to grant him rare authority for expanded powers to cut in other areas. There are several looming milestones that will fill in the budget picture, including whether capital gains taxes will decrease precipitously and whether the state will get healthcare reimbursements it is seeking from the federal government.

"I don't think anybody can be sure about anything, given what's happening on Wall Street right now," Kirwan said. "We will work together through this, with the treasurer and the Legislature."
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Matt Viser can be reached at maviser@globe.com.
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"Massachusetts may seek a US loan as credit markets dry up"
By Beth Healy, (Boston) Globe Staff, October 4, 2008

State Treasurer Timothy P. Cahill this week approached the US Treasury and the Federal Reserve Bank of Boston about lending Massachusetts money under the same extraordinary terms the government is giving banks and Wall Street firms during this financial crisis.

The request was prompted by the state's inability to borrow from the short-term debt markets because the financial turmoil has essentially caused credit markets to stop lending or charge prohibitive rates. Earlier this week, Cahill's office shelved a $750 million debt offering because there were no buyers for state or municipal debt, he said. He did say how much the state might want to borrow from the Fed.

Massachusetts' need is not as urgent, Cahill said, as the state of California's, which requested similar federal assistance on Thursday. California officials said the state would run out of money by the end of the month if the short-term debt markets do not ease, and if it could not obtain loans from the Fed.

Cahill said the state has enough available funds to cover its expenses for the coming weeks. But he would not predict when the government would run into a cash shortfall should the borrowing problems persist.

Federal officials have not yet responded to Cahill's request, he said yesterday. Officials at the Boston Fed and US Treasury did not return calls seeking comment.

The treasurer is going to try to float the $750 million offering again next week. Cahill and other government treasurers hope the passage of the federal bail-out package yesterday will calm credit markets and revive sales of municipal debt.

"We have been preparing all week for contingencies around the fact that, if we don't get access to the credit markets next week, what are our alternatives?," he said.

However, the borrowing problems come as Massachusetts struggles to deal with a sharp drop-off in tax payments. Governor Deval L. Patrick and state legislators on Thursday disclosed the first in what could be a series of cuts to programs and operations after revenues for the fiscal first quarter were $143 million lower than expected.

Meanwhile, if the credit markets remain tight, Cahill said the Fed should offer the state the same low-rate loans or assistance the central bank has been giving the nation's banking system during the credit crisis.

"That's all we would ask them to do: Treat us like the investment banks," Cahill said.

State and local governments and other tax-exempt borrowers sold about 15 percent less debt in this week in credit markets than in typical periods, according to data compiled by Bloomberg.

One major obstacle for governments - and private companies, too - is that a major buyer of the short-term debt they issue, the $3.4 trillion money market mutual fund industry, is sitting on the sidelines, too, analysts say.

Matt Fabian, managing director at Municipal Market Advisors, a research firm in Concord that follows government debt markets, said, "Money markets have been getting comfortable sitting on cash as opposed to buying bonds."

One reason for the reticence of money market mutual funds, he said, is that the insurance companies that routinely back up the debts they buy are themselves financially weak, adding to the nervousness about holding those securities.

Also, he said these mutual funds feel they need to have more cash on hand than normal to repay anxious customers who want their money back. Two weeks ago, money market mutual funds were the scene of panic as investors withdrew $210 billion out of fear their money was not safe; Putnam Investments of Boston was forced to close a $12.3 billion fund because of an onslaught of redemption requests. Also, several funds saw their net asset values fall below the $1-a-share level because of money-losing investments -meaning their shareholders stood to get less than $1 back for every $1 they had invested.

"You can't quite tell when the next wave of panic will come," Fabian said. "At this point, money markets should be cautious."

Fidelity Investments, the nation's largest money market manager, has $500 billion in money market mutual funds. One person involved in selling government debt to Fidelity and other money market fund managers said the Boston investment giant had cut back on buying certain government debt in recent days. But a spokesman for Fidelity said it had not retreated from that market.

"We remain a very active participant," Fidelity spokesman Vincent Loporchio said.

The US government recently took steps to ease the pressures on the money market mutual fund industry by temporarily insuring accounts and helping fund managers with cash-flow problems. Yet the markets still remain tight.

Now, some financial analysts are predicting the passage of the bailout yesterday would lead to credit markets loosening in the coming days, though it might be weeks before conditions begin to return to normal.
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Beth Healy can be reached at bhealy@globe.com.
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Robert A. DeLeo (left), House Ways and Means chairman, and Alan Clayton-Matthews, professor of public policy at the University of Massachusetts, spoke to the media after an economic summit at the State House yesterday. (Aram Boghosian for the Boston Globe)
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"State's fiscal picture gets darker: Economists predict long period of poor revenues, tighter budgets"
By Matt Viser, (Boston) Globe Staff, October 8, 2008

Governor Deval Patrick and the Legislature should brace themselves for an extended period of declining or tepid tax revenues and smaller state budgets that will define the State House agenda for up to three years, a group of economists and public policy specialists warned lawmakers yesterday.

Legislators emerging from an hourlong meeting highlighted by the gloomy prognosis promised serious belt-tightening.

"We heard some very difficult news," said Representative Robert A. DeLeo, chairman of the House Committee on Ways and Means, who convened the forecasting session.

Beyond the immediate impact on state residents, rapid-fire economic developments spell difficult choices for Patrick as he gets ready to begin the second half of his four-year term. Patrick won election in 2006 on promises to lower property taxes, hire new police officers, and restructure the education system. Now those goals seem increasingly elusive.

"The economy is going to get worse, not better. . . . We don't know how bad it is going to get. " said Alan Clayton-Matthews, a professor of public policy at the University of Massachusetts at Boston.

House and Senate lawmakers are waiting to see what steps Patrick will offer next week to cut the budget. The governor has been meeting this week with Cabinet members, but so far he has not publicly discussed details.

But in an indication of how dire the state's circumstances are becoming, state lawmakers for the first time yesterday signaled that state financial aid to local communities may be at risk.

"Municipalities across Massachusetts should be concerned," House Speaker Salvatore F. DiMasi said yesterday. Although local aid cuts will be a "last resort," he said, "I think they should be prepared."

Local officials are already fretting over that possibility. In Boston, the City Council is planning to call today for a hearing on the city's financial state.

"Government has to find a way to make due with less or find a way to make more," said Stephen J. Murphy, chairman of the council's Ways and Means Committee, who predicted the city eventually will have to consider layoffs or a hiring freeze. "It all kind of flows downhill, and we're the bottom of the hill."

As dour lawmakers headed into their private briefing with economists, State Treasurer Timothy P. Cahill yesterday delayed, for the second time in a week, issuing $750 million in revenue bonds because of continued uncertainty in national credit markets.

Cahill had initially delayed issuing the bonds last week in hope that the federal bailout approved by Congress on Friday would unfreeze credit markets.

With the problems persisting, the state yesterday hired two New York-based banks, Goldman Sachs and Citigroup, to help it sell the $750 million in bonds, starting as early as today. Cahill said that he was afraid that if the state went out on its own and there were no takers for its bonds, it could hurt the state's image in the credit market.

"It takes a lot of the guesswork out, and this is not a good time to be guessing," Cahill said. "There is a cost to negotiating the deal, but there is a higher cost in getting killed going in and not knowing the interest rates."

The state has enough money on hand to carry it through several weeks, Cahill said, and there is another $1.8 billion in the state's rainy-day fund that could be tapped in an emergency. If the sale is completed today, the state will probably have enough available cash to last until December, Cahill said. Standard & Poor's Ratings Services said yesterday that it believed Massachusetts has enough cash to meet its needs through the end of the year.

"In the short term we can survive," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "But if this is an indication of the credit market, this is a huge deal."

State officials are developing new estimates on how far the revenues will fall, and by next week Patrick is expected to have a new estimate on budget cuts. The Department of Revenue reported last week that revenue for the first quarter of fiscal year 2009 had come in $223 million below expectations, not counting one-time payments. September was the worst of the three months, with revenues dropping $188 million.

"It's really, really hard to tell how long the state will be feeling the fiscal stress," Yolanda Kodrzycki, a senior economist and policy adviser at the Federal Reserve Bank in Boston, told reporters after the meeting with DeLeo.

Patrick has not offered any specifics on budget cuts, other than to say they will be in the "hundreds of millions" and will probably be announced next week. But many observers believe that will just be the beginning, including Widmer and others who say the state will need to cut $1 billion from its budget.

State officials over the last week have reacted to volatile developments and a barrage of negative economic news. Yesterday's meeting between lawmakers and economists was highly orchestrated. A small press pool was allowed in DeLeo's wood-paneled office for several minutes at the start of the meeting, a practice normally done when presidents meet with heads of state.

"We had to get a better grasp of what's going on in the Massachusetts economy," DeLeo told reporters after the hourlong meeting. "Every day we're talking about it. I just want to be better prepared for the future."

DiMasi and DeLeo said they plan to push the Massachusetts congressional delegation to seek a bailout for states, now that a $700 billion credit market bailout has been approved.

"They need to assist the states as well as assist the financial markets out there," DiMasi said.
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John C. Drake of the Globe staff contributed to this report. Matt Viser can be reached at maviser@globe.com.
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"Massachusetts treasurer reports a 'home run' $750m bond deal"
By Matt Viser, (Boston) Globe Staff, October 9, 2008

Massachusetts Treasurer Timothy P. Cahill said yesterday that the state was finally able to sell $750 million in revenue bonds at favorable interest rates, averting potentially dire financial problems and securing enough money to keep the state afloat until late November.

"The deal was a home run," Cahill said in an interview. "It was much better than we had even in our best estimates hoped for."

On Tuesday, Cahill had delayed, for the second time in a week, issuing the bonds because of continued uncertainty in national credit markets.

Rather than auction the bonds themselves, state treasury officials this week hired two New York-based banks, Goldman Sachs and Citigroup, to help Massachusetts sell the $750 million in bonds. Cahill said he was afraid that if the state sought bids on its own and there were no takers for its bonds, it could hurt the state's image in the credit market.

The state got a 2.2 percent interest rate on the bonds, which will have to be paid back in April and May, largely using income tax revenues that will come in next year.

"The market received it very, very warmly," Cahill said. "It's a really good sign, not only for us, but for other states across the country."

Credit markets have been nearly frozen in recent weeks, making even the most routine borrowing by big customers far more difficult. Cahill said the state would probably not need to go back to the markets until late next month or early December, to secure enough money to make its quarterly local aid payment due Dec. 31.

Meanwhile, Lieutenant Governor Timothy Murray is summoning the state's mayors to Beacon Hill tomorrow afternoon to discuss the budget shortfall the state is facing. Governor Deval Patrick, who is planning to announce budget cuts next week, has been seeking expanded powers from the Legislature that would allow him to trim local aid, a lifeblood for mayors and other municipal officials. Patrick has not ruled out making such cuts, and House Speaker Salvatore F. DiMasi said this week that while reducing local aid is a "last resort," cities and towns should prepare to cut their budgets.

On another front, state officials said yesterday that the state's pension fund has taken some big hits from the falling stock market, losing 14.9 percent of its value since the beginning of the year and taking it to levels unseen since 2006.

The fund, which covers retirement payments owed to state employees in Massachusetts, has tumbled $8 billion since January. The fund lost $4.1 billion from January through August, then took a $4 billion hit last month.

The S&P 500 index has gone down 19.4 percent over the same time period, so the state's performance has been better than average. And Massachusetts treasury officials say that while the pension fund's erosion is certainly negative news, the fund is a long-term player that will ultimately bounce back.

"Anyone who has retired or is about to retire doesn't have to worry about us making our payments," Cahill said. "We could be up $3 billion from this by the end of the month. We've been fluctuating."

The fund, down from $53.7 billion in January to $45.7 billion, has seen similar declines during past financial downturns. Cahill announced the losses during a pension board meeting yesterday, and urged board members not to panic, saying the markets will bounce back for such long-term investments.

US economic problems have spread globally, to stock markets from London to Tokyo, as well as to state and local governments.

Patrick has not offered an estimate on how deep his expected budget cuts will be, but outside analysts suggest the reductions may need to exceed $1 billion.

The Pioneer Institute, a fiscally conservative nonprofit in Boston, released a report yesterday calling for a wide variety of cutbacks, including a paring of state employment to 2004 levels, a reduction of 6,000 employees for savings of $357.5 million; elimination of the so-called Quinn Bill, which provides financial incentives for police officers to seek master's degrees, for savings of $50.2 million; and cuts of $10 million from programs that promote the state lottery.

"While using a scalpel may be preferable to the cleaver, time is of the essence," said Jim Stergios, the Pioneer Institute's executive director. "The longer we wait, the deeper the cuts will have to be."
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Matt Viser can be reached at maviser@globe.com.
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The Boston Phoenix
"Financial fallout: The devastating wall street crisis has a potential silver lining — if you’re a Massachusetts politician looking for a foothold" -"FREEFALL WINDFALL: Will Tim Cahill benefit politically from the economic crisis?"
By DAVID S. BERNSTEIN, October 8, 2008

The current US financial disaster will roil Massachusetts residents in myriad ways. But while most of us worry about our jobs, our mortgages, and our heating oil, rest assured that some in the state are thinking hard about how all of this will affect their political careers.

Massachusetts State Treasurer Tim Cahill, for example, has been keeping a significantly high profile in recent weeks, doing on-air interviews with NECN and giving quotes to almost every publication in the area. That’s no shocker — in a massive financial crisis, the guy handling the state’s billions figures to have something useful to say.

But it’s hard not to see Cahill’s ubiquity as at least partly political. Cahill, a Democrat, is much rumored to be mulling a run for governor — against Deval Patrick in 2010, or sooner if Patrick heads to Washington as part of a Barack Obama administration. “Tim Cahill hasn’t been too shy about what his ambitions are,” says one close State House observer.

Of anyone in the state, Cahill arguably has the most to gain — or lose — politically from the subprime-mortgage catastrophe that has devastated both Wall Street and the US economy. He could be seen as the one who guided the state through rocky shoals, or as the guy in charge of the patient when it started to flat line.

The last treasurer who ran for governor — Shannon O’Brien in 2002 — was pilloried for the poor performance of the state pension fund after 9/11. “[Mitt] Romney basically blamed me for the stock-market crash,” says O’Brien. “You can be doing the best job in the world, and they’re only going to see the latest numbers.”

A cynic, then, might suggest that Cahill is trying to proactively ensure that he comes through this as a hero, rather than a goat. He made sure it was widely reported, for example, that he had to go through hoops to secure funds for the state’s local-aid payments at the end of September. He told that story both to illustrate the need for congressional action and to cast himself as the man whose expert action saved towns from ruin.

Cahill also has been criticizing the Patrick administration, and the state legislature, all year. He blasted the budget they passed this summer as unaffordable — which now looks prophetic, as Patrick seeks to strip hundreds of millions from it through “9C” emergency cuts. He further criticized the numerous bond bills enacted this year as potentially overloading the state’s debt.

Those critiques haven’t made him many friends. (He was blocked from obtaining a delegate slot to the Democratic National Convention this summer.) But they could put him in a position to run in a gubernatorial race as the fiscally conservative candidate, better suited to trim budgets in tight times than the liberals currently in office.

Even so, some say that, by necessity, Patrick is about to become the face of state budget-cutting — which squeezes Cahill out on his signature issue. “[Cahill] could not possibly be more fiscally conservative than the current administration is going to be,” says Scott Ferson, political consultant with Liberty Square Group. “The first casualty of the financial crisis in Massachusetts is Tim Cahill.”

Deval-ued

Cost-cutting is likely to bring more criticism than compliments for Patrick — and, by extension, Lieutenant Governor Timothy Murray, who observers say would love to inherit the Corner Office someday. The left will decry the cuts to social services; the municipalities will likely face tough layoffs; and those still waiting for lower property taxes and more police will find those campaign pledges abandoned.

“The Patrick administration is in a tough position,” says another political observer. “They promised more than they could deliver.”

Voters may sympathize with Patrick and Murray as victims of circumstance. But critics will argue that the Democrat-run state has been irresponsibly outspending its means for years.

That could boost the chances for a Republican challenger in 2010 — most likely Charles Baker, Harvard Pilgrim CEO, who is considered by many the strongest GOP hopeful for governor. (Notwithstanding Romney’s recently stated opinion that Kerry Healey could run again.)

The financial crisis seems to be working against Republicans nationally, in large part because their party was in charge as the crisis developed. But the opposite is true here; Republicans generally stand blameless for anything that’s happened in the Commonwealth. Except, perhaps, those closely associated with former GOP governors — as Healey, for example, was lieutenant governor under Romney, and Baker was secretary of administration and finance under William Weld and Paul Cellucci.

Gubernatorial hopefuls are not the only ones who could be helped or hurt by the crisis.

Plenty of high-profile Massachusetts pols — including US Representatives who had to vote on the Wall Street bailout — have their eye on a potential opening for the US Senate. John Kerry is rumored to be in line for a cabinet position in an Obama administration, and Ted Kennedy is facing a grave illness.

Barney Frank, as chair of the House Finance Committee, raised his profile considerably during the bailout-bill debate — even meriting an unflattering homage on Saturday Night Live. His high profile, however, brings added controversy, including questions about whether he did enough to oversee Fannie Mae and Freddie Mac in the lead-up to the disaster. “When they’re doing a parody of you on SNL,” says one local elected official, “it’s never a good thing.”

That pol and others suggest that Congressman Steven Lynch may have had a Senate run on his mind when he voted against the bailout bill, twice. Lynch, observers say, would run as the fiscally conservative Democrat, and as the fighter for working-class citizens. Opposing the bailout for its rewarding of fat cats and shafting of homeowners fits that profile perfectly.

Attorney General Martha Coakley, another potential Senate candidate, has also been playing a visible role using her consumer-protection powers to go after predatory mortgage lenders.

And yet another juicy political position could be affected by the crisis, according to some State House insiders.

That’s the ongoing battle between State Representatives Robert DeLeo and John Rogers for eventual succession to Speaker of the House.

DeLeo, chair of the House Ways and Means Committee, was blamed by some earlier this summer for filling the budget with pork, in what Rogers supporters alleged was an effort to buy loyalty from House members.

That overstuffed budget is now drawing scrutiny, and some of those gifts will be scrapped by Patrick through his emergency 9C cuts.

Supporters of Rogers would love to see DeLeo blamed for the bloated budget — and to see him forced to turn down legislators who come to him with requests for the next budget.

On the other hand, DeLeo remains in a prime position to help individual legislators’ districts survive the impending tight times. And this week he held a summit with dozens of the state’s business and financial leaders. Like Cahill and many others, he is trying to navigate a path to political gain through the shoals of widespread suffering.
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To read the “Talking Politics” blog, go to thePhoenix.com/talkingpolitics. David S. Bernstein can be reached at dbernstein@phx.com.
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http://thephoenix.com/Boston/News/69620-Financial-fallout/
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"Budget gap estimated as high as $1.5 billion; service cuts, layoffs expected"
The Boston Globe Online, October 14, 2008 4:52 PM
By Matt Viser, Boston Globe Staff

Governor Deval Patrick is expected to announce Wednesday that state revenues will decline this year by as much as $1.5 billion, giving greater urgency to the sweeping budget cuts and layoffs he is planning.

The gap was created in large part by a looming shortfall in capital gains tax collections -- a direct result of the Wall Street and real estate meltdowns.

The state disclosed the revenue shortfall -- which it said could range from $800 million to $1.5 billion -- in a disclosure document filed jointly for bond investors by State Treasurer Timothy P. Cahill and Secretary of Administration and Finance Leslie A. Kirwan. The document was filed Friday but not previously released.

Patrick this morning painted a dire picture of the budget cuts he plans to announce Wednesday, saying average residents will be affected and state workers will be laid off.

“People will feel this in their services,” Patrick said at a brief news conference. “This is not about cutting so-called fat. This is going to cut muscle, because the scale of the issue requires that.”

He indicated that he had no current plans to cut money given to cities and towns. Patrick does not have the authority to make cuts in local aid, but he has asked the Legislature to grant it to him.

“We’re doing our level best not to go at either local aid or Chapter 70 [local aid to schools] funding,” Patrick said. “So far, I think we’ll be able to do that, or at least not touch it in significant ways.”

He ended the news conference as he was being asked about whether public colleges and universities would see cuts. The Globe reported last week that higher education administrators are scrambling to reduce spending after receiving word from state officials that their subsidies will be cut by an estimated 5.6 percent.

The governor said this morning that most of the decisions have already been made, but that the plans for "hundreds of millions of dollars" in cuts would not be made public until Wednesday.

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"Financial meltdown tests Patrick, Mass. leaders"
By Steve LeBlanc, Associated Press Writer, October 12, 2008

BOSTON --As a candidate for governor, Deval Patrick vowed to reinvigorate the economy, usher in an era of green technology and make Massachusetts a biotech hub -- all while fighting to lower property taxes.

Now he's facing an economic sinkhole that threatens to turn his first term into an exercise political dog paddling as he desperately tries to keep the state's fiscal head above water.

The first big test comes this week when Patrick announces hundreds of millions in budget cuts to cope with slumping revenues. The administration is also expected to lay off workers and dramatically reduce its revenue estimate for the year.

Those decisions come on top of revelations that the state's pension fund lost $8 billion since January and that State Treasurer Timothy Cahill briefly considered asking for a federal bailout for Massachusetts.

Looming over everything is the possibility that voters may pass a ballot question that would eliminate the state income tax -- putting even more pressure of Patrick and other Statehouse leaders to prove they are serious about cutting spending before election day.

"It's awful," Patrick said when asked about the budget cutting process this week. "There are a lot of very, very painful decisions in front of us."

The first round of cuts will be limited to the executive branch agencies over which Patrick has control, including the offices of health and human services, education, transportation, environment, housing and economics, public safety and labor and work force development.

Since the state is already a quarter of the way through the fiscal year -- and $223 million short of original revenue projections -- Patrick will have to make the hundreds of millions in cuts from the remaining portion of the state budget covering the executive branch, about $12.5 billion.

Patrick could also seek to dip into the state's rainy day fund, a move that would require the approval of lawmakers.

Patrick tried to set the stage earlier this month by ordering a 7 percent cut in his office budget -- a reduction of about $600,000. House Speaker Salvatore DiMasi and Senate President Therese Murray followed by announcing a 10-percent cut in their budgets, a savings of $9.1 million.

The state's other constitutional officers say they're also trimming costs.

State Auditor Joseph DeNucci said he hopes to match Patrick's 7 percent cut by ordering a hiring and salary freeze and imposing a mandatory furlough program, ordering all employees to take seven unpaid vacation days between January and June for a savings of $1.1 million.

State Treasurer Timothy Cahill said he'll also match the 7 percent cut by making administrative and personnel moves for a savings of $400,000.

Secretary of State William Galvin argued that he's in a different position than the other constitutional offices because he's not only charged with running elections, but brings in money through the portion of his office dealing with corporate filings. He said he'll try to make the cuts in areas that don't effect revenues.

"That's what I've been asked to do and that's my target," he said.

Attorney General Martha Coakley is also looking where to cut without inhibiting the office's ability to bring in revenue, according to spokeswoman Emily LaGrassa.

LaGrassa said the office generates money for the state from lawsuits and fraud investigations. She said the office has also saved consumers money by lowering gas, electricity and insurance rates.

Patrick has also asked the courts to cut back.

Joan Kenney, a spokeswoman for the Administrative Office of the Trial Court, said Chief Justice Margaret Marshall and Chief Justice Robert Mulligan have been talking with the chief justices of every trial court department.

"Every aspect of the judicial branch budget is under a magnifying glass right now," Kenney said.

Despite the economic slowdown, Patrick said he hopes to insulate some of the key initiatives he helped push through during his first 21 months in office.

"We are as much as possible looking at where we can take cuts that may be deeper in some areas so we can afford the initiatives that are important to this administration." he said.

Officials have reassured city and town leaders that local aid payments will likely be spared from the first round of cuts, but other steps said to have been under consideration included reducing the ranks of state police officers and paying them at the lower rate and eliminating the law which gives raises of up to 25 percent to officers with college degrees.

Patrick has also pushed for a series of initiatives designed to streamline government including dismantling the Turnpike Authority, consolidating state agencies, and reforming the state and MBTA pension systems.

Those initiatives would have little immediate impact on the state's fiscal woes.

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"Grim reality in state"
The Berkshire Eagle - Editorial
Monday, October 20, 2008

The Berkshires, like every other region of the state, took a body blow last week when Governor Patrick announced the specifics of his $1 billion in budget cuts to address a shortfall that is largely a product of the nation's economic freefall. Realistically, however, there is more bad news to come. The nation's economic problems are not close to being over, and neither assuredly are state budget cuts.

Wall Street engaged in a week of wild swings that are based more on perception than reality, fear than common sense. A modest bit of good news provokes mammoth climbs in the Dow, and a little troubling news precipitates a precipitous fall. With this lemming-like behavior, we see events like that of last Thursday, when the Dow took triple-digit swings in both directions before settling for a modest gain. The federal rescue should introduce stability, but it will take time for it to be put in motion and its ultimate impact cannot be entirely predicted.

The Wall Street meltdown did considerable damage to the capital gains of investors, and will continue to do so, which means they will be paying less in capital gains taxes. Governor Patrick's revenue commissioner, Navjeet K. Bal, penciled in a realistic projection of a 30 percent loss in capital gains taxes for the state in helping the governor formulate his projected budget deficit, but there are predictions that the stock market's continued bungee-jumping will mean a 50 percent decline in capital gains taxes. If that is the case, it could be necessary for the administration to make round of cuts in the $500,000 range to go with the $1 billion already made.

Locally, the cuts made are tough enough to handle without considering the possibility of more. With the governor thus far protecting aid to cities and towns and Chapter 70 funds for public education, higher education has taken a hit. Massachusetts College of Liberal Arts in North Adams will lose $718,000 and Berkshire Community College in Pittsfield will lose $464,000 at a time when enrollment is increasing in the state's already underfunded public colleges and they play an increasingly important role in building local workforces.

MCLA President Mary Grant and Paul Raverta, her counterpart at BCC, deserve praise for their pragmatic approach to the news of the cuts and their anticipation of them. Their grasp of harsh realities will help their schools handle the cutbacks, and the budget reductions could even serve as an impetus for the admirable collaborative efforts both school presidents have embarked upon.

We share the Berkshire delegation's dismay over cuts to the budget of the Massachusetts Office of Travel & Tourism given the county economy's huge reliance on the tourist dollar. That said, cuts must come from somewhere, and where are the alternatives when the governor is trying to protect homelessness services, food programs for those in poverty and fuel assistance with winter around the corner? The state's budget was already lean, so when it comes to cutting a billion dollars from it, there are no good choices.

Just as the state is making tough choices, towns and cities must do the same. Should more cuts be necessary, as appears likely, and if state aid to communities is included in the next round, there will be additional pressure on property taxes. To avoid tax increases on residents already hit hard by the economy's struggles, communities must tighten their belts.

The state had to make similar hard decisions following the stock market crashes of 1987 and 2001, and after a time, revenues rebounded and funds were largely restored. The current crisis could be worse than those, however, and residents and elected officials alike must do their best in preparing for the worst.

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Re: The Berkshire Eagle's Editorial on local aid is WRONG!

10/20/2008

Re: "Grim reality in state" (The Berkshire Eagle - Editorial, Monday, October 20, 2008): I believe the Berkshire Eagle erroneously stated the following: "The state had to make similar hard decisions following the stock market crashes of 1987 and 2001, and after a time, revenues rebounded and funds were largely restored." The reason why I believe this is because from the FY2002 through the FY2004 Massachusetts State Budgets, the Governor(s) and the Legislature(s) GUTTED local aid, including public education funding, to record low levels and have NEVER largely restored those cuts.

The Berkshire Eagle is WRONG because local aid and public education dollars are what the Berkshires largely relies on from the state government. When the Berkshire delegation sold out their region, they rewarded themselves with sizeable increases in their pay and compensation packages. In fact, "Luciforo", (& Stan Rosenberg), Peter J. Larkin, Daniel Bosley, William Pignatelli, and Shaun Kelly, (& then Denis E "Golddigger" Guyer), accepted 3 pay raises during and after the 3 years of cuts to their legislative district(s).

I cannot believe Massachusetts State Government finances! The "Big Dig" is the most expensive, costly public works project in US History. The Healthcare Reform Law is really only an unfunded liability & mandate. Lobbyists are making record salaries -- see Peter J "Lobbyist" Larkin today. Big businesses are receiving huge tax breaks and taxpayer subsidies.

In conclusion, Berkshire County is getting SCREWED by Beacon Hill's State House! And, that includes the past and current lousy Berkshire delegation, too.

In Dissent!
Jonathan Melle

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"Special laws skirt pension system: Legislature boosts benefits for some police, firefighters"
By Donovan Slack, Boston Globe Staff, October 24, 2008

It was about 3 a.m. in the Theatre District when Boston police Officer William I. Griffiths wrenched his back during a struggle with a gun-wielding drug suspect who fired a bullet that zipped past the officer's head. The injuries he said he suffered during the July 2001 arrest, a herniated disc and traumatic stress, were so disabling that Griffiths decided he could not return to the force.

But rather than applying for a disability pension, Griffiths went another route. He went to City Hall and Beacon Hill and persuaded local and state elected leaders to back a special state law granting him a much larger pension - 100 percent of his salary, tax free - than most disabled retirees receive.

The windfall added nearly $20,000 to his pension this year, which will total $2 million more over the course of his expected lifetime, all with no formal medical scrutiny required.

He is not alone.

A Globe review found 19 other Boston police officers and 11 firefighters have benefited from laws granting them the same increased pensions and benefits dating as far back as 1968. The city of Boston is paying them a total of $2.34 million per year, at least $655,000 more per year than if they were receiving disability pensions at the regular rate of 72 percent, records show.

In Griffiths's case, as in the 30 others, he also gets thousands of dollars in raises each year that other disabled retirees don't get. When he dies, his wife will receive 75 percent of his pension amount at the time, monthly, for life.

Griffiths and the others were also not required to have their injuries verified by a state panel of doctors as other disabled retirees must do. They are not subject to future evaluation of their medical conditions as other disabled retirees are. And their pensions will not be reduced if they get another job, unlike the pensions of other disabled retirees.

Fiscal watchdogs say that passing laws to grant specific individuals increased pensions and special benefits has been a common practice in Massachusetts and could be costing taxpayers as much as $125 million per year in extra pension costs.

In Boston, the special laws were backed by the City Council, Mayor Thomas M. Menino, approved by the Legislature, and signed by governors, including Republican Mitt Romney.

"It's simply unfair that people come up with trapdoors and they get treated differently," said Steve Poftak, research director and head of the Shamie Center for Better Government at the Pioneer Institute, a fiscally conservative nonprofit think tank. He suggested that such deals tarnish other public sector retirees.

"The average state pension is $22,000; the vast majority of pensioners are not getting rich," he said.

Elected officials, even though they have no expertise on disability and medical issues, say they passed the laws because of the seriousness of the injuries suffered by the beneficiaries, some of whom were shot in the line of duty.

But the process for awarding bigger pensions to people perceived as heroes lacks any overarching policy goals, standard procedures, or safeguards against abuse. Of the 31 cases involving Boston public safety personnel, only six obtained verification of their injuries by a state panel of doctors responsible for reviewing regular accidental disability applications.

In Griffiths's case, Councilor Michael F. Flaherty flipped through some medical records and looked at photos of the officer's back showing two surgical scars.

"He was banged up pretty good," Flaherty, who sponsored Griffiths's law, said in a recent interview.

Griffiths says he had nothing to lose by asking for the larger pension, which is worth $68,680 this year. If the law didn't go through, he said, he would have applied for regular accidental disability.

"I just tried to go for the 100 percent," said Griffiths, who said he still suffers disabling and chronic back pain.

Typical disability retirees, if they work in new jobs after they leave the force, must report income they earn from employment each year. At the discretion of the Boston Retirement Board, their pensions can be reduced by an amount equal to the additional earnings. Not so the beneficiaries of special pension laws. They are exempt from income reporting requirements, fraud investigations by the state, and from any future medical evaluations.

They are free to get new jobs, and some of them have done so.

Former Boston police officer Robert Welby, for example, won passage of a special law in 2005 granting him an increased pension after he was shot in the abdomen when he responded to a domestic dispute in Dorchester in 2003. He was recently seen working as a private security guard, however, during the high-profile grand opening preview of the Apple Store in Back Bay. It is unknown how regularly he works, or for what company. Welby did not respond to requests for comment.

Councilor Rob Consalvo, who sponsored Welby's special law, said he did not realize when he pushed the legislation through that it would exempt Welby from a medical review, income reporting requirements, and regular evaluations of his fitness to return to work.

"Given the information I had at the time on Robert Welby, I stand by my decision," Consalvo said in an interview this week. "That being said, I also think it's appropriate to take a fresh look at the process to address any concerns as we move forward in the future."

Menino declined to comment on the details of individual cases but said as a rule, he approves all proposals for state laws passed by the council.

"The mayor would not stand in the way of the council getting their legislation heard at the state level," said the mayor's spokeswoman, Dorothy Joyce.

Not every one of the laws has passed the City Council without problem. A fight erupted in the council chamber several years ago when Councilor Stephen J. Murphy sponsored 100 percent pension legislation for a police detective who had been shot in the face but recovered and returned to work for eight more years on the police force before asking the council for a disability pension. Another councilor, Peggy Davis-Mullen, called it a questionable, back-room deal and suggested the detective submit to an evaluation of his injuries by a state panel of doctors.

Nevertheless, the measure passed and was signed into law without any formal medical reviews in 2001.

Murphy said yesterday that he now believes all applicants for 100 percent pensions should first go through a medical panel review.

At the State House, lawmakers routinely introduce bills benefiting certain individuals by name.

The vast majority of the hundreds of measures introduced each year never pass. But about 10 percent do.

The state lawmakers who introduced the measures on Beacon Hill on behalf of the city of Boston say they are merely doing the bidding of local politicians. Representatives Martin J. Walsh, Brian P. Wallace, Kevin G. Honan and Walter F. Timilty all have sponsored the laws granting 100 percent pensions in recent years.

"We don't initiate these laws; these come up from the local government," Wallace said.

The cochairman of the Legislature's Public Service Committee, which reviews bills granting increased pensions to public safety employees, agreed.

"We have a hard time second-guessing bills that come to us with the full support of the community," Representative Jay R. Kaufman said in a recent interview.

Still, Kaufman said he is trying to tamp down the number of laws passed to benefit specific individuals by name or at least require stricter language.

For example, one law passed in June granting an increased pension to an injured firefighter in Worcester requires that he first be evaluated by a state panel of doctors and then report earnings from future jobs that could be deducted from his pension.

Governor Deval Patrick has signed into law five bills granting special pension benefits to individuals by name in cities and towns other than Boston since he took office in January 2007. He said in a statement yesterday that he considers the bills on a case-by-case basis.

"The administration does not generally believe the public is well served by making individual exceptions to a rule that is meant to apply to everyone," said the statement issued by Patrick spokeswoman Rebecca Deusser. "But, there are sometimes unique circumstances, not contemplated by the existing rules, where special measures are needed to address gaps in the law."

Though Patrick has not had to make a decision yet on any bills granting increased pensions to Boston public safety employees, he may soon get his chance.

The City Council is considering a measure introduced by Councilor Charles Yancey that would award the same increased pension and benefits to former firefighter Allen Curry that Griffiths, Welby, and the others receive.

Curry retired from the Fire Department in 1982 after he was injured while showering in a Dorchester firehouse. Another firefighter poured cleaning chemicals in a neighboring stall and Curry inhaled the fumes, damaging his lungs, records show.

His disability status stood up under review by a state medical panel and he has received 72 percent of his salary in disability pension payments ever since. If Yancey's bill passes, he would receive 100 percent of that salary, plus thousands of dollars in annual raises, retroactive to his retirement 26 years ago.

"I just think it's a case of long overdue justice," Yancey said. "It will be a substantial amount of money, but we have to ask what is fair and what is just."
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Donovan Slack can be reached at dslack@globe.com.
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"Treasurer redeposits $200m: Cahill reaches accord with Sovereign Bank on guarantee of funds"
By Ross Kerber, Boston Globe Staff, October 25, 2008

Massachusetts Treasurer Timothy Cahill said his office has returned to Sovereign Bank the remaining $200 million he yanked out last month over concerns about the bank's health.

Cahill said he made the move this week after Sovereign guaranteed the safety of the deposits, as he has been asking of all banks that do business with the state. He had previously returned $100 million of the $300 million he withdrew from the bank on Sept. 29, when Sovereign's shares were plunging as investors feared it would be the next institution to topple during the crisis sweeping the financial industry.

The treasurer also said he was reassured by Sovereign's pending takeover by Banco Santander, a deep-pocketed Spanish bank that said Oct. 13 it is buying the remaining 75 percent of Sovereign it didn't already own.

"It certainly didn't hurt their cause, because [Santander] has avoided many of the problems" plaguing other banks due to holdings in subprime mortgages and other bad assets, Cahill said in an interview.

All told, Sovereign now has about $575 million of state deposits.

Cahill's $300 million withdrawal was part of a huge exodus of customers who pulled $4.2 billion out of Sovereign during its third quarter, nearly 9 percent of its deposits. On Sept. 29, Sovereign shares fell 72 percent, to close at $2.33, and the next day Sovereign replaced chief executive Joseph Campanelli.

Its shares fell 9.2 percent yesterday to close at $2.28. Based on yesterday's closing price of Santander's American Depository Shares, the takeover values Sovereign at $2.63 a share.

Bank executives have said some of that outflow was customers spreading their money among several banks so as to stay below the federal insurance deposit level of $100,000, and that outflows eased after the FDIC this month raised its insurance limit to $250,000 per depositor.

"Deposits have stabilized since early October, and the bank hasn't seen any material deposit outflows in that time," said Sovereign spokesman Andrew Gully yesterday.

The $300 million in state funds represented money that Sovereign hadn't yet guaranteed under a new policy Cahill instituted requiring banks to collateralize state deposits. Yesterday, his office said major accounts held at other banks were fully collateralized, including about $106 million held by Citizens Bank and $30 million held by Bank of America.

Madrid-based Santander has the largest market capitalization of any bank on the European mainland. Bank officials have so far declined to discuss their intentions for Sovereign, whose 232 branches in Massachusetts and $13 billion in deposits make it the state's third-largest bank.

In a conference call with analysts on Oct. 14 Santander chief financial officer Jose Antonio Alvarez called Sovereign "an attractive entry point" into the Northeastern US market and said it is a bank "with a strong regional presence and there is potential to improve the efficiency and commercial productivity" of the bank.

At another point Alvarez said, "it's probably too early to talk about opening branches" of Sovereign. He also made references to cost-cutting and efficiencies, though neither bank would discuss if this will lead to job losses.
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Ross Kerber can be reached at kerber@globe.com.
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"Massachusetts tax collections beat revised estimates"
By Associated Press, Tuesday, November 4, 2008, www.bostonherald.com, Local Politics

BOSTON - Massachusetts revenue collections were down nearly 5 percent in October compared with the same month a year ago, but they did exceed a revised forecast from the administration of Gov. Deval Patrick.

Revenue Commissioner Navjeet Bal said today that preliminary collections totaled $1.150 billion last month, down $58 million or 4.8 percent from last October.

The state revised downward its monthly revenue benchmark on Oct. 15, the same day Patrick announced the state would eliminate up to 1,000 jobs and make more than $1 billion in cuts and spending controls to bridge a growing budget gap.

Bal said October revenues exceeded the new benchmark by $10 million.

Withholding tax collections were up 2.7 percent compared with a year ago, while sales tax collections were down 3.8 percent.
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Article URL: www.bostonherald.com/news/politics/view.bg?articleid=1130042
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"Tim Cahill challenges Deval Patrick, hints at 2010 run"
By Hillary Chabot, Tuesday, November 18, 2008, www.bostonherald.com, Local Politics

Gov. Deval Patrick could be in for a shock come election time as his chief Democratic rival Treasurer Tim Cahill refuses to rule out a primary challenge for the Corner Office.

Patrick told the Herald in August that he intended to seek a second four-year term in 2010 - and that Cahill had assured him that he would not run against the incumbent governor.

“He tells me he’s not going to do it if I’m here, and I’m planning to be here, so I assume I’m not going to have to deal with him,” Patrick said during that interview.

But yesterday, Cahill would not rule out challenging Patrick.

The treasurer said he would “most likely” run for governor if Patrick isn’t in the race, but wouldn’t shut the door on running against him either.

“I don’t want to say either way, because I honestly don’t know,” Cahill said at a meeting with Herald reporters and editors. “It would depend on the situation that the state faces. Obviously, you’d have to believe you could do a better job, but it’s a huge uphill battle to challenge someone from your own party.”

A spokesman for Patrick’s campaign declined to comment on Cahill’s remarks yesterday. The governor has repeatedly insisted he will not take a post with incoming President Obama’s administration and will instead seek re-election - and Cahill says he believes him.

Cahill said he’s less interested in running for U.S. Senate than he is in making a bid for governor. “I enjoy being the boss,” he said. “I’m more interested in what’s happening here in Massachusetts.”

With nearly $320,000 in his campaign war chest and a relatively solid political resume, Cahill would likely be Patrick’s toughest competitor. Independent Christy Mihos has already entered the 2010 race, and Attorney General Martha Coakley is another potential opponent.

Cahill has questioned some of Patrick’s economic policies and yesterday took aim at the governor’s plan to remove tolls in western Massachusetts as “irresponsible.”

He added that pushing the Big Dig debt to the Massachusetts Port Authority could hobble the agency.

“It doesn’t make economic sense,” Cahill said, adding he understands why it may be easier politically. “At some point you have to pay the bills.”

But Patrick spokesman Kyle Sullivan said, “The governor has put together a responsible plan on how to deal with a sad legacy inherited from prior administrations.”

Article URL: www.bostonherald.com/news/politics/view.bg?articleid=1133104

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Massachusetts State Treasurer Timothy Cahill during an afternoon meeting in October 2008. (Globe Staff/Jonathan Wiggs)
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"Cahill associate is under scrutiny: Legality of pact with gaming firm is questioned"
By Frank Phillips, Boston Globe Staff, January 12, 2009

Thomas F. Kelly, a political confidant and close friend of State Treasurer Timothy P. Cahill, stood to make as much as $2.4 million in fees from a deal he tried to broker for a gaming company with the state lottery, which is under Cahill's control, according to a copy of his contract.

The payment would have been made as a contingency fee to Kelly from Bingo Innovative Software LLC of Johnston, R.I., according to the contract. Such a contingency fee would be illegal under state law if regulators determined that Kelly lobbied Cahill and other state officials on Bingo Innovative's behalf.

As it was, the bid by Bingo Innovative to provide a cable TV bingo game was rejected by the lottery. And Kelly insists he was operating within the law by providing "business development services" in exchange for the potentially huge payoff - not lobbying.

But the nature of Kelly's contract and his contacts with Cahill and state lottery officials are another example of a friend of a powerful Massachusetts elected official seeking to trade on his political connections.

House Speaker Salvatore F. DiMasi is facing questions after his close friend, State House lobbyist Richard McDonough, got $1.1 million in hidden fees from one of his clients, a state computer contractor. Another close friend and accountant, Richard Vitale, has been indicted for failing to register as a lobbyist when he received $60,000 from a trade group to push legislation at the State House.

Secretary of State William F. Galvin, who is investigating the legality of Kelly's contract with Bingo Innovative, is questioning whether Kelly was acting as a lobbyist without registering with his office, as required by state law. He declined to comment specifically on Kelly's contract be cause of the inquiry, but he described the state law that prohibits so-called contingency arrangements like Kelly's as an "anticorruption statute."

"When there is a tie-in to a particularly government decision to the payment of a success-fee, you come perilously close to a kick-back or corruption act," Galvin said. "That's why Massachusetts law has prohibited these types of payment arrangements for more than 100 years."

Kelly signed a contract with Bingo Innovative in June 2007 that guaranteed him 4 percent of its gross revenues from the sale of the online televised bingo game if the Massachusetts State Lottery used its product. The contract, a copy of which has been given to the Globe, said he was to act as a "business development agent" to "create business opportunities" with the lottery.

During several years of discussion over the project, Kelly put the firm in touch with Cahill and lottery officials and attended several meetings with the treasurer and others. The commission sought bids in August 2007, but rejected the proposals submitted by the Rhode Island firm and another company, Scientific Games International - which also was represented by Kelly - because of cost issues.

In an interview, Kelly insisted that he was only providing "business development services" for the company and was not trying to influence Cahill or the lottery to chose the firm's bingo game. He firmly rejected assertions by Bingo Innovative's executives that he would have won a cut of the potential gross revenues because of their expectations he would use his close ties to Cahill to land the firm the contract.

"There is nothing illegal about that," Kelly said of his activities. "I wasn't a lobbyist for them and I did no lobbying."

Kelly, who lives in Cahill's Quincy neighborhood and has been a longtime political adviser, fund-raiser, and close personal friend, said his only contact was to ask for Cahill and his top aides for meetings, and to accompany the firm's representatives to those meetings.

"The conversations [with treasury officials] were, 'Can you get me in,' and what they thought of their deal," Kelly explained. "There was no favors asked or favors given in any of this process. . . . I was not trying to influence anything."

Grace Lee, Cahill's first deputy treasurer, said state lottery officials conduct a rigorous procurement process. She rejected any notion that the contract was subject to outside influences. She said Kelly's role had come under scrutiny because Bingo Innovative executives were angry at not getting the work. The company has filed a $20 million lawsuit against Cahill and the lottery's executive director, Mark Cavanagh, alleging that its plans for a bingo TV game were rejected unfairly.

"Any representation that the process was influenced by anything other than the merits of their submissions is patently false and should be considered an unscrupulous attempt to bolster a frivolous lawsuit," said Lee.

Lee also said the Lottery was mistaken to indicate to Bingo Innovative that it would accept a deal based on the percentage of sales instead of a flat fee. She said the Lottery has never contracted with a gaming firm based on sales, claiming such deals are questionable under state law.

The firm had offered the deal in its bid, and the commission said shortly after the Aug. 2007 bid opening, that it would consider it as an alterative to the $30 million flat fee the company also quoted. The flat fee would have yielded Kelly about $1.2 million.

Bingo Innovative's own projection for its revenues from the lottery's purchase of its copyrighted game was close to $60 million, guaranteeing Kelly a huge windfall, far more than any normal lobbying fee.

Bingo Innovative had projected $1.2 billion in gross revenues during the first three years of its game, which would be played on a special Comcast channel. Those figures are difficult to verify, according to lottery specialists, because of a lack of prior experience with Bingo Innovative's game.

Kelly said Bingo Innovative's revenue figures were greatly overstated.

"Those numbers are bogus," he said.

Bingo Innovative canceled its contract with Kelly in October after the Globe reported that Kelly was also working for Scientific Games International, which is based in Georgia.

By that time, lottery officials had judged that the Bingo Innovative proposal was superior, but found both too costly.

Bingo Innovative signed an agreement with the lottery in last April to implement a two-month pilot program to evaluate the firm's online televised bingo operation. But the pilot project never got off the ground. Negotiations began to break down in the fall.

By late December, Bingo Innovative had filed its $20 million federal law suit in which it said Cahill and Cavanagh, a Kelly protege, favored Scientific Games because Scientific executives had contributed to Cahill's campaign coffers.

Kelly had been on Scientific Games payroll secretly since 2004, getting between $3,000 and $4,000 a month, when the company won $21 million worth of contract work with the lottery.

Under pressure from Galvin, both Kelly and Scientific Games registered with his lobbying division in September.

Kelly's work for Scientific Games ended last week when the firm learned of his work for Bingo Innovative.

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"Withholding snafu pins bill on State"
By Hillary Chabot, Saturday, January 10, 2009, www.bostonherald.com, Local Politics

Taxpayers are on the hook for $1.6 million to pay for a two-decade-old state Treasury goof that let Beacon Hill lawmakers avoid a 2.9 percent Medicare deduction from their paychecks, according to documents obtained by the Herald.

Comptrollers working under state Treasurer Tim Cahill noticed the mistake, which allowed lawmakers to take home additional cash, in 2006. The news comes shortly after Gov. Deval Patrick approved a 5.5-percent legislative pay hike.

“It’s obviously bad timing, but I don’t think anyone was trying to game the system,” said Sen. Richard Tisei (R-Wakfield). “Obviously a mistake was made 20 years ago and no one knew about it.”

The treasurer’s office, which handled the paychecks of all 200 legislators and eight governor’s councilors, failed to withhold the cash when a law changed forcing state employees hired after 1986 to pay federal Medicare tax.

“The Treasury has enjoyed a good working relationship with the IRS in dealing with this matter and we look forward to resolving it,” said Cahill spokeswoman Francy Ronayne. She declined to comment further because the terms are not final.

Officials caught the mistake when payroll duties for the 208 employees moved from the treasurer’s office to the comptroller’s in 2006. Other state employees have had their Medicare tax withheld since the change in 1986.

The state must pay $1.6 million for both its own and the 208 employees’ contributions from 2005 to 2008 as part of a deal worked out with the IRS, according to the document.

The deal struck means taxpayers won’t have to pony up for the 18 years of payments missed from 1986 to 2004.

Sen. Michael Morrissey (D-Quincy) said lawmakers shouldn’t be on the hook for the missed payments because the treasurer’s office made the mistake.

Most lawmakers elected before 1986 are exempt from the deductions, and those elected after 1986 would have no way of realizing anything was wrong because the state never withheld the money in the first place, Morrissey said.

“It would be one thing if (the deduction) was there and disappeared, but it just never showed up,” said Morrissey. “If the employer made the mistake, then the employer should bear the burden of the loss. That should be true in the public or private sector.”

Lawmakers and governor’s councilors began seeing the 2.9 percent withheld in their first checks in 2009, according to the document. They will also have to pay taxes on their portion of the $1.6 million because the missed deductions count as wages.
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Article URL: www.bostonherald.com/news/politics/view.bg?articleid=1144336
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"Local pols who keep $1.6M tax ‘raise’ blasted"
By Hillary Chabot, Tuesday, January 13, 2009, www.bostonherald.com, Local Politics

Days after lawmakers got a controversial 5.5 percent pay hike, a governor’s councilor blasted them for keeping a “back pocket” raise thanks to a decades-old state treasury slipup.

The state treasurer’s office failed to withhold 2.9 percent in Medicare tax from lawmakers’ paychecks since 1986, officials recently discovered. Taxpayers now have to cough up $1.6 million to rectify the goof.

“This is basically another raise they’ve been taking for the last 20 years,” said Governor’s Councilor Mary-Ellen Manning, who said she’d pay back her portion of the mistake, or about $1,450.

“They’re all standing up and saying they’re not going to take it, but here they’ve had this in their back pocket,” Manning said.

Rep. Vinny deMacedo (R-Plymouth), who is giving his raise to charity, said he won’t pay back the Medicare withholdings because he was in the dark about the mistake.

“I don’t want to take anything that’s not mine. Anything I rightfully owe I’ll pay, but I had no idea what they state was doing,” deMacedo said.

State officials caught the mistake when the payroll duties for the 208 lawmakers and governors’ councilors were shifted from the treasurer’s office to the comptroller in 2006. Lawmakers were supposed to put 2.9 percent of their paycheck toward Medicare starting in 1986, but the treasurer’s office hadn’t made the deductions.

Under a deal hammered out with the IRS, taxpayers will pay $1.6 million for the missing deductions from 2005 to 2008. Manning said the missed deductions amount to extra cash in lawmaker’s pockets in the end - and taxpayers wind up footing the bill.

Most lawmakers elected before 1986 were grandfathered as exempt from the withholdings, and those elected after that year didn’t know they were supposed to contribute.
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Article URL: www.bostonherald.com/news/politics/view.bg?articleid=1144956
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A BOSTON GLOBE EDITORIAL
"Risky business at the lottery"
January 20, 2009

AN UNDERCURRENT of cash is eroding confidence in state government. The latest episode involves the Massachusetts State Lottery. In a convoluted arrangement set up by public relations consultant George Regan, the firm Scientific Games paid some $200,000 in undisclosed fees to Thomas F. Kelly - a close friend and fund-raiser to Treasurer Timothy Cahill - as the lottery was directing millions in ticket-printing business to the company.

During that period, Kelly also signed on with Bingo Innovative Software, which ended up competing with Scientific Games for a contract to develop a televised bingo game for the lottery. According to his contract, Kelly stood to pocket as much as $2.4 million if Bingo was chosen.

Kelly no longer works for either company. The lottery did not go forward with the bingo game. Still, big questions remain. What was Kelly's true role? Although he eventually registered as a lobbyist for Scientific Games, Kelly claims he was merely providing "business development services" to Bingo. The company, however, says Kelly was hired specifically to use his influence with Cahill to help it get the contract - and that Kelly related conversations the two had on that subject. That would make Kelly a lobbyist for Bingo, too, though he didn't register as such. If so, his payment arrangement would be illegal, since his compensation was contingent on Bingo winning the business.

Cahill, who notes that Bingo did not get the contract, says Kelly merely set up a meeting or two and introduced Bingo officials. He claims he didn't know Kelly was working for either company.

"I have never asked Tom who he represents or what business or companies he is involved with," Cahill says.

Well, then, wasn't he curious why Kelly was there during meetings with Bingo Innovative?

"I am not stupid," Cahill replies. "If someone makes an introduction, there is probably a relationship."

But it makes no difference, the treasurer insists, because he decides everything strictly on the merits.

This tangled affair demonstrates the need to strengthen the state's lobbying laws so they leave no ambiguous areas for door-openers or influence-peddlers to exploit. Further, as Secretary of State William F. Galvin suggests, executive branch officials should be required to notify his office when approached by intermediaries for interests trying to win state business.

Galvin is investigating this situation. But if his office's limited powers constrain his efforts, Attorney General Martha Coakley may need to step in. The public needs to know whether games are being played with the state lobbying laws.

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"Critics slam Timothy Cahill’s slots plan, say it doesn’t add up"
By Thomas Grillo, March 4, 2009, www.bostonherald.com, Business & Markets

The governor yesterday blasted the state treasurer’s plan to license three slots parlors, saying resort-style casinos are a much better option.

“Destination casinos bring us a bigger bang for the buck in terms of jobs and revenue,” said Gov. Deval Patrick yesterday.

State Treasurer Timothy Cahill plans to unveil his proposal for Rhode Island-style slots parlors at a Greater Boston Chamber of Commerce breakfast today, but the plan, which the treasurer’s office leaked Monday, is already drawing criticism for its combination of fuzzy math and small thinking.

The treasurer estimated Massachusetts could generate $2 billion to $3 billion in up-front licensing fees and as much as $250 million annually if 9,000 machines were allowed. The idea comes as the struggling Massachusetts Lottery, which Cahill runs, and weak tax collections have left the state facing a $1.1 billion deficit this year and $3.5 billion in budget cuts for next year.

Michael Widmer, president of the Massachusetts Taxpayer Foundation, cast doubt on Cahill’s slots projections. In good economic times, those might be realistic numbers, he said. But these are the worst of economic times and getting worse by the day.

Daniel E. Bosley, a North Adams Democrat who has opposed expanding gambling in the Bay State, said slots do not deliver on promises of instant cash.

New York was promised $400 per slot machine per day at the race tracks and they’re getting less than half of that, he said.

Richard Young, president of Casino Free Mass, said Cahill’s plan fails to consider the costs of introducing slots to Massachusetts.

But Cahill may have some powerful allies on Beacon Hill. House Speaker Robert DeLeo, who has two racetracks in his district, said he has favored slots at racetracks for years and Senate President Therese Murray called Cahill’s slots concept “intriguing.”
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Hillary Chabot and Jay Fitzgerald contributed to this report.
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Article URL: www.bostonherald.com/business/general/view.bg?articleid=1156096
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State Treasurer Timothy P. Cahill outlined his slot machine parlor plan yesterday before a committee at the State House. (Globe Staff Photo / Wendy Maeda)
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"Patrick skeptical of plan to license three slot parlors"
By Matt Viser, Boston Globe Staff, March 4, 2009

Governor Deval Patrick reacted skeptically yesterday to state Treasurer Timothy P. Cahill's proposal to license three slot machine parlors around Massachusetts, as legislative leaders quickly embraced the idea as a way to raise quick cash that could help the state navigate a recession of historic proportions.

Patrick said that he does not want immediate budget considerations to trump the benefits of his preferred gambling alternative: large resort casinos. He argued that gambling resorts, with accompanying hotels and other luxury amenities, would create far more jobs and economic development than slot parlors, offering lasting gains that he said could help offset the inevitable social costs of gambling.

"It seemed like the human costs would be less in the resort setting, and that the benefits would be greater," Patrick told reporters yesterday morning, adding later, "Whatever we do or not do is going to be with us for a while."

Lawmakers and specialists also questioned whether Cahill's estimates on revenues were excessively rosy, particularly his prediction that selling slot parlor licenses could immediately raise as much as $3.3 billion.

Nonetheless, the Cahill proposal, detailed in yesterday's Globe and highlighted at a legislative hearing, renewed the spirited debate over legalized gambling in Massachusetts. House Speaker Robert A. DeLeo, Senate President Therese Murray, and other lawmakers welcomed Cahill's plan, their rapid support a reflection of the deep budget problems facing lawmakers.

"If they're real, I'll take them," Murray said of Cahill's revenue estimates from slots, adding that she was open to looking at the idea further.

Cahill has proposed that the state sell the rights to as many as three slot parlors across Massachusetts, which he estimated could boost state coffers by up to $244 million annually through a 27 percent tax on revenue from the slot machines. In addition, licensing fees for 15- to 20-year operating rights could bring in between $2 billion and $3.3 billion in up-front payments.

The figures are significantly higher than the governor's 2007 estimate for licensing revenue, which was $600 million to $900 million.

The slot machines could be built in a matter of months, and revenues could start coming to the state before the end of 2009, Cahill said at a budget hearing yesterday.

But while slot parlors are much cheaper to build and operate than casino resorts, some questioned whether developers would really be willing to spend what Cahill predicted. Las Vegas gambling operators are suffering mightily in the recession, with empty casinos, stalled expansion projects, and plummeting stock prices.

"Two years ago they would have been flooded with applications. Right now the people who want to do it - I don't know if they can do it," David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, said when told of Cahill's proposal.

Other states that have tried to get in on slot parlors have struggled. Four years after Pennsylvania legalized gambling, only half of the state's 14 slot parlors have opened, and competition was light for some of the licenses. Maryland, which charged $50 million for slot-machine licensing fees, has struggled to sell its licenses, and some companies have neglected to submit their license fees.

"I'm doubtful in this economic climate, when the industry is feeling the impacts of the recession, whether these estimates can be realized," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "It's one thing to look at these numbers in a growing economy, quite another when we're in this global economic meltdown."

Cahill made his proposal as lawmakers grapple with increasingly dire budget news. Murray and DeLeo said yesterday that revenues are falling more than projected and could result an additional $500 million budget gap this fiscal year. That would come on top of a $2.5 billion budget hole that has already been plugged by the governor, and could result in immediate budget cuts.

Cahill laid out his slot proposal yesterday during a legislative budget hearing. He plans to further outline the plan in an address this morning before the Greater Boston Chamber of Commerce.

"I'm not suggesting that this is a solution to this year's budget problem, because it's not," Cahill said. "But it very well could be part of the answer to next year's budget problem."

The proposal is very much in flux and would need approval by the Legislature and the signature of the governor. Also, Cahill has not proposed specific locations.

The 27 percent state share proposed by Cahill is identical to Patrick's proposal for resort casinos. But Patrick's relatively low gambling tax took into account the large up-front costs resort developers would invest in billion-dollar properties. Other states have set much higher rates for smaller slot parlors. In Pennsylvania, the "racinos" have to pay 55 percent. Because Cahill believes the state would get large upfront costs from bidders, he is suggesting a lower annual tax than most other states that offer slot parlors.

DeLeo, who has advocated for slot machines at the racetracks for years, responded with enthusiasm yesterday when asked about Cahill's proposal.

"It's been an issue which I've been talking about for a number of years," he said, before entering a luncheon forum at Locke Ober. "To have the treasurer bring it back to the forefront of the discussion is something I'm very interested in. I've always been in favor of slots at the racetracks."

Others, who have been under fire from constituents for considering a 19-cent increase in the gas tax, were happy to discuss any revenue-generating proposal.

"Anything that raises nontax revenue should be on the table," said Senator Steven C. Panagiotakos, chairman of the Senate Committee on Ways and Means. "You absolutely have to look at it."

Cahill's plan does not envision giving any special rights to the state's four racetracks, although they could bid on a license.

George Carney, owner of Raynham Park, declined to comment specifically on Cahill's plan yesterday but said he was interested in pursuing slot machines at his track.

"We're pushing for the racetracks to be given slots," he said. "On what terms and conditions, I don't know. That will have to be worked out with the powers that be."
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Material from State House News Service was used in this report. Matt Viser can be reached at maviser@globe.com.
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Tim Cahill (Photo by Stuart Cahill)
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"Tim Cahill flip-flops on lottery: Urges leasing agency two years after advising against it"
By Hillary Chabot, March 4, 2009, www.bostonherald.com, Local Politics

Saying the declining state lottery can’t compete with legalized gambling in the Bay State, Treasurer Tim Cahill will today suggest leasing the agency for a $1 billion upfront boost - even though he opposed privatizing the games just two years ago.

The proposal, which has already been panned by House Speaker Robert A. DeLeo, would give the state an infusion of quick cash while insuring $900 million-per-year payments to cities and towns during a 50-year lease, Cahill maintains.

“There’s no question the lottery would be impacted (by expanded gambling,)” Cahill said while testifying on the state budget before a joint Ways and Means committee hearing yesterday. “There would be a 3 to 5 percent hit during the first five years.”

The treasurer is expected to make a pitch for leasing the state lottery to a private company at a speech before the Boston Chamber of Commerce this morning.

But in a 2007 interview with the Boston Globe, Cahill vowed to fight lottery privatization when Republican lawmakers filed a similar bill to lease the agency and former Gov. William F. Weld was lobbying on Beacon Hill to sell the cash cow.

“Usually these ideas are quick fixes to generate upfront cash and to make enormous fees for investment banks,” Cahill told the Globe. “I don’t think that’s in the state’s interest or the cities and towns’. ”

DeLeo torpedoed the idea in any event yesterday, saying, “You have to weigh the short-term benefits with the long-term benefits.’

“I think with respect to the Lottery, once we get out of the economic problem we find ourselves in, hopefully that’s going to turn around and be more fruitful and then in the long run keeping it in state control will be more beneficial,” the speaker said.

Cahill testified that the lottery, which is one of the most profitable in the country, has faced a 5.5 percent revenue drop from last year - even as it remains an impressive financial performer in tough times.

The treasurer is proposing selling the rights to three slot parlors, and said the state lottery will have trouble competing with any expanded in-state gaming.

Under his plan, the state would continue to regulate the Lottery, but the operation and investment would be private, according to a source familiar with Cahill’s proposal.
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Article URL: www.bostonherald.com/news/politics/view.bg?articleid=1156074
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"Massachusetts treasurer proposes privatizing state lottery"
By Glen Johnson, AP Political Writer, boston.com, March 4, 2009

BOSTON --Massachusetts Treasurer Timothy Cahill said Wednesday the state should think about licensing not only slot machine parlors but also the state lottery to help ease its cash crunch.

The treasurer estimated the government could reap $1 billion immediately from a private entity interested in a 50-year license to run the lottery, as well as another $900 million annually under a revenue-sharing arrangement.

Massachusetts currently faces a $1.1 billion budget deficit that could grow still, as well as $3.5 billion in projected spending cuts for the 2010 budget.

Cahill told members of the Greater Boston Chamber of Commerce he would use the lottery license and revenue-sharing money -- plus $2 billion to $3 billion more from licensing and taxing the slot machines -- to replenish the state's rainy-day fund, cover unfunded state retiree health care costs and provide a nearly $1 billion endowment for the University of Massachusetts.

"A different environment such as the one we are in today forces us to think and act differently," he told the chamber.

The treasurer runs the lottery, which last year had a record $4.7 billion in sales. But activity peaked in September, the same time Wall Street investment banks started to collapse. Cahill is now predicting that last year's $913 million in net revenue will fall to $853 million this year.

That take could even further decrease, by an estimated 3 percent to 8 percent annually, if gambling were expanded in Massachusetts.

Cahill said that drop and competition from the slot machines make it logical to consider privatizing the lottery. He said private equity firms with few places to invest their money would be attracted to the lottery's long-term revenue stream, while the state could offload its current risk for a guaranteed share of future proceeds.

The lottery has been one of the most successful in the world in terms of cost efficiency and costs in relation to payouts.

"There's billions of dollars sitting on the sidelines, waiting to invest ... and this is a pretty sure thing," Cahill said.

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The Boston Globe, Op-Ed, SCOT LEHIGH
"Cahill's false start"
By Scot Lehigh, March 6, 2009

HERE'S the good news for state Treasurer Tim Cahill.

His publicity offensive this week has got everybody talking - and the papers have spelled his name right.

And now for the bad news. His proposals have been roundly panned by both Boston dailies.

"He's basically won the Grand Slam of poor press," says one wag.

How bad has it been? Well, so half-baked have the reviews judged his policy concoctions that if the treasurer were a celebrity chef, he might well have to close the kitchen, lay off the staff, and shutter the windows at Cafe Cahill.

This is not an auspicious start for a man who, as the Globe reported this week, is giving serious consideration to running for governor next year. Others say that, privately, Cahill has been far more definitive.

"He's definitely running," says one Cahill insider. "He's putting together a team."

In an interview yesterday, Cahill told me he'll certainly run if Governor Patrick doesn't, but said he hasn't yet made a decision about challenging Patrick if the incumbent seeks reelection, as the governor says he plans to.

"If the governor is able to solve all these problems, straighten out the economy and get Massachusetts moving, he is not going to have to worry about me," Cahill said. "If things don't turn around, then we'll see."

Although he told the Globe Wednesday that if he runs, he expects to run as a Democrat, Cahill left the door open for an independent candidacy. If the GOP fails to field a serious candidate, that could give him considerable room to Patrick's right. But if a credible Republican does run, an independent candidacy by Cahill would likely help the incumbent by dividing the anti-Patrick vote.

As he mulls his future, Cahill has embarked on an obvious effort to raise his profile.

He began the week by proposing that the state grant the rights to operate three slot machine parlors. Then in a Wednesday speech to the Greater Boston Chamber of Commerce, he floated the idea of privatizing the lottery.

"He's like a guided missile seeking publicity," quips one State House observer.

Or maybe a misguided missile, for skepticism abounds about his ideas.

The deepening recession has cast considerable doubt on gambling as a budgetary remedy. But if the state does embrace gambling, destination casinos are the way to go. With them, you get more construction jobs as well as permanent hotel, restaurant, and casino employment. Slot sites would deliver far fewer of those benefits. Cahill, however, says slot parlors can be done quickly and contends that, once established, they could evolve into full-blown resort casinos.

A second problem: As the Globe's Matt Viser reported yesterday, experts on the industry say Cahill's projected $2 billion to $3.3 billion in upfront licensing fees for slot machines is significantly inflated.

And though Cahill told the chamber that Massachusetts could get as much as $1 billion initially and $900 million annually by letting a private company run the lottery, such a plan would face a large obstacle: Last year the US Department of Justice advised states that federal law bars them from privatizing their lotteries, something Cahill failed to note in his speech.

Queried about that, Cahill offered this tortuous explanation: Though he was aware of the opinion, he didn't mention it because he was only signaling that he's open to privatizing the lottery, and was not actively pushing such a plan. And besides, he believes the federal opinion, issued under President Bush, can be overcome.

The treasurer professed not to be discouraged by the criticism he's received.

"I have some different ideas," he said. "I would rather put them out there and let people shoot them down, and if I can defend them, I will defend them, and if at the end of the day we are wrong, we are wrong. The more criticism we get, the more we will think about how to overcome it."

Memo to Tim: Time for more thinking.

Certainly Cahill has every right to run for governor. Indeed, the view here is this state would benefit from more political competition.

But let's be blunt. This week, he didn't seem ready for political prime time.
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Scot Lehigh can be reached at lehigh@globe.com.
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State Treasurer Timothy P. Cahill has built up a $3 million campaign account and could add another $1 million this year. (GEORGE RIZER/BOSTON GLOBE STAFF)
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"Cahill considers run for governor: Treasurer may challenge Patrick as independent"
By Frank Phillips, Boston Globe Staff, March 5, 2009

State Treasurer Timothy P. Cahill is giving serious consideration to running for governor next year, either in a challenge to Deval Patrick for the Democratic nomination or possibly as an independent candidate, advisers to Cahill said recently.

Cahill will complete a serious assessment by Labor Day to decide what political route he will follow, first looking at his chances of wresting the nomination from Patrick as a conservative Democrat in a primary typically dominated by liberal voters. The other choice, said some of those advisers, is for Cahill to position himself as a fiscal conservative and run as an independent in the general election, skipping any primary campaign.

Cahill, in a telephone interview yesterday, said that he has made no decisions about his future and that he has not discussed his potential plans with what he referred to as his political committee. But he did not close the door on any options.

"Unless the party throws me out, I expect to run as a Democrat, if I run," Cahill said. He also pointed out his sometimes rough relationship with party leaders and activists since he first ran for treasurer in 2002, adding, "If the Democrats throw me out, we'll cross that bridge when we come to it."

Others who are part of Cahill's inner circle said the treasurer does not want to appear to be abandoning the Democratic Party at this point, particularly as he continues to raise funds from Democratic sources and because of the possibility that Patrick would not seek a second term. But they say that Cahill needs to consider running in the general election as an independent. Said an adviser whom Cahill consults: "They're very much looking at the viability of an independent candidacy."

In recent weeks, Cahill has created a buzz about his potential for challenging Patrick. He has stepped out of the traditional areas in which treasurers generally exercise their power, promoting high-profile policies that bolster his credentials as a fiscal conservative. He proposed that the state sell slot machine concessions to generate revenues to deal with unfunded health benefits for state retirees. He also advocated using the funds to set up a huge endowment fund to bolster the state's university system. Other revenues would be diverted to the state's rainy day fund.

Whatever his decision, Cahill, a 50-year-old Quincy native, could be a formidable candidate, even running as an independent. Beyond injecting himself into high-profile public policy debates, he has used his office to build a large fund-raising base, hitting up legal bond counsels and other contractors who do business with his office and the State Lottery. He already has $3 million in his war chest and is expected to add another $1 million this year, putting him in a strong financial position for a gubernatorial campaign.

Cahill has recently moved to deal with a political liability by distancing himself from Tom Kelly, one of his closest political associates and chief fund-raiser. Kelly helped guide Cahill from his post as a Quincy city councilor to Norfolk County treasurer and eventually, in 2002, to state treasurer.

Still, Cahill faces significant obstacles if he decides to run as an independent or Democrat. The state electorate has shown a general skepticism of third-party candidates; just once in the last century has a third party or independent candidate come in higher than third place in a gubernatorial race. And if a strong Republican candidate surfaces, Cahill could split any anti-Patrick vote.

In a Democratic primary, Cahill would probably run at Patrick from the right, a difficult prospect electorally. In addition, Patrick controls the state party apparatus and would be able to use it to try to prevent Cahill from getting the 15 percent of the convention delegate voters necessary to appear on the September 2010 primary ballot. Just the battle for the ballot qualification could exhaust much of Cahill's war chest.

"Running as an independent is probably the only path to the job," said Dan Payne, a long-time Democratic media consultant. "Massachusetts Democratic voters are very liberal, and the people who go to conventions are even more liberal."

Beyond that, Cahill has to contend with Patrick's high public approval ratings: 64 percent viewed him favorably in a December Globe poll, compared to 43 percent for Cahill.

Cahill's relationship with the state Democratic Party and its activists turned sour in last year's presidential primary elections when he tried to seek a seat at the national convention as an uncommitted delegate. He declined to endorse Barack Obama or Hillary Clinton. The caucus, heavily dominated by Clinton and Patrick supporters, punished Cahill by throwing votes to another candidate.

Cahill is also convinced that many in the Democratic leadership set up obstacles for his run for state treasurer in 2002, including throwing delegates to his opponents and encouraging a second candidate with the name Cahill to run in the primary.

Although Cahill's campaign committee account is far larger than the $450,00 Patrick's committee has, the governor and the state party have created a fund-raising operation that allows him to skirt the $500 donation limit. By using a special committee, the Seventy First Fund, they are exploiting a loophole in the law in which Patrick can raise $5,500 per individual per year, with $5,000 going to party accounts and $500 to his committee.

In turn, the party has paid $628,000 toward the Patrick committee's bills since the fund was created in May 2007. Cahill's political committee can only accept $500 annually from an individual.

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"Cahill slot estimates criticized: Outdated data used, analysts say"
By Matt Viser, Boston Globe Staff, March 5, 2009

State Treasurer Timothy P. Cahill's estimate that three slot machine parlors he has proposed for Massachusetts would produce $2 billion to $3.3 billion in licensing fees was criticized yesterday by gambling specialists as significantly inflated and apparently based on outdated data that did not take into account current economic realities.

Cahill also encountered problems on a second major proposal, a plan to privatize the state lottery that he unveiled yesterday morning. It is a move that has been contemplated by other states, but which the US Department of Justice has said would violate federal law.

Cahill's numbers for slot machines were based on an underlying flaw, an assumption that each slot machine would produce profit of $275 per day, which is probably too optimistic, specialists said. Cahill used that number in a financial analysis to conclude that prospective bidders would agree to pay between $665 million and $1.1 billion each in upfront fees for a license.

"Nobody's ever paid that much for a casino license," said Clyde Barrow, a casino specialist at the University of Massachusetts at Dartmouth. "I can't see anybody putting up that kind of money to license a slot parlor. This is really an eye-popper for me."

The real-world experience for states has been far less lucrative. Pennsylvania has sold licenses to operate slot machines for $50 million each, which is only 7 percent of Cahill's lower estimate.

Cahill is running into problems similar to those Governor Deval Patrick encountered last year in coming up with estimates for what expanded gambling could bring to Massachusetts. It is an inexact science, particularly in estimating how much prospective slot operators would bid on a license.

In an interview yesterday, Cahill called his numbers preliminary. "They're absolutely an estimate," he said. "But I would rather err on the side of overestimating what they're worth and get more than underestimate them and be kicking ourselves later."

"Even if the revenue is less than we thought, it's still more than we've got right now," he added.

In a breakfast speech to the Greater Boston Chamber of Commerce yesterday, Cahill proposed that the state consider privatizing the lottery, which he said would net $1 billion immediately and $900 million a year in ongoing revenues.

But an opinion issued last year by the US Department of Justice said selling or leasing a lottery to private enterprise would be illegal. The opinion, issued in October in response to a number of states considering leasing their lotteries to private companies, said federal law requires that states maintain control over all significant business decisions made by a lottery and keep the vast majority of the money.

Cahill did not mention the potential legal impediment during yesterday's breakfast speech, which captured widespread attention, but he said in an interview later that he and his staff knew about the legal problems with the plan. He said he hoped the Justice Department's position would be reversed by the administration of President Obama.

"We recognize this is a roadblock," he said. "I feel very strongly that if the president of the United States wants states to solve our problems, they should allow us to do something like this. The reason I'm doing this is so we don't have to go to the feds hat in hand."

Cahill has been using his estimate of up to $3.3 billion in slot licensing revenues to sell top lawmakers on his plan. His proposal could include a two-stage licensing system for each facility, one license for the rights to build a slots parlor and a second "concession" license to install and run machines.

Cahill's staff used a variety of assumptions and financial models to arrive at the figures, including estimating how much each slot machine would yield, how many slot machines would be installed, and what the operating expenses would be, according to a summary of the plan.

Casinos and slot parlors in other states have attracted bids that are much lower than Cahill estimates.

In December, Illinois put its 10th full casino license out to bid, and the highest bid was $435 million. The state gave the license to Midwest Gaming and Entertainment, which paid a $125 million up front and $300 million over the next 30 years to build a casino in a Chicago suburb.

Illinois has among the highest tax rates for slots in the country, at up to 50 percent. Cahill argues that developers in Massachusetts would be willing to pay more upfront costs in return for a relatively low state tax of 27 percent.

One of the flaws in Cahill's analysis, several gambling specialists said, is that he appears to be overestimating the amount of money the slots would make.

"They're taking numbers that are prerecession and applying them to a time period when we're in a deep recession," said Michael Pollock, managing director of Spectrum Gaming Group, a New Jersey-based consulting firm that last August completed a gambling study for the Patrick administration. "Clearly those numbers are out of date."

Cahill estimated profit by extrapolating from casinos in Connecticut and Rhode Island. But according to statistics compiled by Spectrum Gaming, the annual numbers for those casinos in January 2009 were lower than the ones Cahill used.

In his address yesterday, Cahill said he would divide the money that comes from licensing slot machines into thirds: A third would replenish the state's reserve account, which has been used to bolster state finances; a third would create a public higher education endowment; and a third would boost state retiree healthcare funds.
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Matt Viser can be reached at maviser@globe.com.
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A BOSTON GLOBE EDITORIAL
"Long shots from the treasurer"
March 5, 2009

STATE TREASURER Timothy Cahill's proposals to license three slot parlors and privatize the state Lottery look like desperation bets. The successful Lottery isn't broken, and the slots proposal undermines the governor's sensible plan to introduce resort casinos, which maximize job creation and economic development.

In a speech yesterday to the Greater Boston Chamber of Commerce, Cahill said his proposals could generate as much as $4 billion in upfront payments or licensing fees from private interests eager to operate slot parlors and the Lottery. Such promises are creating a lot of buzz on Beacon Hill, where lawmakers fear that falling revenues will generate a $500 million midyear budget deficit in addition to the $2.5 billion gap already identified by the governor. But Cahill's boast of $2 billion to $3.3 billion in upfront concession fees from slot machine operators seems based on a wildly optimistic view of the capital markets, especially given the current downturn in casino gambling from Connecticut to Las Vegas.

"I haven't seen any analysis that supports this [Cahill plan]," says Greg Bialecki, the state's economic development secretary.

Cahill acknowledges that many observers might find his proposals "completely out there," in his words. Still, he argues that the state's economic crisis, and support for expanded gambling within the House's new leadership, make this the right time for bold ideas. Cahill's proposal to open a competitive bidding process for up to 9,000 slot machines is certainly bold. But is it in the best long-term interest of the state? Not by a long shot.

Slot parlors are the skid rows of the gambling industry. There may be distinctions of degree, but the basic play for slots operators is to put as little capital investment as possible into the facilities to offset the high gambling tax rates levied by the state on gross gambling revenue. Rhode Island imposes a whopping 60 percent gaming tax on Twin River, a combined racetrack and slot parlor. Taxing slot parlors at 30 to 50 percent is more the norm. Cahill's 27 percent proposal runs the double risk of opening the door for second-rate gambling facilities while shortchanging the state coffers.

How to do gambling right
Massachusetts could benefit from expanded gambling. But the right way to do it is by demanding major capital investment from casino operators whose facilities should include entertainment, fine dining, shopping, and other amenities capable of attracting tourists, out-of-state visitors, and the local residents who now spend hundreds of millions each year in Connecticut's world-class destination casinos.

Governor Patrick's plan to license three such casinos held out the prospect of 20,000 permanent jobs in addition to healthy licensing fees and nearly $600 million in annual casino-related tax revenue, including meals and hotel taxes. Cahill's plan offers unrealistic upfront licensing fees, marginal employment, and up to $243 million in annual revenue for the state.

Unlike destination casinos, slot parlors are also an instant draw for so-called convenience gamblers with marginal incomes. Divorced from the wider entertainment crowd, slot parlors could quickly become a breeding ground for problem gamblers and other social ills.

This is a disappointing comedown for Cahill, who was one of the state's earliest and most ardent proponents for building world-class destination casinos in Massachusetts. He now says that he is trying to protect the state's taxpayers in an economic climate that is hostile to resort casinos. He also fears that the Legislature might move to license slots at the state's four racetracks for much less in upfront fees. Desperation permeates his plan. And it isn't warranted, according to at least one industry leader. Richard Fields, an owner of Suffolk Downs and the co-developer of the Hard Rock Casino in Florida, has issued a statement claiming "complete confidence" in his ability to finance and develop a world-class casino complex in the Boston market.

Selling the golden goose
Cahill's openness to privatizing the Lottery is also perplexing. He fears that the Lottery, which he runs, won't be able to compete with expanded gaming. But his own studies suggest that the Lottery would likely suffer only temporary setbacks, and those could be offset by requiring casino operators to ensure that the Lottery, which returns about $900 million annually to cities and towns, be held harmless.

When Republican legislators proposed privatizing the Lottery in 2007, Cahill put up a ferocious defense, reminding them that Massachusetts sets the "gold standard" among the nation's lotteries and already operates as a public-private partnership, with 8,000 small businesses that sell the product.

"Why would you want to mess with the best-performing lottery in the country?" he asked at the time. That is still the question. Cahill had it right the first time. He should fold this weak hand.

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"Still no easy money"
The Berkshire Eagle - Editorial, Friday, March 06, 2009

State Treasurer Timothy P. Cahill's proposal to sell licenses for three slot machine parlors, a life raft grabbed onto by legislators hoping to avoid tough budget decisions, doesn't hold up under the most modest scrutiny. The various gambling proposals floated in recent years do not offer an easy way out of the state's economic problems, and serve only as a distraction from the search for genuine solutions.

The treasurer asserts that licensing fees for the three parlors would generate between $2 billion and $3.3 billion for the state, numbers that appear to have been pulled out of thin air. Illinois, as reported by the Boston Globe, sold a full casino license in December for $435 million, a mere fraction of what Mr. Cahill claims a modest slot machine parlor would go for in Massachusetts. The treasurer believes parlor developers would be attracted by a relatively low proposed state tax rate of 27 percent, but this would reduce the slot revenues that are the point of the proposal.

Mr. Cahill's optimistic revenue estimates from the slot parlors are pre-recession in origin, and don't reflect the current harsh economic realities that have caused casino giants Foxwoods and Mohegan Sun in southeastern Connecticut to lay off workers as revenues plummet. The slot parlors wouldn't even have the questionable benefits of Governor Patrick's resort casinos, which he claims would enhance the communities they are located in. Low-rent slot parlors prey upon the poor, not high rollers, and are magnets for crime.

The pipe dream of gambling millions, however, has appeal for legislators who can't face the uncomfortable reality of the need for a substantial hike in the gasoline tax. In the Berkshires, this issue is being drawn simplistically as a battle between west and east.

As this page has noted for about a decade, Boston's Big Dig unfairly drained state and federal tax dollars from the Berkshires. However, the debt of this boondoggle continues to be a drag on the finances of the entire state and it must be retired.

Yes, most of the revenue from a gas tax hike will go to the eastern end of the state, which is where most of the people are. The tax, however, will generate needed highway revenue for the Berkshires, which toll increases on Route 93 will not do. When the Big Dig debt is retired, it will continue to do so. Western residents should also keep in mind that when former Governor William Weld eliminated turnpike tolls in this end of the state as a political stunt he gave drivers here a break that eastern Massachusetts residents did not receive.

The avoidance of difficult decisions and the false hope that something can be gained without sacrifice are among the reasons the state and nation are in the dire situations they are in today. It is time to put aside childish dreams of gambling megamillions and acknowledge that we must pay off past blunders and pay for the rehabilitation of our broken infrastructure.
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www.topix.net/forum/source/berkshire-eagle/TQQVIF9AKLCDBVJD9
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Critics say video slots like these at Foxwoods are especially addictive to some. (JANET KNOTT/GLOBE STAFF/FILE 2003)
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"Glitzy video slots seen as particular addiction risk"
By Carey Goldberg, Boston Globe Staff, March 7, 2009

Among addiction specialists, video slot machines have come to be known as the "crack cocaine" of the gambling industry.

The mechanical wheels of spinning fruit used in the old one-armed bandits have gone the way of the typewriter. Modern-day slot machines are computerized sound-and-light shows so skillfully designed to keep players glued to their seats that some have been known to wear adult diapers to avoid bathroom breaks.

As state Treasurer Timothy P. Cahill promotes the idea of licensing three slot parlors in Massachusetts, some mental health and gambling specialists warn that the newer machines deliver such potent gambling highs that they can be particularly addictive.

The video slots allow players to gamble incredibly rapidly, winning or losing a game every several seconds without a break, to the point that their brains are undergoing the equivalent of an intravenous drip of an intoxicating drug, said Bob Breen, director of the Rhode Island Hospital Gambling Treatment Program.

"When you sit in front of the slots, especially if it's 24/7, there are no cues for you to quit," he said. "There's no time to stop and think. You're getting that constant drip, and people describe it as being in the zone," he said.

The gaming industry defends the computerized slots, saying their widespread use has not led to increased addiction problems.

But in 15 years of clinical experience, Breen has found that gambling descends into pathology much more quickly among slots players than among people who bet on sports, races, cards, or lotteries.

It tends to take just a year, as opposed to up to five for other types of gambling, said Breen, who has published two studies that analyzed more than 200 addicted patients.

It is not only the speed of the games that makes so addictive the playing of new-style electronic gaming machines, which include video lottery and electronic poker games along with high-tech versions of traditional slots. The machines produce a highly intense and continous experience for players, said Natasha Schull, an MIT professor who has studied the machines, their designers, and their players.

There is no waiting for the horses to run or the wheel to stop spinning, she said. And the machines have been cramming more and more betting possibilities into each wagering moment, so that a nickel machine might actually allow 100 bets of a nickel at one push of the button.

"It's like playing 100 machines at once," she said.

Brain studies have shown that gambling causes the release of dopamine, a feel-good chemical that spurs the desire to repeat a pleasurable behavior and that is involved in drug addiction. The pleasure comes not just from winning, but from the process of playing and anticipating a possible win.

"Worldwide evidence shows that slot machines tend to be more problematic than most other types of gambling, in terms of addiction," said Mark Griffiths professor of gambling studies at Nottingham Trent University in England. In some European countries, he said, up to 80 or 90 percent of the calls to help lines for gambling addiction now concern slot-machine problems.

Overall, there are perhaps 30 different ways in which electronic slot machines keep players playing, Griffiths said, including their use of lights, colors, "ka-ching!" sounds, familiar television characters such as those in "The Simpsons," and rapid-fire payouts. "It's the kitchen-sink approach," he said.

One trick: Though the machines generate their winning or losing combinations randomly, they also tend to be programmed to make it look as if players have a great number of near-wins, said Roger Horbay, president of Game Planit Interactive, a Canadian company that develops educational tools to prevent problem gambling. "You get the impression your odds are good, you're about to win," he said.

Horbay, a former addiction counselor, and Breen both say that slots gamblers they have treated tend to differ from other gambling addicts, who often have preexisting psychiatric or life problems that put them at risk for addiction.

After slot machines came to Ontario, Horbay said, "what stuck out for me was that a lot of these folks had never had a problem before they met a machine."

Cahill has argued that slot machine parlors would not generate any more social problems than the resort casinos proposed last year by Governor Deval Patrick; both have a revenue model that relies heavily on slot machines. And, he says, people are gambling in other states anyway - Rhode Island has slots emporiums, and Connecticut has casinos - and bringing slots to Massachusetts would allow the state to establish a fund to treat gambling addictions.

"All we're saying is to let Massachusetts people do what they want with their money in their state, as opposed to having to drive out of state," Cahill told reporters this week. "We're not looking to exacerbate the problem, just try to capture it here in the state."

Some also dispute whether the machines are more of a problem than other forms of gambling.

"We don't believe any one activity is more addictive than any other," said Christine Reilly, executive director of the Institute for Research on Pathological Gambling and Related Disorders, which receives most of its funding from the gambling-industry-supported National Center for Responsible Gaming.

"What the research is telling us now is that addiction is a relationship between a vulnerable person and the object of addiction, which can be just about anything," she said.

She pointed out that despite the huge growth in the gambling industry in recent years, gambling addiction in the United States has remained steady at about 1 percent of the population, with an additional 2 to 3 percent having a gambling problem that falls short of full-blown addiction.

Holly Thomsen, spokeswoman for the gambling industry's leading trade group, the American Gaming Association, cited those unchanging figures, as well.

"They put the lie to the premise that these machines are causing more addictions," she said. The machines "are clearly in more locations than they've ever been, and yet the studies keep coming back the same."

Schull countered that while addiction may be relatively rare in the general population, a number of studies have found that problem gamblers generate between 30 percent and 50 percent of the revenue from machine play, indicating that the figures cited by the industry understate the addiction's impact.

The gambling industry "promotes the idea that there's a small group of people who are predisposed and the rest of us can gamble normally," she said.

But machine manufacturers aim to maximize their profits by "getting people to sit there as long as possible and gamble as intensively as possible," she said.

While they may not intend to produce addicts, Schull said, they can.
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Matt Viser of the Globe staff contributed to this report. Carey Goldberg can be reached at goldberg@globe.com.
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www.boston.com/news/local/massachusetts/articles/2009/03/07/video_slots/
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Players at some of the nearly 3,000 electronic games at Philadelphia Park Casino and Racetrack in Bensalem. (Scott Lewis for The Boston Globe)
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"A far cry from Foxwoods, but these no-frills casinos pay big: Slot parlors, such as Treasurer Cahill has proposed, have proved a $900m cash bonanza for Pennsylvania"
By Matt Viser, Boston Globe Staff, March 15, 2009

BENSALEM, Pa. - It's a little past 6 o'clock on a vanilla Monday night in March and Philadelphia Park is slammed. There are men in sweat suits, women with cigarettes dangling from their mouths, senior citizens with canes - all hoping the numbers and symbols on the screens in front of them match up just right.

They haven't come for the $3.50 hot dog at Grab-N-Go. They're not here to shop at the only store on the premises, a gift shop selling candy, cigarettes, and hats.

They're here, really, for just one thing: penny slots.

"We're old. We need something to do," shrugged Blanche Riffas, a 65-year-old retired postal worker from Willingboro, N.J., who with her husband was leaving $400 poorer. "This is a hobby for old people."

It is facilities like this one, located just north of Philadelphia at a horse track not unlike Boston's Suffolk Downs, that state Treasurer Timothy P. Cahill and House Speaker Robert A. DeLeo have in mind for Massachusetts. For years, DeLeo has pushed to install slot machines at the state's racetracks, while Cahill put forth a plan last week calling for as many as 9,000 slot machines by auctioning three licenses.

Here at Philadelphia Park, which is 15 miles from downtown, there are no hotels with the requisite terry cloth bathrobes, no celebrity chefs padding through their namesake restaurants, no theaters to view concerts and Broadway plays.

Doesn't matter. The slot parlors in Pennsylvania are doing brisk business using a model that is remarkably uncomplicated: cramming a building full of slot machines, playing loud music over a stereo system, and sending scantily clad waitresses around with drink trays. Last year alone, the slots brought nearly $900 million to state government coffers in a gambling tax, and the facilities have created more than 6,000 permanent jobs.

And while casinos in gambling meccas like Las Vegas have seen a massive decline in the economic downturn, the revenues here have been rapidly growing. They are taking hold after opening just two years ago, overcoming stiff competition from full service casinos over the border in Atlantic City.

"From a revenue standpoint, these casinos are doing very well; month over month they're seeing growth," said Doug Harbach, spokesman for the Pennsylvania Gaming Control Board, the state agency that regulates the industry. "And if you look at the numbers in Atlantic City, they're being impacted greatly because we have casinos here."

In 2004, Pennsylvania lawmakers legalized up to 61,000 slot machines at 14 facilities throughout the commonwealth, which could give Pennsylvania more slot machines than anywhere outside Nevada. Seven have opened so far, and two more are scheduled to open later this year.

Governor Edward G. Rendell was the chief advocate, winning a difficult political fight by arguing that the slots would produce as much as $3 billion in revenue annually to put toward economic development, keeping the ailing horse racing industry afloat, and reducing residents' property taxes.

The slot parlors have to pay little money upfront - only $50 million - but they have to agree to one of the steepest tax rates in the country, 55 percent. Cahill has proposed an opposite approach for Massachusetts, asking for a large amount of money upfront - as much as $1.1 billion apiece - in exchange for an annual tax rate of 27 percent.

A wide variety of gaming interests bid on the Pennsylvania licenses, including tribes like the Connecticut-based Mashantucket Pequots who operate Foxwoods; large Las Vegas-based casino conglomerates like Las Vegas Sands; and smaller gambling companies like MTR Gaming Group.

Most of the locations in Pennsylvania have drawn little outcry, in part because most have been located at racetracks, far from neighborhoods and in areas already accustomed to gambling and the traffic.

But the two slot parlors that are slated for Philadelphia, a city that prides itself on being the home of the Liberty Bell and Independence Hall, not slots and video poker, have been mired in controversy.

Foxwoods, which was chosen to build one of two standalone parlors, faced such strident neighborhood opposition for its waterfront location that it has been looking elsewhere, possibly converting two floors of a downtown Burlington Coat Factory. Another building it has been eyeing is just two blocks away from the Liberty Bell.

"This is a predatory business that the state not only legalizes but promotes," said Jethro Heiko, a 36-year-old founder of Casino-Free Philadelphia who lives about 300 yards from where one of the casinos is proposed to be built. "Most cities that host casinos become known only as cities that host casinos."

The 55 percent cut that Pennsylvania gets from the slot revenues essentially makes the state a majority shareholder, and the move has paid dividends.

The seven slot parlors brought in $1.6 billion in gross slot revenue last year, meaning the state made $888.6 million. There have been 6,200 permanent casino positions created so far, along with 17,000 construction jobs to build facilities or retrofit old ones. It typically costs slot parlor owners in the tens of millions or hundreds of millions to erect the parlors - nowhere near the $1 billion Governor Deval Patrick once imagined for full-fledged resort casinos in Massachusetts.

Harrah's Chester Casino and Racetrack, south of Philadelphia and about 10 minutes from the airport, built a $430 million facility that focuses so little on the amenities that its high-end restaurant is closed three nights a week. Even the Temptations Buffet is closed on Monday and Tuesday.

The demographic is a noticeably older one, at least on one recent weekday. At about 4 p.m., a reporter counted 35 walkers, canes, and wheelchairs during a walkthrough of the casino floor, which is about the length of two football fields. There is a gift store that sells an odd assortment of items, including porcelain puppies, Philadelphia Eagles seat cushions, and camcorders.

"I'm retired, and I don't want to sit at home looking at the television set and listening to my wife," Joe Peruto, a 79-year old retired accountant who lives about 15 minutes from the slot parlor, said between puffs of his cigar. "It's just something to do."

Cahill estimates that Massachusetts could reap $244 million in annual slot tax revenues by licensing three slot parlors. The treasurer, who also oversees the Massachusetts State Lottery, has said the state should consider privatizing the lottery, though he doesn't think the introduction of slots would affect lottery gambling much over the long term.

The Pennsylvania Lottery, which started in 1972, has continued to increase statewide but has fallen in most counties where there is a slot parlor, according to a legislative report issued last year.

The slot parlors are not the tourist destinations that casinos in Las Vegas or even Connecticut are. Almost all of the license plates in the parking lots are from Pennsylvania and New Jersey. And while several locations will soon open and others, including Philadelphia Park, are expanding, the clientele is unlikely to change.

"For us it's a day out, a trip," said Jack Fine, a 67-year-old who about once a month drives 90 minutes to Mount Airy Casino Resort in the Pocono Mountains. "You're in a fantasy world; you can get away from your worries, your problems."

"Plus," he added, while playing two slot machines, one with his finger the other with his cane. "There's always the lure that you can win $10,000 on a $2 bet."
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Matt Viser can be reached at maviser@globe.com.
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"Cahill facing ethics inquiry: $21m lottery pact, friend's tie at issue'
By Frank Phillips, Boston Globe Staff, March 24, 2009

State Treasurer Timothy P. Cahill is facing a state ethics inquiry for awarding a $21 million state lottery contract to a company that was secretly paying Cahill's close friend and fund-raiser, Thomas F. Kelly, tens of thousands of dollars in consulting fees, according to multiple people who have been briefed on the investigation.

Investigators from the state Ethics Commission interviewed Cahill this month about his decision in 2004 to award the contract to Scientific Games to make scratch tickets, despite a recommendation from his own staff that Scientific Games receive less state work, said two of the people who have been briefed. Both spoke on the condition of anonymity because Ethics Commission investigations are confidential.

The investigators also have collected e-mails, campaign finance reports, and other documents, the people said. The investigation follows a Globe story in August that detailed Kelly's work on behalf of Scientific Games and Kelly's relationship to Cahill.

Cahill's office did not respond to a request for comment. The treasurer, addressing the issue in the past through a spokeswoman, has said that he was unaware of Kelly's financial relationship with Scientific Games.

Kelly also declined to comment. The Ethics Commission, which makes it a practice not to confirm or comment on investigations, also would not comment.

The commission's inquiry comes at a politically sensitive time for the Democratic treasurer, who is considering running for governor next year, either as a Democratic primary challenger to Deval Patrick or as an unaffiliated candidate in the general election.

Ethics Commission investigators have asked at least one person about Cahill's level of knowledge of Kelly's financial relationship with Scientific Games and about political contributions the company's executives made to the treasurer.

At the time the contract was under consideration, Kelly was pushing Scientific Games to raise funds for Cahill's campaign account, said a person who worked with Scientific Games to win the contract. "He was after the company to throw a fund-raiser," said that person, who only spoke on the condition of anonymity.

That person said Scientific Games executives resisted the request, saying they would run a fund-raising event after Cahill made the decision on the contract.

Three months after the Lottery Commission gave the firm the work, Scientific Games' chief executive, A. Lorne Weil, held a fund-raiser in Manhattan at the Water Club, a pricey restaurant on the edge of the East River. Campaign reports show that Weil and his associates raised nearly $20,000 for Cahill's campaign committee at the Oct. 26, 2004, event. Cahill, as treasurer, chairs and controls the commission.

Scientific Games said in a statement last week that it was chosen to continue its work because of the quality of its services. The company is the leading producer of scratch lottery tickets in the world, and it has contracted with the Massachusetts lottery since its creation in the early 1970s.

"Scientific Games won these contracts through competitive processes because we offered technical superiority and the best value," the statement reads. It would not respond to questions about its fund-raising activities or to questions about whether Kelly made requests of the firm's executives to donate to Cahill.

The ethics inquiry comes in the middle of a new bidding process in which Scientific Games is seeking another multiyear contract to develop instant games and print tickets. The state's instant ticket lottery is considered one of the highest performing in the world when measured on a per-capita basis, with $3.3 billion in annual sales. Scientific Games has also been prominently mentioned by state Treasury officials as a possible bidder on licenses to operate slot parlors under a plan that Cahill proposed this month.

A Rhode Island gaming firm, Bingo Innovative Systems, filed a $20 million lawsuit against Cahill and the lottery's executive director, Mark Cavanagh, in December, charging that Scientific Games has been granted a "most favored contractor status" based on the firm's fund-raising for Cahill's political committee. It described it as a "pay-to-play" scheme.

The lawsuit cited the Globe's report in August of Kelly's role helping Scientific Games. It also cited the fund-raiser in New York. Cahill aides have said the charges in the lawsuit are "outrageous" and counter that the allegations are tainted because they are coming from a company that is in a contract dispute with the commission.

At the time the contract was up for rebidding in 2004, Kelly was collecting $3,000 monthly payments from Scientific Games. The money was not paid directly by the company, but through Scientific Games' public relations adviser, Regan Communications, which then billed Scientific Games for Kelly's payments, according to invoice documents the Globe obtained.

Overall, Kelly collected about $200,000 from the company between late 2003 and late last year, when Scientific Games fired him after it learned - through a Globe story - that he also had contracted to consult with Bingo Innovative Systems. He and the company said he did not lobby, but after the Globe's August story and under pressure from Secretary of State William F. Galvin, Kelly registered as a lobbyist for Scientific Games in 2007 and 2008.

Kelly, while on Scientific Games's payroll, signed a contract with Bingo Innovative in 2005 and again in 2006 in which he stood to make as much as $2.4 million. The fees would be generated from a deal the firm and he were trying to broker with the Massachusetts Lottery Commission for a televised bingo game.

According to Globe interviews and documents supplied by Bingo Innovative, Kelly, beginning in late 2003, arranged and attended several meetings for its executives to meet the treasurer, both in his office and at fund-raising events that he threw for Cahill.

Galvin's office is investigating Kelly's Bingo Innovative arrangement. Contracts based on success fees in lobbying are illegal under state law. Kelly said that he acted only as a "marketing agent" for the firm and his contacts with the treasurer and that the commission's staff did not constitute lobbying. Galvin said last week that his investigation is hampered because of a lack of documentation and the amount of time that has passed since the activities took place.

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"State scratches $100M from books: Lotto sales, treasury funds plummet"
By Hillary Chabot, Tuesday, March 24, 2009, www.bostonherald.com, Local Politics

The Lottery and treasury investments have hemorrhaged revenue at an alarming rate in the past five months, blasting a new $129 million hole in the state budget after an already gasp-inducing fiscal freefall, according to new figures obtained by the Herald.

Treasurer Tim Cahill has also drastically scaled down his revenue estimates for next year by at least $100 million, said a source who reviewed the new figures.

The Lottery’s total revenue estimates have nose-dived from $1.025 billion in October to $954 million last week thanks to the crippled economy and a steep drop in instant ticket sales. Out of the estimated Lottery profit, $853 million is targeted for local aid.

“The credit crunch, the market and the fear in the economy. That’s the drop in that number,” said Lottery executive director Mark Cavanaugh. “We’re expecting flat revenues for next year, too.”

Gov. Deval Patrick struggled to close a whopping $2.5 billion shortfall in the budget earlier this year. Cities and towns who depend on the Lottery for state funding are already reeling from a $128 million hit to local aid due to those cuts.

“There are some municipalities that, quite frankly, I don’t know how they’re going to make it,” said Somerville Mayor Joe Curtatone. “This year has already been extremely difficult, and moving forward next year there will be a lot of tough choices.”

Cahill’s department has also been hit by a slump in interest rates and stock sales from the abandoned property division. Cahill originally estimated $357 million in revenue for this year’s budget, but has reduced that amount to $291 million.

“Interest rates have plummeted during this economic downturn and as a result, interest on the stabilization fund is lower. This is exacerbated by the fact the balance of the fund is lower because of the authorized draw-down,” said Cahill spokeswoman Francy Ronayne.

Paul Brachman, director of research at the watchdog Beacon Hill Institute, said the treasury shortfall has “sort of a spiraling, ratcheting effect. Any additional loss cranks up the pressure and makes closing the gap that much more difficult.”

Cahill has also dialed back expectations for next year’s interest and stock earnings from $342 million to $234 million.

The fiscal 2010 budget due this spring already carries a nearly $4 billion deficit. “It seems like the bottom continues to fall, and that’s the problem,”said House Ways and Means Chairman Sen. Steven C. Panagiotakos (D-Lowell).
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Article URL: http://www.bostonherald.com/news/politics/view.bg?articleid=1160657
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"State trumps town's veto of keno at restaurant: After 7-year fight, Lottery Commission intervenes"
By Eric Moskowitz, Boston Globe Staff, April 3, 2009

COHASSET - DiNero's, an Italian restaurant and bar known for fist-sized shrimp and family-friendly prices, has endured seven years of bad luck, situated in a town where the officials are not keen on Keno.

But after countless rounds of debate, costly renovations, and expensive appeals, restaurant owner Frank Plotner was surprised yesterday when the state Lottery Commission took the rare if not unprecedented step of awarding him a Keno license despite repeated denials by town leaders.

The town's objections to allowing a Keno operation had gone on too long, said state Treasurer Timothy P. Cahill, who chairs the commission and oversees the lottery. Cahill said he was unaware of another community where the state awarded a lottery franchise over the wishes of local officials.

"It's obvious that the town doesn't want Keno, but it's unfair," Cahill said.

Although the state is openly debating whether to license slot machine parlors and casinos, local opposition to gambling can still run strong. And Cohasset, known for its high-priced housing and ocean vistas, has resisted the state in the past. Before accepting a commuter rail line through town, for instance, residents insisted that the state provide extra-wide parking spaces for large sport utility vehicles.

DiNero's eschews exclusivity, with its $14.95 broiled lobster, twice weekly Italian nights, and website slogan, "Elegance without the cost!" On the town line, it draws heavily from Hull, a more modest community.

Given Cohasset's steadfast opposition, Plotner said he was resigned to thinking that he could not fight Town Hall. Unaware that the commission was voting on his case yesterday, he was incredulous when a reporter told him the news.

"Are you sure this isn't a day-late April Fool's joke?" he asked. "I never thought this day would come."

Plotner tried to bring Keno to DiNero's in 2002, shortly after he bought out a partner. He had enjoyed success with Keno at other bars and restaurants he owned in Boston and on the South Shore and wanted to extend it to the Cohasset venue, which was a low-ceilinged Italian restaurant with a dark, mirrored dining room, a bar that sat 10 people, and a tiny parking lot.

Neighbors objected, and Cohasset's selectmen rejected Plotner's request on the grounds that DiNero's was too small and lacked adequate parking. He appealed, but the Lottery Commission sided with the town in 2004.

Plotner then spent more than $1 million on the establishment, expanding the parking lot to hold 40 cars and building a new bar and lounge, with high ceilings and soaring windows, a three-sided marble bar, and a fireplace. He was sure that the changes would appease local officials.

In May 2005, Cohasset's town manager wrote Plotner's lawyer and told him a second application could be received more favorably, "based on the new circumstances associated with the establishment and the significant change of membership on the Board of Selectmen since the original objection to the Keno license was made."

But residents again objected, and the selectmen denied Plotner's request.

"They gave this excuse and that excuse," Plotner said.

Yesterday, after more appeals, the Lottery Commission voted to overrule Cohasset. State law and court decisions give towns the authority to block Keno, but grant veto power to the commission, "in the public interest."

Selectman Frederick R. Koed, who represented Cohasset's board on the matter, said he still considers DiNero's an inappropriate site for Keno, based on parking, traffic, and other concerns from neighbors.

"We're disappointed to hear that the Lottery Commission has overturned the selectmen's decision," said Koed, who did not know whether the five-member board would vote to appeal the decision in superior court.

Maria Plante, a neighbor who has consistently opposed the Keno applications, said lottery officials should have respected the selectmen's decision. Plante said the renovations at DiNero's - which met local planning board requirements - did not resolve parking and traffic issues, and that Keno is inappropriate for an area where homes share space with businesses.

"We love it here. We spent our whole heart and soul building a beautiful community, and I just think that gambling has no place" here, said Plante, who raised six children in the house she and her husband built 50 years ago. "Put it somewhere else, where there's no houses around and people can go and spend all night and drink and play Keno."

Keno, a lotto-style cousin to Bingo, generates about $750 million in annual sales, through its traditional video terminals and a Keno-to-Go version in which players must check numbers on the lottery's website. The 7,500 agents who carry one or the other earn an average of $40,000 a year.

At DiNero's yesterday, regular patrons said Plotner had done everything the town asked over the years.

Richard Abbadessa, a retired Cohasset police sergeant who owns commercial buildings near the restaurant, said the objections of neighbors put selectmen in a difficult position. He chose his words carefully: "The town of Cohasset is . . . very conservative."

On the far side of the bar, retired diesel mechanic John Dolan was more direct: "You're in Hingham, Duxbury, Scituate; the people are 'uppies,' " said Dolan, who drives from Quincy once a week for the clam plate washed down with a black Russian. He explained that uppies are affluent people who don't want change in their community, whether traffic lights or rail lines. "They don't want to disturb anybody."

Plotner wore a wide grin yesterday, hand-shaking and back-slapping regular patrons as he spread the news through his establishment.

In the hallway, near oil paintings composed by his late mother, Plotner was on the cusp of speculating about why the selectmen rejected Keno when his lawyer, Gregory V. Sullivan, pulled him away for a moment.

He returned, smiling: "He said I should be very nice to the town and very appreciative of the town for giving us this opportunity.

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"Lottery ponies up $300G for Tim Cahill suit"
By Hillary Chabot, Friday, April 3, 2009, www.bostonherald.com, Local Politics

The State Lottery Commission yesterday approved up to $300,000 to defend Treasurer Tim Cahill against what his lawyers call a “baseless” lawsuit claiming Cahill favored Scientific Games International over another company because of political ties.

Cahill’s lawyer, former state Attorney General Scott Harshbarger, said the federal lawsuit used a recent ethics investigation into Cahill as the basis for their claim.

“A lot of their facts are gleaned from the headlines. The timing was such that they were able to glom onto this (investigation),” Harshbarger said.

The $20 million lawsuit, filed by Bingo Innovative Systems, also names Lottery executive director Mark Cavanagh and claims the pair favored Scientific Games in exchange for campaign donations to Cahill.

The lawsuit comes as Cahill is considering a high-stakes run for governor.

“This was filed as a personal attack on the defendants, who were performing their official duties,” Harshbarger said.

According to Lottery attorneys, the state entered into negotiations with Bingo Innovative Systems last year for a free pilot program for TV bingo games, but the company later said it was interested in only cell phone and Internet games.

The state backed out of the pilot deal, prompting Bingo to file the lawsuit in December.

Lottery general counsel Charles McIntyre pointed out that neither Scientific Games nor Bingo Innovative Systems won the contract in question.

“This complaint is absurd,” McIntyre said. “You don’t negotiate with people who take hostages. That’s what this is.”

The Boston Globe reported last week that Cahill is under an ethics investigation for awarding a $21 million state contract to Scientific Games while they were paying Cahill’s buddy and fund-raiser Thomas Kelly.

The legal contract approved yesterday with the firms Mintz Levin Cohn Ferris Glovsky & Popeo and Proskauer Rose is for up to a year.

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"State pension drops GMO fund: Double-whammy compounded losses for Massachusetts"
By Beth Healy, Boston Globe Staff, April 9, 2009

Big losses in a cash fund run by one of the state's most venerable money managers set off a ripple effect that cost it a prominent client - the Commonwealth of Massachusetts' giant pension fund.

Grantham, Mayo, Van Otterloo & Co. was fired by the $36 billion state pension fund yesterday over soured investments in asset-backed securities that were battered amid the credit crunch last year. The firm is run by renowned investor Jeremy Grantham, one of Wall Street's most famous bears, who holds his company out as a stalwart of conservative investment principles.

The losses in question were triggered by a cash fund that invested in asset-backed securities, which can include corporate and mortgage-related debt and securities, and home equity loans.

But the state pension fund was invested in a different GMO fund, its Emerging Country Debt fund.

Trouble was, GMO had moved a large portion of the Emerging Country Debt fund assets into the cash fund, called Short-Duration Collateral.

Both funds had steep drops last year, compounding the losses to the emerging markets investors.

The Emerging Country Debt fund plunged 30.1 percent in the 12 months ended in March, according to its website. To deal with customers wanting their money back because of the fund's poor performance, GMO moved up to 19 percent of its assets to the cash fund, according to a state pension official.

Then the cash fund blew up, too, dealing a double-whammy. The Short-Duration Collateral fund lost 14.7 percent in the 12 months ended March 31, according to Grantham, Mayo's website, while its benchmark index gained 3.4 percent in that period.

In regulatory filings, a number of GMO's fixed-income funds say they invest "a substantial portion" of their assets in the Short-Duration Collateral fund.

"In this environment, that hurt investors," said Michael Travaglini, executive director of the state pension fund, which had $228 million in GMO's Emerging Country Debt fund.

Grantham, Mayo's spokesman declined to comment yesterday. The firm says it manages $85 billion for its clients.

It continues to run another $500 million for the state in emerging market stocks.

The state pension fund invested $200 million in Grantham, Mayo's emerging debt fund in 2004 and stands to get its $228 million back, once the fund's liquidity problems have been resolved. But the investment was worth $345 million at its peak in October 2007, Travaglini said.
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Beth Healy can be reached at bhealy@globe.com.
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"State seeks reward in distressed investments: Pension fund is wading deeper into credit markets"
By Beth Healy, Boston Globe Staff, April 15, 2009

In the wreckage of the credit markets, investors are starting to look for opportunities. Count the state pension fund among them.

The $36 billion retirement fund for state workers is nearly tripling its potential exposure to distressed debt investments this year - mainly in beaten-up corporate debt - to $800 million. That's a small slice of the total portfolio, at 2 percent. But it's a sign that large investors are looking for places where money can be made, after a crushing year in virtually every realm of the market.

"We're not making a bet on distressed debt, but we think there's opportunity there," said Michael Travaglini, executive director of the fund, called Pension Reserves Investment Management.

The $800 million will be invested with firms that specialize in corporate distressed debt. Last year the fund allocated $300 million to such investments.

However, the pension fund is not venturing directly into the array of new funds started recently to take advantage of steep declines in the value of distressed mortgage securities - many of them based on the subprime loans that have been the undoing of the financial sector. For instance, the state fund last fall passed on an offer from New York investment firm BlackRock Inc. to invest in a new bank-loan fund. BlackRock is participating in the US government's plan to buy up troubled mortgage assets.

"A lot of people are out raising distressed debt funds, many of whom don't have track records in our view," Travaglini said. The state pension fund does other business with BlackRock, in fixed-income investments.

Instead, the Massachusetts fund will likely have other exposure to other types of distressed debt through its hedge fund holdings and investments with Pimco, the bond manager, officials said.

Calpers, the California state pension fund and the nation's largest public pension fund, says it, too, is "looking at distressed opportunities in various portfolios given the current market conditions."

Indeed, the flood of distressed debt in the market has prompted scores of new funds to try to reap profits in the sector. Eighteen private equity firms raised nearly $23 billion in distressed-debt funds in 2008, according to data provided by Thomson Reuters, up from the eight firms that raised $9 billion in 2007. Other players also have raised funds, and some firms, such as Goldman Sachs, are planning to spend parts of giant private equity funds on distressed debt investments.

The state pension fund is planning to allocate $1.5 billion to private equity again in 2009, as it did in 2008, even though that sector is going through a difficult time. In private equity, funds acquire companies and overhaul them, with a goal of taking them public or reselling them at a profit. With the public markets depressed and bank lending at a standstill for the past year, there have been few deals by private equity firms and no stream of gains being returned to investors, such as pension funds.

At a meeting of the pension board last Wednesday, the value of the fund's private equity portfolio was marked down between 10 and 15 percent as of Dec. 31. Travaglini expects those negative adjustments to continue for at least two more quarters.

"There's a lag," Travaglini said. "We've heard plenty of bad news in the public markets - now the private market news continues to worsen in the short term."

The pension fund had lost 33.3 percent in the 12 months ended Feb. 28.

The pension fund last week also named its first new consultant in more than two decades. Ennis Knupp & Associates of Chicago will replace the fund's longtime consultant, Cliffwater, and will be evaluating the portfolio in the coming months. The review could lead to manager changes late in the year or early in 2010.
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Beth Healy can be reached at bhealy@globe.com.
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"Casino gambling back on the table"
By Matt Viser and Eric Moskowitz, Boston Globe Staff, April 16, 2009

As lawmakers prepared a state budget yesterday with the deepest cuts in memory, Senate President Therese Murray offered a future remedy of her own.

"Ka-ching," Murray said, jerking her arm downward, as if she was pulling the lever on a slot machine.

With that simple motion, made in front of a hotel ballroom packed with Boston's business elite, Murray sent the most emphatic statement to date that casino gambling will be back on the legislative calendar this fall before state officials who are favorably inclined, to say the least.

"We need the revenue," Murray told members of Greater Boston Chamber of Commerce in a question-and-answer session that followed a decidedly drier speech. "To see that over $900 million leaves the Commonwealth every year and goes to Connecticut and Rhode Island for gaming, I think that even if we could pick up $700 million of that, we would all take that."

Murray's sentiments were echoed around Beacon Hill yesterday by officials who said that the change in House leadership and the economic crisis battering state tax collections have pushed the Legislature closer than at any point in recent memory to expanding gambling.

"I think it's more [a question] of when than if, and in what form," said Treasurer Timothy P. Cahill, who proposed licensing up to three slot parlors around the state. "It seems as if the stars are aligning, especially with the change in leadership in the House."

But in the unity over the concept, there remains significant disagreement in the form that legalized gambling would take. Governor Deval Patrick has been an ardent supporter of resort-style casinos, and his previous proposal, defeated in the House last year, called for three licenses in different parts of the state.

House Speaker Robert DeLeo, whose district includes Suffolk Downs and Wonderland racetracks, has expressed strong backing for slot parlors, with the most likely venues being the state's existing dog and horse racing tracks. Cahill, who oversees the lottery, has supported auctioning three licenses for slot parlors. Murray has not detailed her preferences.

"The governor is comfortable with casinos and the speaker is comfortable with slots, so in order to get something done, I think we're going to have to compromise some and maybe do a little of both," said Representative Brian P. Wallace, who supports expanded gaming.

The departure of Salvatore F. DiMasi, the House speaker and gambling opponent who resigned in January, has brought many more supporters "out into the sunshine," added Wallace, a Democrat whose district straddles South Boston and Dorchester.

Patrick said in a brief interview that legislative leaders have shown interest "in having the conversation."

"I think it will come later in the year," he added.

DeLeo said he is open to discussing casinos, not just slots at tracks, or "racinos."

"It's obviously a very controversial subject matter," DeLeo said, in a meeting with Globe reporters and editors yesterday. "We have to try to get it as right as we can the very first time out of the box."

The speaker cautioned that gambling is not "the end-all" to the state's economic woes: "I look at it as one source of revenue that we can tap into as a Commonwealth," he said.

Amid the moves toward casino gambling, opponents said they hope the economic crisis does not make lawmakers grasp for the promise of casino revenue without considering related ills, such as gambling addiction, or associated costs. They also warned of other states that have seen reality fall short of projections, and pointed to Las Vegas, where gambling conglomerates are struggling financially.

"Whether we ultimately end up doing it or not doing it, it is a huge decision for Massachusetts, because it sets us on a course that no other state has been able to return from," said Representative Daniel E. Bosley, a North Adams Democrat and vocal gaming opponent. "Once you do it, it's done."

Richard Young, the president of Casino Free Mass, warned of hidden costs to gambling and said casinos could "become our next Big Dig." Laura Everett, the group's vice president, cautioned about the "predatory" nature of modern slot machines and said Murray's arm gesture was misguided.

By delaying any floor debate until fall, which all parties detailed as the scenario, it means that the Legislature can pass the controversial 2010 budget, which starts July 1, without entangling it in the casino question.

Even with swift approval, casinos or slots would be unlikely to generate revenue for the upcoming budget, given the time needed for lawmakers and officials to establish regulatory oversight and for operators to build their gaming facilities.

Murray has asked two lawmakers - Senator Michael W. Morrissey, a Quincy Democrat, and Senator Stanley C. Rosenberg, an Amherst Democrat - to lead negotiations from the Senate.

Morrissey has been a vocal advocate for expanded gambling but described himself as a casino "realist," not an enthusiast.

"I'm of the wagon-train theory. The wagons have already circled, and we're the ones they have circled," Morrissey said. "If you can't beat them, you want to join them - but you want to join them in a way that makes some sense, creates some jobs, generates revenue, and protects the people of the Commonwealth."

DeLeo said the House is already studying the issue. Representative Brian S. Dempsey, a Haverhill Democrat and the House chairman on the Joint Committee on Economic Development and Emerging Technologies, has been reviewing reports and meeting with proponents and opponents.

"I have an open mind," said Dempsey.

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"Massachusetts Legislature State losing revenue online"
By Matt Murphy, The North Adams Transcript Boston Bureau, 4/20/2009

BOSTON -- As state politicians ponder hikes to the sales tax, gas tax or income tax to counter a deepening financial crisis, hundreds of millions of dollars in revenue for the state are disappearing into cyberspace each year.

Bay State consumers typically pay a 5 percent sales tax on most purchases made in the Commonwealth, be it a new plasma television or a set of golf clubs. But as lawmakers consider raising the tax to 6 percent to generate an extra $750 million, more than $500 million could be going uncollected on items bought online by residents at sites such as Amazon.com.

Changing the way retailers tax online purchases will require action at both the state and federal level. Faced with bleak alternatives, however, state lawmakers are being forced to take a closer look at Internet sales and are calling on their colleagues in Washington to do the same.

Online retailers are exempt from charging sales taxes in states where they do not have a physical presence, thanks to a 1967 U.S. Supreme Court ruling known as Bellas Hess v. Illinois. The ruling was later upheld in 1992 in a similar case called Quill Corp. v. North Dakota, in which the court cited the burden on mail and Internet companies of having to comply with complex, varied tax codes from state to state.

"Our members, Massachusetts brick and mortar retailers, compete every day with both the Internet and New Hampshire. We’re not ones to go out and advocate for more taxes, but if we’re going to tax a product, we want to see a level playing field," said Bill Rennie, vice president of the Retailers Association of Massachusetts.

At least seven states, including California, Indiana and Minnesota, have challenged this by passing laws requiring national chains such as Border Books, which operate both online and brick-and-mortar stores, to charge sales tax online. Courts in Ohio, Pennsylvania and Connecticut, however, have ruled against such laws in those states.

The Center for Business and Economic Research at the University of Tennessee has estimated that states lost as much as $30 billion in 2008 because they were not able to collect taxes on remote sales, with Massachusetts losing as much as $539 million.

New York became the first state in 2008 to take on Internet-only companies like Amazon by passing a law that says Web retailers must collect taxes if they have sales affiliates in the state that generate at least $10,000 from the retailer. Affiliates are defined as individuals or companies that are paid a commission for linking to the retailers Web site.

New York’s law is currently being challenged in court.

Technically, Massachusetts residents are still required to pay "use taxes" on purchases made online at the end of the year, but forcing people to comply with this statute has proven difficult.

"You just can’t collect use taxes. It’s impossible," said Scott Peterson, executive director of the Streamlined Sales Tax Project.

The Streamlined Sales Tax Project is a multi-state compact, organized through the National Governor’s Association and the National Conference of State Legislatures, that seeks to get states to create uniform sales tax codes in order to spur Congress to pass a law overturning the Supreme Court and requiring all retailers to collect and remit sales taxes to the states where their products are delivered.

The compact does not specify tax rates but does require states to agree on reporting methods and definitions, such as whether a marshmallow is a general food or candy. It also prohibits price thresholds like the one Massachusetts uses on clothing when the tax is only applied to clothing items costing more than $175.

So far, 22 states have reformed their tax codes and joined the compact, with Wisconsin on track to join the group next month.

In Massachusetts, lawmakers have shown interest in joining the compact, and even participated in drafting the regulations of the SSTP, but have yet make the necessary reforms to the state’s tax codes. A special corporate tax committee that studied the issue voted 14 to 1 in 2007 to support implementation here.

"It’s really not going to work unless it’s uniform and the federal government takes action. But I would expect a vote to join sometimes this year," said state Sen. Steven Panagiotakos, D-Lowell, chairman of Senate Ways and Means.

The Department of Revenue estimates the state could collect up to $15 million more in sales taxes immediately if the state were to join with retailers who voluntarily participate in the multi-stage compact.

DOR Commissioner Navjeet Bal has drafted a report for the Legislature to consider this year.

"It can be implemented if the Legislature wants to do it," said Robert Bliss, a spokesman for the DOR.

State Sen. Richard Moore, D-Uxbridge, and state Rep. Mark Falzone, D-Saugus, are leading the charge on Beacon Hill, where momentum seems to gaining as lawmakers look to squeeze every available penny out of the current tax system.

Moore introduced and helped pass a resolution in the Senate earlier this year, calling on Congress and the state’s 12-member delegation to support the Main Street Fairness Act, a federal law that would require the all online retailers to collect sales taxes.

The lead sponsor of the bill in the U.S. House has been Rep. William Delahunt, D-Quincy.

Moore has also filed legislation to bring Massachusetts in line with the regulations agreed upon in the SSTP, and Falzone has done the same in the House.

Nine state lawmakers signed on to Moore’s resolution this session, including Rep. Cory Atkins, D-Concord, and many more interviewed support the idea.

House Ways and Means Chairman Charlie Murphy, D-Burlington, signaled his willingness to study the issue just this week in an editorial board meeting with Lowell Sun reporters and editors.

"We want Massachusetts to become a member because they will have a better sales tax system, and all Congress has to do is say these states have done enough work to require retailers to collect sales taxes," Peterson said.
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www.topix.net/forum/source/north-adams-transcript/TANF9SGVA7LHFR0NJ
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"Letter: Ethics Commission closed Cahill investigation"
By Boston Globe Staff, April 23, 2009

The state Ethics Commission has closed an investigation into allegations that state Treasurer Timothy P. Cahill awarded a $21 million state lottery contract to a company that was secretly paying his close friend and fund-raiser tens of thousands of dollars in consulting fees.

Cahill's office released a letter this morning from the Ethics Commission that said it had undertaken "a comprehensive review" of the allegations and determined that "this matter does not warrant further action at this time."

"Therefore, this file is closed," said the letter, which was stamped at the top with the word "confidential."

The Ethics Commission would not confirm or deny that there even had been an investigation of Cahill. It keeps all complainants and investigations confidential unless it "makes a finding that there is reasonable cause to believe that the law has been violated," said David Giannotti, a commission spokesman.

The Globe reported in March that the commission was investigating Cahill and the allegations about the payments to his close friend and fund-raiser, Thomas F. Kelly. The article, which ran on the newspaper's front page on March 24, cited multiple people who have been briefed on the investigation.

Cahill issued a statement today saying he was "pleased with the outcome of this inquiry" and thanking the commission for "their professionalism and for recognizing that the State Treasury conducts business in a fair and equitable way across the board.”

The Globe story in March said that Ethics Commission investigators interviewed Cahill about his decision in 2004 to award the contract to Scientific Games to make scratch tickets. The probe followed another Globe story in August that detailed Kelly's work on behalf of Scientific Games and Kelly's relationship to Cahill.

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"State revenues continue free fall: Collections at least $300m short"
By Matt Viser, Boston Globe Staff, May 1, 2009

State revenues are continuing to collapse, falling short by at least an additional $300 million in April and leading state officials yesterday to predict possible cash shortages, budget cuts, more layoffs of state workers, and perhaps additional tax proposals to bridge the growing gaps.

Senate leaders say the state appears to be on track to fall as much as $365 million short in the current fiscal year, on top of a similarly sized deficit the governor announced just two weeks ago. The additional shortfalls come after a deficit of more than $2.5 billion has already been closed in this fiscal year's budget. Even big infusions of financial aid from the federal government, courtesy of President Obama's stimulus package, have not been enough to plug the holes.

"Every day it gets worse and worse," said Senator Susan C. Fargo, a Lincoln Democrat.

The situation has grown so dire that, in a highly unusual move, Governor Deval Patrick is planning to refile his budget proposal for next fiscal year to reflect the toll the economy has taken since his initial budget request in January.

The picture is expected to continue worsening into the next fiscal year, which begins July 1. Senators are readying a fiscal year 2010 budget that may use an estimated $3 billion to $3.5 billion decline in revenues from the original projection for fiscal year 2009 - a stunning 16 percent decline in revenues because of the recession.

Meanwhile, State Treasurer Timothy P. Cahill warned yesterday that the state treasury could be depleted of all its funds before the end of the fiscal year, which could mean delaying or lowering payments to cities and towns, or draining more from the state's rainy day fund.

"We're starting to sincerely worry about the cash flow and making all our payments at the end of this year," said Cahill, who projected the state could actually be in the red for several days in over the next two months. "It's fallen off the cliff. It's literally fallen off the cliff."

The tumbling revenues - which have consistently fallen short all year, even failing to meet the state's reduced expectations - will put even greater pressure on Patrick and the Legislature to cut programs or raise taxes. The discussions are bound to raise tensions among Democrats on Beacon Hill, who have been at loggerheads all week over which taxes to raise and how much to raise them.

The House has approved an increase in the state sales tax from 5 percent to 6.25 percent, but Patrick has threatened to veto it unless lawmakers also approve a series of ethics, pension, and transportation overhauls.

Patrick sent out a one-page summary to state lawmakers yesterday, detailing his "deep reservations" on raising the sales tax. Senate Republicans responded by circulating their own one page summary - titled "The Real Story" - that pointed out what they see as Patrick's shortcomings on each issue.

House Republicans tried unsuccessfully to delay budget deliberations until next week, when lawmakers will have firmer estimates on April revenue figures.

"We're in a free-fall here," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation. "The collapse of revenue is so huge that all of the options seem impossible - cuts of that magnitude or additional revenue of that magnitude."

Senate Democrats met for nearly three hours yesterday behind closed doors to discuss the budget forecast, and emerged projecting that their budget would use revenue estimates up to $1.5 billion below the House budget, which has spurred wide protests from social service groups.

State senators have generally avoided any discussion of raising taxes, saying they are weighing a wide range of options.

"We've got a big problem," said Senator Steven A. Tolman, a Boston Democrat. "And we can't tax our way out of it."

Just two weeks ago, Patrick announced he was planning to cut an additional 750 jobs from state government and furlough 5,000 executive branch employees for up to five days. That was the third time in seven months Patrick had announced emergency budget cuts.

April revenue figures, which will be officially released next week, are estimated to fall between $365 million and $465 million below expectations, said Senator Steven Panagiotakos, the chairman of the Senate Committee on Ways and Means. He also estimated that May and June revenues would fall by $200 million to $300 million.

"We have chased the number," Panagiotakos said. "There's been three downward revisions and we still haven't gotten to the bottom yet. It's just an indication of the economy continuing to deteriorate."

The Senate plans to begin its budget deliberations over the next few weeks. Several State House officials said the Senate would end up using a revenue estimate of $18 billion to $18.5 billion, although Panagiotakos would not specify which figure he would use.

Patrick and House lawmakers built their budgets around an estimate that the state would bring in $19.5 billion next year.

"The governor's budget," Senate President Therese Murray said yesterday, "is about $1.5 billion out of whack."

Just as the House and Senate debate their own budget proposal, Patrick is planning to come up with a new revenue estimate and refile his budget in the next few weeks, according to Leslie Kirwan, secretary of administration and finance.
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Matt Viser can be reached at maviser@globe.com.
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The Boston Globe, Quotes of note, May 2, 2009

"It's fallen off the cliff. It's literally fallen off the cliff."
State Treasurer TIMOTHY P. CAHILL, on state revenues

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Michael Widmer, president of the Massachusetts Taxpayers Foundation. (AP file photo)
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"State budget to be 'doom and gloom' for years to come"
By Matt Viser, Boston Globe Staff, May 5, 2009

Massachusetts residents should brace themselves for several years of rapid declines in state spending, which will cause budget problems beyond even the dire warnings in recent weeks. And state lawmakers are running out of adjectives to describe the problems.

The state’s commitment to health care reform, its funding levels to cities and towns, and the amount of money that goes to education could all be dramatically restructured, according to state officials and economists who spoke during a widely-anticipated revenue hearing held today by the Senate Committee on Ways and Means. Nearly half of the 40-member Senate attended the hearing, held in a packed conference room with four television cameras.

Several economic experts who testified at the hearing advised state officials to prepare for at least four years of shrinking revenues. Michael Widmer, president of the Massachusetts Taxpayers Foundation, said state tax collections would not return to 2008 levels until at least 2014.

"This is going to be the worst fiscal crisis in the state's history," Widmer said.

The declines will require Senate budget writers to reduce their revenue estimates for fiscal year 2010, which begins July 1. Governor Deval Patrick and House budget writers based their budgets by on estimates that the state would get $19.5 billion in tax revenues next year.

But economists today said that estimate should be reduced as low as $17.7 billion.

“Even with additional revenues, how do you fill those numbers?” Senate President Therese Murray told reporters. “How do you get to those numbers? It’s very depressing ... it's going to be doom and gloom.”

Current spending for this fiscal year also must be dramatically scaled back. Treasurer Timothy P. Cahill said state spending will outpace incoming state revenues by $335 million in May and $717 million in June. Even if the state stopped paying all of its employees, Cahill said, it would not be enough to solve the current year's budget problems.

The rapid decline is putting further pressure on the need to raise new taxes, as well as to revisit casino gambling.

Murray said gambling revenues would not arrive in time to balance next year’s budget but added that gambling revenues could help solve future budget problems.

The economic woes are having another impact: state lawmakers are running out of adjectives to describe how bad it's getting, using "catastrophic," "doom and gloom," and "very depressing." Senator Steven C. Panagiotakos, chairman of the Senate Committee on Ways and Means, was asked to rank how bad the situation is and a scale of one to 10.

"Ten being the worst?" he said. "This is a nine or a 10."
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Matt Viser can be reached at maviser@globe.com.
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Massachusetts, Mississippi pension funds suing over loss"
By Associated Press, May 9, 2009

JACKSON, Miss. - Mississippi and Massachusetts pension systems are suing to recover $123 million they claim was lost when the Royal Bank of Scotland Group illegally sold 38 million shares of stock without revealing massive debts that nearly made the company collapse.

The lawsuit claims the stock deal violated US security laws.

US District Judge Deborah A. Batts ruled Tuesday that the Mississippi Public Employees' Retirement System and the Massachusetts Pension Reserves Investment Management Board will be co-lead plaintiffs because they lost the most money. The class-action suit was filed in January in the Southern District of New York.

London-based Royal Bank of Scotland is the parent company of Citizens Financial Group, based in Providence.

A spokeswoman said yesterday the bank would defend the lawsuit.

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"Cahill yielded on pension issue in '04: Says legislators advised against reforms"
By Frank Phillips, Boston Globe Staff, May 12, 2009

State Treasurer Timothy P. Cahill backed down in 2004 from a push to curb retirement abuses by lawmakers, after top legislative leaders on Beacon Hill privately objected to the changes, Cahill said.

Cahill said he received a visit from Representative John Rogers, House Ways and Means chairman, who was sent by House Speaker Salvatore F. DiMasi to tell him to abandon his quest to eliminate termination pensions for lawmakers.

Termination pensions allow legislators and other elected officials to collect early, enhanced retirement benefits if they are voted out of office. The law has also been stretched by the state Retirement Board to allow lawmakers who step down voluntarily to get the special lifetime benefit, equivalent to one-third of their salary.

Rogers, joined by another lawmaker and Cahill ally, Representative Ronald Mariano, told Cahill that House members opposed the initiative, Cahill and Mariano said in interviews.

Sending Rogers, whose Ways and Mean Committee was in charge of setting the state budget, was a not-so-subtle warning of possible financial consequences. At the time, Cahill was seeking additional money for the operations and staff at the state Lottery.

In an interview, Mariano said lawmakers were upset by what they considered Cahill's bid to make political hay out of the pension issue.

"It was contentious," he said. "It was the tenor of the report that people didn't like."

Mariano, whose political ties to Cahill are rooted in their home city of Quincy, denied that he or Rogers conveyed any warnings to Cahill that his budget would face cutbacks if he did not back off his threat to end their pension perk.

"We tried to get him to see the wisdom," Mariano said. "We just laid out our position, saying to him, you have a lot of big salaries over here and the legislators who are only making $50,000 or $60,000 a year need those benefits."

Rogers did not return a call seeking comment. DiMasi could not be reached for comment.

The message was clearly heard. Cahill quickly abandoned the plan to end lawmakers' use of termination pensions. He said yesterday that Rogers and Mariano convinced him of the political realities and that the Senate was also lined up against the changes. In fact, Cahill said, he and his staff could not find one lawmaker to file the bill on his behalf.

"I didn't think of it as intimidation in terms of the budget," Cahill said in an interview yesterday. "They [Rogers and Mariano] came down as friends to tell me it was not going anywhere and that it would tick off everyone in the building. I appreciated it."

The two lawmakers made their visit as Cahill was saying that pension reform was a priority for him. Cahill said at the time that he especially objected to an interpretation of the law by the State Retirement Board, which he oversees, that allowed legislators to win enhanced pensions after deciding not to run for re-election.

"It bothers me because termination means termination," Cahill told Commonwealth Magazine in 2004. "Quitting or leaving is not being terminated. . . . It is being twisted to help the higher-up people."

Cahill, who has privately told colleagues he plans to run for governor even if it means challenging Governor Deval Patrick for the Democratic nomination, criticized Patrick last week for "grandstanding" in his push to revoke such retirement benefits.

A legislative conference committee is expected to report out pension law changes within days or weeks that are aimed at dealing with a variety of special pension provisions, including enhanced benefits for lawmakers.

A key point of contention is the push by the Senate and Patrick to deny early, enhanced "termination" pensions for state employees who retire in future. The House argues that the Legislature is legally handcuffed because retirement benefits for current workers are contractual obligations that cannot be taken back.

In recent weeks, Globe articles have highlighted how the State Retirement Board granted pensions to 10 former legislators who voluntarily gave up their seats. Two of them got their pension in 2003 when Cahill, as treasurer, chaired the board. He said he was "just trying to follow the law," although he felt it was a stretch. The Cahill-led board later denied another such pension.

Patrick's legal counsel asked the Retirement Board yesterday to repeal the termination benefits it had given to lawmakers, including those approved on Cahill's watch.

"I am writing to respectfully request that the board promptly take action . . . to correct the errors and recoup any excessive amounts that have been paid to the former legislators," wrote Ben T. Clements, the governor's chief legal counsel. He urged action "given the relative clarity of the error and the erosion in public confidence that results from these and other pension abuses."

But Cahill said he will seek an opinion from Attorney General Martha Coakley on the legality of such action.
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Sean Murphy of the Globe staff contributed to this report.
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FROM THE EDITOR: "A dose of reality from Cahill"
southcoasttoday.com - Editorial, May 17, 2009

If you're one of the many for whom commuter rail represents SouthCoast's Holy Grail, you probably want state Treasurer Timothy Cahill banished to his home in Quincy for the rest of his political life.

Cahill said the chances that Massachusetts will build commuter rail by 2016 are "bleak" and that "it is virtually going to be impossible" for the state to build it in the foreseeable future.

This from a man who would be governor? From someone who will need every vote he can get in Southeastern Massachusetts if he is to challenge Deval Patrick or anyone else for the big office?

"I may not be electable if I tell people the truth," he said.

And the truth according to Tim Cahill is that Massachusetts cannot afford what it will cost to bring commuter rail service to New Bedford and Fall River when the Legislature is going to have to find $2 billion to $3 billion in spending cuts to meet the new economic realities — including a three-year slump in taxes on capital gains because of investor losses in the stock and housing markets.

Say what you will, but it took guts for Cahill to come to New Bedford and announce the bad news in New Bedford before this newspaper's editorial board.

This newspaper, like most business, government and civic institutions, has long pushed for commuter rail service to the region. There can be no denying that Southeastern Massachusetts has been left waiting at the station as billions of dollars, much of it wasted, poured into the Big Dig project in Boston, and hundreds of millions more went to rail service around the hub. Our tax dollars helped pay the toll for economic expansion in greater Boston, and it sure as heck should be our turn at the table.

Cahill doesn't deny that, either.

But the MBTA has $8 billion in long-term debt and a $160 million budget shortfall, and he doesn't believe the federal government will come to the rescue (even though the new federal transportation secretary, Republican Ray Lahood of Illinois, is a big supporter of rail service).

"The federal government doesn't trust us anymore because of the Big Dig," Cahill said.

Across SouthCoast, there was a nearly unanimous outcry against Cahill's assertion that the numbers just don't add up in a way that Massachusetts will be able to afford the new train, even though he called it a "top priority."

And the locals are right. Commuter rail will fuel economic growth here in a way that perhaps nothing else can, including casino gambling.

However, a state treasurer has a fiduciary responsibility that other elected officials do not. He has to tell the truth about our financial situation as a commonwealth, and I admire him for having the courage to tell a hard truth right here.

"I'm not going to make a promise I can't deliver," he said.

Deval Patrick has made that promise, but then his term in office will expire before 2016, when he hopes rail service will be completed.

"I guess," Cahill said, "that's how you can promise it — if it's that far away."

He allows that a lot of things can change between now and then, including the establishment of a dedicated source of money (such as the gas tax) to pay for SouthCoast rail, but for now the state's financial circumstances are so dire that the first job for the Legislature and the governor is to figure out how Massachusetts can continue to provide its most basic services: education, children and family services, crime fighting, aid to cities and towns, and even employee pensions (the plan has an unfunded liability of more than $6 billion).

Straight talk from a politician who doesn't sound like a Democrat when he warns he won't sign any agreement to borrow short-term money if the revenues aren't there to pay it back.

The decision whether he will decide to run against Patrick for his party's nomination, wait until Patrick leaves office, or seek the governor's office as an independent is still in his future, but ordinary taxpayers have to like the fact that he isn't afraid to speak truth to power.

"The Legislature and the governor put together a $28 billion budget that was unsustainable. ...We have to cut spending," he said, and that means education and local aid (which together cost about $5 billion) and even the state's nearly universal health care program ($9 billion) are likely to lose significant support.

"It would be irresponsible to say that everything except commuter rail should be on the table," he said. "I'm just trying to be realistic."

An unpopular viewpoint around here?

Certainly.

Courageous words from someone who will need SouthCoast votes to get elected governor?

Absolutely.

"I'm not positioning myself," he said. "I am what I am."
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Bob Unger is editor of The Standard-Times. He can be reached by e-mail at runger@s-t.com or by phone at 508-979-4430.
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(Wendy Maeda/Globe Staff File)
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"Cahill ally brokered pension fund deal: Fund-raiser takes home $2.3m fee"
By Frank Phillips, Boston Globe Staff, May 24, 2009

He is a close political ally and prodigious fund-raiser for state Treasurer Timothy P. Cahill. When a blue-chip New York financial firm was trying to persuade Cahill and his staff to award it a lucrative contract to manage state pension money, it hired Anthony S. Rust to push their cause.

In the end, the payday was a big one for everyone involved. Ivy Asset Management was awarded the contract in 2004 to manage $393 million in state pension funds, a deal that would net it about $18.3 million in fees, according to state records. Ivy paid Rust an estimated $2.3 million for brokering the deal, according to the records.

Rust's introduction to Ivy came through Cahill's closest political associate and close friend, Thomas F. Kelly, whose firm, CanAm Consultants, specializes in acting as a placement agent for financial firms seeking to manage public pension funds, according to a person briefed on the arrangement.

State campaign disclosures show that Cahill collected tens of thousands of dollars in campaign contributions from Rust and his family members, from Ivy executives, and from executives at Ivy's corporate parent, the Bank of New York - more than $41,000 in all.

There was nothing illegal about the financial arrangements between Cahill's office, Rust, and Ivy, but their actions echo controversies that are raging in state capitals across the nation.

Federal regulators and state investigators from New York to New Mexico are probing the way major public pension funds hand out contracts to manage billions of dollars in taxpayer money. What they're finding is that major money management firms often pay seven-figure fees to politically connected middlemen to help them in their bids, while at the same time showering public officials with campaign contributions.

In Massachusetts, Cahill chairs the Pension Reserves Investment Management Board in his capacity as state treasurer, overseeing the $37 billion public pension fund.

The fund is managed by private financial firms, who compete ferociously for the lucrative contracts that typically carry significant fees. As part of that competition, the firms often hire brokers, or middlemen, to help their cause.

Cahill declined to be interviewed last week about Rust or any other pension contracts. But in a written statement, he said PRIM's selection process involves "a multi-tier review" conducted by the agency and is "one of the most rigorous and comprehensive in the industry."

"To infer that anyone has received special treatment is patently false," Cahill wrote in the statement. He said that Massachusetts "serves as a model around the world" and noted that the 169 managers who have been chosen through competitive bids have helped produce $12 billion in growth for the fund over six years.

Cahill's chief deputy, Grace Lee, said Cahill, notwithstanding his ties to Rust, did not recuse himself from the selection of Ivy, which invests about $7 billion in assets, and other firms associated with his political fund-raising because he typically is not made aware of what middlemen are involved in broker placements of state pension funds. Cahill acts on recommendations of finalists made by his staff, she said.

"He is presented a synthesized version which only contains information about the firm," not the middlemen who helped arrange the awards, Lee said.

Michael Travaglini, PRIM's executive director, strongly defended the integrity of the selection process for money managers. He said Cahill was only one of a number people involved in the decision to choose Ivy Asset Management. He said the selection is primarily "staff driven" and includes detailed and objective competitive bidding.

"I can speak to the integrity of our process," Travaglini said. "But why a firm would pay a third party? There are many times where we don't understand why, particularly in a process like ours, which is open and competitive."

He said, however, the use of middlemen is a legitimate practice.

Rust is a close political associate of Cahill and key member of the treasurer's campaign fund-raising team. A Rhode Island resident, he and his family members have given Cahill $11,000 in campaign contributions over the years. Rust did not return repeated telephone calls placed to his cellphone; the number listed for his company, Newport Capital, has been disconnected.

Rust, according to state pension officials, has been active for well over a decade in public pension circles, representing financial firms seeking business from the state and city of Boston pension fund managers.

Rust was one of a half dozen people who met as often as every week in the Quincy office of the treasurer's brother-in-law, Anthony Falco, to map out political fund-raising plans, according to two people who were involved in Cahill's fund-raising operations. Cahill has been a prodigiously successful fund-raiser, building a $3 million political war chest. He has told associates he is ready to challenge fellow Democrat, Governor Deval Patrick, next year.

Rust profited as the placement agent when the PRIM board decided in June 2004 to hire Ivy Asset Management to invest the funds. The agreement between Rust's firm, Newport Capital, and Ivy required Ivy to pay him 12.5 percent of all fees that Ivy charged the pension fund for its management services and performance. State pension records show that Ivy made $18.3 million in fees between 2004 and February 2009, when the PRIM board fired the firm, citing changes to its executive team.

The contract with Ivy came during a particularly interesting juncture for the state pension system, as Cahill was among the first public pension overseers in the country to branch out into higher-risk investments like hedge funds and private equity companies in an attempt to increase returns. These money managers, in turn, fought hard for the Massachusetts business, which would then give them credibility to win business from funds in other states.

Rust's company appeared on a disclosure list of third party marketers that the Massachusetts PRIM board released to the Globe at the newspaper's request. Those marketers make multimillion-dollar fees by pitching investments to pension funds on behalf of private money managers - often hedge and private equity funds.

Cahill played an active role in the selection of Ivy as a member of the treasury selection committee, which is typical for Cahill but a departure from past practices. Previous state treasurers did not involve themselves in the selection process.

Cahill pushed for the change in state investment policy that allowed the PRIM fund to invest $2 billion in pension proceeds in hedge funds. Cahill then sat on the nine-member selection committee that chose the money managers.

The list of third-party marketers helping financial firms secure Massachusetts pension investments shows that others with political cachet or inside connections, including a firm with ties to a member of the Kennedy clan, have served as middlemen with the Massachusetts pension system.

Included on that list is Kelly's firm CanAm Consultants. The documents provided to the Globe show CanAm Consultants has twice represented a client bidding on treasury business since Cahill took office in 2003. The clients were not awarded any work.

The list also includes Marwood Group, a firm run by Edward M. Kennedy Jr., the son of US Senator Edward M. Kennedy. Marwood Group served as a third party marketer for a $325 million allocation that PRIM assigned to Arden Asset Management to invest in hedge funds in April 2004. Arden did not return calls seeking comment. But if industry standards were followed, Marwood would have made over $3 million from $22.6 million in fees that Arden charged PRIM.

Kennedy, who has been, politically, a low-key member of his famous family, declined to comment on his work on behalf of Arden. Although he only contributed $250 to Cahill's campaign coffers, Kennedy has attended numerous Cahill fund-raisers and a hosted Cahill and other pension finance experts at a clambake at the Kennedy compound shortly after the decision was made to invest with Arden in 2004, according to people who were there.

The value of Massachusetts pension money managed by Arden grew from $325 million to $556 million by 2007, according to state records. That included an allocation of another $81.7 million in 2005 and 2006.

In October 2005, the PRIM board chose EARNEST Partners, an Atlanta-based financial firm, to manage $250 million in pension money. EARNEST used Connors & Co. as a middleman on the deal. Paul F. Connors Jr. and his wife have contributed $12,000 to Cahill's campaign committee. Connors's director of marketing, Josephine Shea, a Quincy resident, is one of Cahill's chief fund-raisers and, along with Rust, attended the fund-raising strategy meetings at Falco's office. She has given $3,000 to the treasurer's political account.

The firm also employs Robert Q. Crane Jr., the son of the former state treasurer, and a Harvard classmate of Connors. Shea declined to comment. Connors did not return a call made to his office.

The mix of politics, campaign fund-raising, and public pension fund investments has raised serious questions - and in some cases, criminal allegations - in other states, particularly in New York. The attorney general there, Andrew Cuomo, has brought charges against political insiders in Albany he says were carrying out a "pay-to-play" scheme involving pension investments.

Earlier this month, Cuomo pulled together prosecutors from 36 states, including Massachusetts, to participate in a telephone conference to discuss the issue.

As a result of the New York scandal, placement agents are facing either bans, beefed-up regulations, or disclosure requirements by pension managers around the country.

There is no evidence that so-called pay-to-play schemes that have erupted in New York have taken place here.

Middlemen are legal, as are their significant fees, unless it can be proven that they were paid as bribes.

Still, the mix of campaign contributions and politically connected brokers calls into doubt Cahill's assertion that the PRIM selection process is devoid of political considerations.

Secretary of State William F. Galvin's securities division recently sent letters - and in one case subpoenaed - financial firms asking them to detail their relationships with placement agents involved in public pension investments in Massachusetts. Galvin said that Travaglini provided a list of placement agents.

Galvin would not comment on the documents his office received, except to say that he is seeking to make sure the agents are properly registered with his office.

He is questioning whether the agents should be required to register as brokers/dealers or financial investment advisers.

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"Monday morning briefing" (~In Part~)
By Hillary Chabot, Monday, May 25, 2009, www.bostonherald.com - Local Politics

State Treasurer Timothy Cahill won’t be attending this year’s state Democratic Convention - another sign the potential gubernatorial candidate is considering running as an independent. A spokeswoman for Cahill said the June 6 convention is simply bad timing. Cahill’s daughter - the same one who secured Cahill’s win in 2002 with her “Tim for Treasurer” ad - is graduating the same day.

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A Boston Globe Editorial: Short Fuse - May 27, 2009

"Pensions: Making way for middlemen"

Anthony Rust, a rainmaker with close political ties to state Treasurer Timothy Cahill, is casting a cloud over the state's $37 billion public pension fund. According to Sunday's Globe, Rust earned about $2.3 million when his client, Ivy Asset Management, scored a 2004 contract to manage $393 million in state pension funds. Other third-party marketers, including Edward M. Kennedy Jr., son of US Senator Edward M. Kennedy, have smoothed the way for clients seeking to manage public pension funds here. The financial arrangements aren't illegal. But they do raise an obvious question: If the pension fund's competitive bidding process for money managers is all that Cahill cracks it up to be, why would it require the presence of well-connected middlemen in the first place?

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"Tim Cahill slams fellow Dems: Eyes gov run as independent"
By Hillary Chabot, Saturday, June 6, 2009, www.bostonherald.com - Local Politics

A feisty Treasurer Tim Cahill - emboldened by an onslaught of scandals by his fellow Democrats - yesterday slammed his own party, saying Democratic leaders, including Gov. Deval Patrick, are compromised by a cozy majority that breeds corruption.

Cahill, who is considering a run for governor, said he hasn’t decided whether he will run as an independent - but he dealt several body blows to Dems on the eve of their convention today in Springfield.

“I think the party is exclusionary. The party forces you to make deals, and those haunt you in the end,” said Cahill, referencing recent scandals surrounding ex-Speaker Salvatore F. DiMasi, ex-Sen Dianne Wilkerson and Sen. Marian Walsh’s controversial job offer from Patrick.

“When you cook the books and take kickbacks for legislative decisions on software contracts or alcohol licenses - or you create faulty resumes and job descriptions to justify an outrageous salary - those all go to the core of the public questioning if anything is on the level here,” Cahill said.

The statements come after Patrick announced David Plouffe, President Obama’s former campaign manager, would consult on his re-election campaign.

Cahill isn’t going to the convention because he is attending his daughter’s high school graduation, but he said party chairman and former Patrick campaign manager John Walsh assured him he would be treated evenhandedly if he ran as a Democrat.

Yet asked if he would get a fair shake by the party, Cahill said, “It doesn’t appear that way.”

Walsh vowed to remain neutral.

“I made that promise to the treasurer face-to-face. I personally will go into the voting booth and vote for Deval Patrick enthusiastically, but in the operation of the party, we won’t take sides,” he said.

Patrick spokesman Kyle Sullivan said in a statement: “Instead of playing politics, the governor is focused on bringing real change to Beacon Hill by fighting for . . . ethics and pension reform.”

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A BOSTON GLOBE EDITORIAL
"Cahill does good, and does well"
June 7, 2009

STATE TREASURER Timothy Cahill runs a conference aimed at helping women manage their finances. It's a worthy program - some women consider it life-changing - that was started by his predecessor, Shannon O'Brien. But the way money is raised to fund Cahill's conferences gives business as usual the usual bad name.

As detailed in the Globe last week, "The Money Conference" is underwritten by corporate sponsors such as State Street Corp., Bank of America, and Barclays Bank, with contributions ranging from $5,000 to $25,000. These same financial institutions also handle the state's bond offerings or invest the state's pension fund.

Federal rules prohibit them from making direct political contributions to public officials like Cahill. But they can - and do - underwrite these seminars.

The treasurer opens each conference, appearing before the gathered women and investment executives. Cahill's website features photos of him posing with speakers, volunteers, and bankers.

It's a two-fer: an educational event for attendees and a promotional event for Cahill. Actually, it's a three-fer, since participating sponsors stand to benefit, too. And that's where it can get ethically sticky.

O'Brien, who launched the conferences a decade ago, partnered with the nonprofit YWCA of New England to set up a separate financing structure to raise money, collect it, and pay expenses. Today, the YWCA is still the middleman. But the fund-raising is more centralized and Cahill's own political fundraisers are soliciting the donations.

Cahill contends that no one is pressured to contribute. But virtually all the donors do business with the treasury, and would have good reason to want to curry favor with the treasurer. Contributing to "The Money Conference" is one way to do it without running afoul of campaign finance laws. So, who is going to decline? Doesn't that add up to pressure?

Pam Wilmot, head of Common Cause Massachusetts, believes the state treasurer, via his own fund-raisers, should not be soliciting money from businesses doing business with the treasury. It's as simple as that.

If the public interest is strong enough to justify such conferences, there are ways to avoid any appearance of impropriety. Solicit sponsorships from a broad range of people, not just people doing business with the treasury; and keep an arm's-length distance between the treasury and the political fundraising. Currently, the distance between the treasury and the fund-raising is too short.

The conferences are a worthy endeavor, especially during tough financial times. So Cahill should take a step back and figure out the best way to serve the public good without compromising the public trust.

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Josephine Shea raises funds for state Treasurer Timothy Cahill.
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"Cahill voted to double supporter's pension"
By Sean P. Murphy and Frank Phillips, Boston Globe Staff, June 10, 2009

A longtime political supporter and fund-raiser for state Treasurer Timothy P. Cahill is collecting the kind of lucrative pension typically reserved for public safety personnel such as police and prison guards, even though she held administrative jobs in the Norfolk County sheriff's office.

Cahill voted to approve the hazardous duty pension for Josephine E. Shea in 2000, while he was still Norfolk County treasurer and chairman of the Norfolk County Retirement Board, according to public records.

Shea, who retired that year at age 49, has been collecting a pension now worth $47,000 a year, plus health-care insurance, paid by Norfolk county taxpayers. If she had received the kind of pension usually given to sheriff's department administrators, instead of the type Norfolk corrections officers get for their potentially dangerous jobs, her pension would be worth less than half that, $21,230 a year.

Shea, now 57, declined to be interviewed. Responding to written questions from the Globe, she released a statement touting her "22-year career as a corrections official." She said she qualified under state law for the same kind of enhanced pension awarded to corrections officers at the Norfolk County sheriff's office and Correctional Center.

"I was responsible for the care and custody of the inmate population, including murderers and other violent criminals," the statement said. Shea declined to address questions about how often in her career she had contact with inmates, one measure for determining eligibility for enhanced benefits, or to give details of her duties.

Cahill also declined to be interviewed. In a statement, he said he did not remember his July 26, 2000, vote approving Shea's retirement. "It was almost a decade ago, and I don't remember the specifics of the case," Cahill said in the statement.

Shea has since embarked on a second career as a broker for firms seeking to invest state and county pension funds; her firm earned what is estimated to be a substantial fee for helping to arrange a deal for an investment management firm to handle $250 million from the Massachusetts pension fund, which is overseen by Cahill.

Steve Kenneway, president of the Massachusetts Correctional Officers Federation Union, blasted Shea's pension.

"I don't see a lot of stress on a paper-pusher, not compared to an officer who might get stabbed or beaten up on the cellblock," he said. "These retirements are meant for officers who get old before their time under the stress and physical demands of the job."

A corrections officer - William Farretta, a sergeant and 20-year veteran of the Norfolk sheriff's office - said Shea did not deserve the higher pension.

"The higher pensions should go only to those who actually work with inmates and put themselves at risk," Farretta said. "Shea was at not at risk. She was in the front office."

A Group 4 public safety pension of the type Shea received is one of the most lucrative prizes under state pension law, delivering hundreds of thousands of dollars in extra lifetime payments to retiring public employees who put their lives on the line every day. Police officers, firefighters, and prison guards are entitled to it.

Many of them retire with weakened hearts or bad backs and stress borne of hazard on the job. Actuaries predict shorter life expectancy for them, compared to white-collar workers.

Other office administrators have won hazardous duty pensions from the Norfolk sheriff's office. In 2001, Robert Cerasoli, the state inspector general, took a $28,000 pay cut to be assistant deputy superintendent of internal affairs and financial oversight. He retired a year later with a hazardous duty pension, good for $91,000 in annual pension.

Michael T. Maloney, a former state Department of Correction commissioner, also won a hazardous duty pension worth about $90,000 after joining the Norfolk corrections system as an administrator.

Shea's title for most of her tenure was deputy superintendent for administration and finance, overseeing what is now a budget of about $35 million and 317 employees. When Shea applied for retirement in 2000, her title was temporary special sheriff, records show. Before that, her prior title was special sheriff. Each title carried administrative duties.

"Special sheriff does not get you into group 4," said Joseph E. Connarton, executive director of the Public Employee Retirement Administration Commission, a state agency that oversees and regulates pension administration and the 106 pension boards in the state.

Shea's work for Cahill, a Democrat, extends back at least to 1996 when she was actively raising funds for his campaign to become county treasurer, according to three Quincy Democrats who observed their relationship. She also used her contacts from having served on the retirement board to round up support for Cahill around the county.

Shea again worked closely with him in his 2002 campaign to win the state treasurer's post. After he took office, she continued to be on his inner financial team that met in Quincy, sometimes weekly, to plan fund-raising for Cahill's political account, said two Cahill supporters. Shea has also donated to Cahill's coffers, more than $3,000 since Cahill won election as state treasurer.

The five-member Norfolk County Retirement Board approved Shea's pension with no questions asked, minutes show. At the time, Cahill was chairman, and Shea was also a member of the board (and still is). Neither Cahill nor Shea recused themselves from the July 2000 vote, according to minutes of the meeting, which state that the vote was unanimous to approve a batch of pension requests, including Shea's.

Shea did not respond to written questions about her participation in the vote on her retirement. State conflict-of-interest law generally prohibits officials from voting on matters that affect their own financial interests.

Responding to written questions, Cahill said in the statement, "Ms. Shea has been generally supportive of me, and I'm grateful for her support."

After she stopped working at the sheriff's office, Shea began work as a pension investment consultant for Connors & Co., a Georgia company that earns fees by matching investment companies with state and local pension funds. Shea is the firm's director of sales and marketing for New England.

In a 2000 letter to Cahill and her other colleagues on the Norfolk Retirement Board, Shea described her desire to continue working after her tenure with the sheriff's office.

"Not one to sit idly, I subsequently became a consultant," she wrote.

Paul F. Connors Jr. and his wife have been longtime contributors to Cahill's campaign committee, dating back to when he was first elected county treasurer. Since Cahill was elected to the state post in 2002, they have contributed $12,000. Connors could not be reached yesterday; he has previously not responded to requests for comment about his firm's dealings in Massachusetts.

In October 2005, the state retirement board chose EARNEST Partners, an Atlanta-based financial firm, to manage $250 million in pension money. EARNEST used Connors & Co. as a broker on the deal. Cahill also chaired the selection committee that reviewed the proposals.

If normal industry standards were used, Connors & Co. would have earned between 1 and 12 percent of the $6.8 million fee that the state pension board paid EARNEST to manage the funds. EARNEST's disclosure statement did not include the fee Connors & Co. received.

Cahill served on the state pension board selection committee that recommended EARNEST and also voted for final approval. He has said he does not excuse himself from participating, even if his political supporters are involved, because he is not told which third-party brokers helped arrange an investment.

Connors & Co. was the third-party marketer when money management firm Invesco was chosen by the Norfolk County Retirement Board to handle $3 million of its funds in 2005. The agreement called for Connors to get 25 percent of Invesco's advisory fee, which, if industry standards were followed, would be been as much as $90,000. Shea abstained from the vote.
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Sean Murphy can be reached at smurphy@globe.com.
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"Slice healthcare costs, Cahill says: Treasurer calls 2006 law too pricey"
By Matt Viser, Boston Globe Staff, June 24, 2009

State Treasurer Timothy P. Cahill has come out strongly against the $1 billion in tax increases approved by the Legislature, proposing instead deep cuts in the state’s landmark effort at universal healthcare, calling it a luxury taxpayers can no longer afford.

While Cahill has no official role in approving the tax hikes or overseeing the state’s healthcare initiative, he has indicated he may challenge Governor Deval Patrick next year, and his comments could alter the tone of the Beacon Hill budget debate.

In an interview with the Globe, Cahill sharply criticized lawmakers and Patrick for not looking hard enough at cutting what Cahill said were sacred cows in government, including healthcare and education, in an apparent attempt to position himself as the most fiscally responsible Democrat in the State House.

“Everyone wanted it to pass, to get it on their resume,’’ Cahill said of the state’s 2006 healthcare law. “Nobody asked the tough questions. It was expensive, even in good times. In tough times . . . it just doesn’t seem doable.’’

Cahill also said lawmakers were wrong to turn to additional taxes on merchandise, meals, alcohol, satellite television, and hotels, which he said will only prolong the recession.

“It definitely raises the specter of ‘Taxachusetts’ all over again, which we spent a long time trying to get out from under,’’ he said. “It’s more than being nickel-and-dimed. It has a bigger impact because of the conditions that we’re in.’’

Cahill’s criticism of the state’s healthcare initiative stands out amid widespread praise for the effort from within the state and beyond. With nearly 98 percent of Massachusetts residents now covered by insurance, the healthcare plan is seen by many as a model that could be replicated around the country.

At the same time, the healthcare initiative is expensive and getting more so, as more residents enroll, even though at some point, according to the law’s original intent, it is supposed to help pay for itself by shifting more people into managed care. The budget crisis forced state regulators yesterday to slow enrollment.

“We’re all still waiting for the savings,’’ Cahill said. “Universal healthcare was supposed to eventually save us money.’’

“It’s a warning for the federal government as it looks to do something similar,’’ he added. “I’m not saying we can’t afford any of it, but it certainly doesn’t appear that we can afford all of it.’’

Cahill’s comments add to the political pressure on Patrick as he weighs whether to sign or veto provisions of the Legislature’s proposed $27.4 billion budget for the next fiscal year. He has vowed to veto a measure to increase the state sales tax from 5 percent to 6.25 percent unless the Legislature first agrees to major overhauls of the state’s ethics, pension, and transportation laws.

Patrick is stuck between top lawmakers who would be furious with him if he vetoes the sales tax increases, and political opponents - including, perhaps, Cahill and Republican challengers - who could hammer him on the campaign trial if he approves it.

Patrick spokesman Kyle Sullivan said in an e-mailed statement that Patrick had already sliced billions from this year’s and next year’s state budgets, which Sullivan said have had “a real impact on families and vulnerable populations.’’

“In these difficult times, the governor has protected our investments and progress in education, healthcare, and job creation, and that is the best way to prepare Massachusetts for growth in the future,’’ Sullivan said.

Patrick invited hundreds of political supporters to a closed-door meeting with him at a Somerville social club last night. He planned to explain some of his positions - on ethics, transportation, and taxes - during a crucial week at the State House that will have a major impact on state policy and his own political fortunes.

Cahill and Patrick, both Democrats, have been at loggerheads for months, with the treasurer seizing almost any opportunity to differentiate himself from the governor.

Cahill, for example, came out in March with a plan to license slot machines that differed with Patrick’s goal of resort casinos. Last month, Cahill accused Patrick of “grandstanding’’ on pension law changes, in part because the governor did not file legislation of his own.

The treasurer has built a large fund-raising base and said that he is considering a run for governor, either by challenging Patrick in the Democratic primary or running in the general election as an independent.

In the interviews, Cahill avoided criticizing Patrick directly, but said the governor should have acted more swiftly to prepare the state for the economic downturn and should have cut further into the state workforce. Patrick first began cutting the budget in October and implemented two more rounds of cuts.

Cahill asserted that those whose legacies are tied to the healthcare initiative failed to take a hard look at the costs when the legislation passed several years ago and now are reluctant to cut costs. “If you’re going to bankrupt one group to help pay for another, at the end of the day we’re all poorer,’’ Cahill said.

Seth Gitell, a spokesman for House Speaker Robert A. DeLeo, defended what he called the Legislature’s “responsible budget.’’

“In the face of an unprecedented deficit, the Legislature has worked to shield our cities and towns and most needy residents from the pain of the current crisis,’’ Gitell said in e-mail.

Several lawmakers involved in crafting the healthcare legislation bristled at Cahill’s suggestion to cut back.

“To retreat at this point would certainly be premature,’’ said Senator Richard T. Moore, a Democrat from Uxbridge and Senate chairman of the Joint Committee on Health Care Financing. “He should stay being treasurer and keep saving money for us. We’ll figure out how to make healthcare work.’’

Healthcare accounts for about a third of the state budget, although it is difficult to determine precisely how much is attributed to the state’s overhaul.

A report last month by the Massachusetts Taxpayers Foundation, a business-funded group that advocated for the healthcare law, found that state spending on the healthcare overhaul has increased by about $88 million annually since it was implemented.
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Matt Viser can be reached at maviser@globe.com.
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A Boston Globe Editorial: Short fuse - June 28, 2009

"Cahill: Another bad gamble"

Treasurer Timothy Cahill might have expected that the state’s bid to join the multistate Powerball lottery consortium would be rejected. After all, when he begged the Legislature for permission to join Powerball, he admitted that five competing New England states had nixed the proposal on a previous try. But Cahill, who touted the plan as a revenue-raiser worth $25 million to $40 million, neglected to notify the Legislature that a majority of the 30 participating states had voted down the bid May 27, according to the Boston Herald. Then, there was still time to amend the state budget and remove the $25 million lawmakers had included in anticipated revenues. Now, the budget sitting on the governor’s desk is $25 million out of balance. Isn’t attention to such fiscal details just what we elect a treasurer to do?

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"We saw a sea change in attitude, from people looking to make huge money on stock tips to instead going back to more bread-and-butter investments." -- Timothy Cahill, State treasurer
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"Small investors saved day for state: Individuals bought $1.2b in bonds; Rate, risk appealed as stock market slid"
By Casey Ross, Boston Globe Staff, June 29, 2009

When state government faced an urgent cash crunch, an unexpected ally stepped forward to help raise money when it became impossible to borrow from Wall Street: Massachusetts residents.

Since September, individual investors have bought more than half of the bonds - some $1.2 billion worth - that the state has issued in four offerings to help pay for government services. That represents a sevenfold increase in the value of purchases by individuals during the prior year, state officials say.

As it turned out, both sides needed each other during an unprecedented credit crisis that brought borrowing in global financial markets to a near standstill. For the state government, ordinary investors were its only recourse after the financial institutions that normally buy such bonds were paralyzed. For the buyers, the state bonds were a safe - and profitable - investment compared to stocks, which were falling at rates not seen since the Great Depression.

“We felt it was a stable, risk-free investment compared to other opportunities,’’ said Paul Marcus, a Boston real estate executive who significantly increased his pur chases of Massachusetts and other state bonds during the recent sales. The Massachusetts bonds are paying interest of more than 4 percent, while the Dow Jones industrial average, for example, is down 25 percent since September.

State officials were not able to pinpoint how many individual buyers participated in the recent bond sales, but said it numbered in the thousands. Scores made the minimum purchase of $5,000, or bought in $10,000 increments - a departure from the typical multimillion-dollar purchases made by institutions such as banks and mutual funds.

“There was almost a war bond mentality to it,’’ state Treasurer Timothy P. Cahill said of the buying climate. “We saw a sea change in attitude, from people looking to make huge money on stock tips to instead going back to more bread-and-butter investments.’’

Anticipating continued demand, treasury officials are now building a database of individuals who they hope will be regular investors. Officials are using the database to track buyers by ZIP code, so they can target marketing campaigns for future bond sales.

Usually, bond issuers don’t deal directly with individual investors, because it is much more work than selling to institutions, which can bite off huge amounts at a time. But individuals turned out to be the state’s best option during the credit crisis because the usual buyers became desperate sellers, as so many institutions needed to raise cash quickly.

And for investors, Massachusetts bonds became even more attractive because the usual safe haven at a time of turmoil in stock markets - US Treasury bonds - were paying a pittance in interest because of overwhelming demand from jittery investors.

Typically, US bonds pay 20 percent more than municipal bonds, which is how bonds offered by state and local governments are described. But last year that dynamic was turned on its head. On Dec. 18, 10-year US bonds were paying 2.05 percent, while 10-year municipal bonds offered an average of 4.08 percent, according to Municipal Market Advisors, an independent Concord research and strategy firm.

“You had this tremendous flight to safety, and that trend benefited the Commonwealth,’’ said Thomas Doe, chief executive of Municipal Market Advisors. “The state saw that there was strong demand, and they took advantage of it.’’

Interest on municipal bonds is exempt from federal taxes; furthermore, Massachusetts residents don’t pay state income taxes on locally issued bonds.

The Massachusetts treasury, modeling its efforts on a California program, launched an advertising campaign last fall to generate interest among individuals, spending about $170,000 on advertisements on Boston.com, the Globe’s website, as well as on newspaper and radio ads. Buyers from Massachusetts received preference over investors from other states.

It also launched a website, www.buymassbonds.com, and took the unusual step of restricting the first two days of its bond sales to individual investors, hoping a strong start would induce reluctant financial firms to jump in on the third day. It worked. The state sold out its full issue each time.

Individual purchases in the four offerings totaled nearly $1.2 billion, more than 50 percent of the $2.3 billion the state issued in the nine-month period. In the prior four years, purchases by individuals accounted for only 4 to 14 percent of total sales.

Though the interest rates were attractive to buyers at the time, they were good for the state, too, because of its strong double A credit rating. The treasury paid average interest of 4.26 percent in the four sales, several tenths of a point below what it typically pays.

One prominent buyer of Massachusetts bonds is US Representative Barney Frank, whose financial disclosure forms show he has purchased bonds from the treasury and several other state agencies during the past decade.

As chairman of the US House’s Committee on Financial Services, Frank wants to make it easier for states to pay even lower interest. He has filed a bill that would require credit-rating agencies to rate bonds issued by the states on the same scale as bonds floated by corporations, which generally enjoy lower borrowing costs even though they have higher default rates. He said the current system overstates the risk of investing in municipal bonds, effectively saddling them with unnecessary costs.

Yet states often buy additional insurance to get the same rates as corporations. Frank said that is an unnecessary expense, because while there have been a few notorious failures in the municipal bond market, generally states and local government issuers have offered stable investments.

Frank acknowledged such legislation would result in investors like him getting lower returns, but not enough to temper demand.

Today, the municipal bond market is beginning to stabilize, and state issues are paying lower rates than US bonds. Still, Marcus, the real estate executive who invested heavily this year, does not anticipate changing course any time soon, especially with the economy still on shaky footing.

“I expect my investment in bonds to stay in place for at least the next five years,’’ he said.
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Casey Ross can be reached at cross@globe.com.
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OUT OF LUCK: Elipidio Teles, owner of Lakeview Liquor in Dracut, agrees with Timothy Cahill, inset, in saying that customers instead will buy beer and cigarettes in New Hampshire when the Bay State’s tax hikes kick in. (Photo by Faith Ninivaggi).
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"Massachusetts in for Lotto trouble: Tim Cahill: Tax hikes will drive down ticket sales"
By Hillary Chabot

Monday, July 6, 2009, www.bostonherald.com - Local Politics

Upcoming tax hikes on booze and other items will squeeze lottery purchases along Bay State border communities and hobble local aid to cities and towns, Treasurer Timothy Cahill told the Herald.

“This is something that’s absolutely going to drive people over the border. If people are going over the border to buy alcohol, that’s where they’ll buy their lottery tickets,” Cahill said. “It’s really going to have an impact.”

Lottery officials already reduced local aid estimates for the coming year by $40 million after lawmakers cut $8 million in advertising for the state gambling agency, and Massachusetts Lottery Executive Director Mark Cavanaugh said the tax hikes certainly will reduce sales.

“It means the customer will have to dig deeper, and they usually end up buying less or going elsewhere,” Cavanaugh said.

Many lawmakers voted against the sales tax because the state is using the $275 million raised to bail out the Massachusetts Turnpike Authority and the MBTA, not to replenish local aid to cities and towns. Most communities on the border don’t use either agency and only $15 million goes to regional transit authorities.

Local aid already was decreased by up to 30 percent in the $24.7 billion budget signed by Gov. Deval Patrick last week.

The aging Lottery, already facing slumping sales, recently has been affected by even the slightest changes in the economy. High gas prices in 2007 prompted a $100 million drop in 2007 revenues, according to Lottery officials.

“This is going to be bad. It’s going to mean less foot traffic, and 70 percent of our sales are impulse purchases,” Cavanaugh said.

Package stores along the border bring in nearly $1 billion in Lottery sales, Cahill said. The owner of Lakeview Liquor store in Dracut already is bracing for the tax hikes, which begin in August.

“People will be going up to New Hampshire to buy their beer and cigarettes,” said owner Elipidio Teles. “I don’t understand how the state feels like they’re going to get any money.”

In addition to the loss in Lottery revenue, liquor stores are expected to lose 3,300 jobs after the alcohol tax hike, according to the liquor store organization MassPack. Alcohol sales in stores, which once had no tax at all, face the steepest increase at 6.25 percent.

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"Cahill prepares to leave his party: Still undecided on run for governor; Move would avert hard primary fight"
By Andrea Estes, Boston Globe Staff, July 7, 2009

State Treasurer Timothy P. Cahill plans to leave the Democratic Party this week, two advisers said yesterday, in what is probably a first step toward an independent challenge to Governor Deval Patrick, a Democrat, in next year’s election.

By removing his name from the Democratic ledgers in Quincy City Hall and declaring himself unenrolled, Cahill will be making not only a strong philosophical statement, but a practical one as well. As an independent, Cahill will be positioning himself as an outside candidate at a tumultuous time on Beacon Hill; he will also be sidestepping an uphill primary fight against an incumbent in a possible gubernatorial race.

Cahill, a fiscal conservative, did not respond to requests for comment yesterday, but he has told supporters he feels estranged from the Massachusetts Democratic Party, whose tax-and-spend philosophy, as he describes it, is more liberal than his own.

He has recently accused the Legislature and Patrick of taking the easy route by raising taxes instead of making deep cuts in what he called sacred cows, including healthcare and education.

Cahill will be the first incumbent officeholder in memory to drop his party affiliation, according to state election officials, who could recall no instance when an independent candidate won statewide office in Massachusetts. H. Ross Perot garnered 22.8 percent of the vote when he ran as an independent candidate for president in 1992, the largest percentage won in the state by an independent in recent years.

Cahill advisers, speaking on condition of anonymity, said the move does not necessarily mean that he will run against Patrick for governor, but Cahill has told them he will campaign as an independent either for governor or treasurer.

In the past, Cahill advisers have given strong indications that Cahill would challenge Patrick for governor, and Cahill himself discussed it in a March interview with the Globe, though he said he would prefer to remain a Democrat.

“Unless the party throws me out, I expect to run as a Democrat, if I run,’’ he said at the time.

Still, it has always been an uneasy relationship between the treasurer and the state’s dominant political party. Cahill felt spurned when the state party denied him a slot as a delegate to the Democratic National Convention last year after he refused to endorse either Barack Obama or Hillary Clinton.

Before that, when he ran for treasurer in 2002, Cahill was convinced that state Democratic leaders had tried to hurt him by encouraging a second office seeker with the same surname to enter the race. Cahill beat three other candidates in the Democratic primary, including Mike Cahill, then a state representative from Beverly.

Cahill has also told supporters that before being elected treasurer as a Democrat, he had exercised a great deal of freedom as a Quincy city councilor running without party affiliation in municipal elections that were nonpartisan.

But more than anything else, some observers say, Cahill may be leaving the party because it would be nearly impossible for him to win enough support from Democratic party members, 15 percent of the convention vote, to secure a place on the primary ballot.

Patrick’s former campaign manager, John Walsh, serves as state party chairman, and other Patrick supporters serve in key party posts, meaning that Patrick essentially controls the party apparatus.

“That was his main stumbling block to becoming a viable candidate within the party,’’ said former party chairman Philip Johnston. “The only way he could have obtained 15 percent is if he had the support of many members of the Legislature, and I don’t think that would have happened.’’

Yesterday, Walsh called Cahill “a credible candidate for anything he would run for.’’

“As long as he’s a registered Democrat, I love him dearly,’’ Walsh said. He said he believes Cahill would have no problem winning enough convention votes to run in a Democratic primary.

Patrick campaign spokesman Stephen Crawford declined comment on Cahill’s imminent party defection, but said the governor is “proud to be a Democrat.’’

“He will be running for reelection under the party banner,’’ he said. “The party represents the values he feels strongly about.’’

For months, Cahill has been preparing for a run, speaking out on issues not traditionally in the treasurer’s sphere. He came out early for casino gambling and several months ago proposed that the state license slot machines to generate revenue. He has been quick to criticize the Legislature and the governor, seizing on nearly any opportunity to differentiate himself from Patrick.

Advisers said yesterday that Cahill wanted to leave the Democratic Party before making a final decision about running for governor. He has said he will make up his mind on a possible run by Labor Day.

But if independent candidates find themselves at a disadvantage in Massachusetts, Cahill would start the race with a huge fund-raising edge. He has amassed nearly $3 million in campaign contributions, significantly more than Patrick, who had $484,000 on hand on June 15.

But Patrick would still be able to tap into the Democratic Party’s fund-raising machine.

A recently approved ethics law bans the kind of special campaign committee that has allowed Patrick to maximize the money he could raise from individual donors.

With his Seventy-First Fund, so named because he is the state’s 71st governor, Patrick had been collecting $5,500 from individuals, $500 of which went to his campaign and $5,000 to the Democratic Party, which paid some of his political expenses.

Since the fund was created in May 2007, the party has paid $628,000 of Patrick’s campaign bills.

Lawmakers proposed limiting all donations, including to the party, to $500. But in the end, they left the $5,000 limit intact. The governor can no longer collect $5,500 checks, but supporters can still give generously to the party, which in turn can pay his expenses.

If Cahill runs for governor as an independent, observers said, he could hurt Republican candidates more than Patrick.

Tarah Donoghue, spokeswoman for the Massachusetts Republican Party, said that by any other name Cahill is still a Democrat.

“The letter next to his name doesn’t make a difference,’’ she said. “It’s the same broken promises and disappointing leadership . . . Nothing will change.’’

Even though independent candidates have not done well in Massachusetts, almost half its 4 million voters are unenrolled, according to state officials.

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"Analysis: Cahill’s Party Switch A Loud Signal He’ll Run For Governor"
By DELORES HANDY - wbur.org - July 7, 2009

BOSTON — Massachusetts state Treasurer Timothy Cahill is leaving the Democratic Party. He’s expected to become an independent this week, a move that could pave the way for him to challenge Gov. Deval Patrick in next year’s gubernatorial race. Cahill has said he is considering a run for governor and will decide if he will run by September.

Jeffrey Berry, a political science professor at Tufts University, spoke with us about the political fallout of Cahill’s party switch.

Delores Handy: I guess you could say this is clearly a signal that Tim Cahill will be a candidate for governor next year?

Jeffrey Berry: Couldn’t be much louder. There’s really no reason for him to change party affiliations unless he wants to create a path for himself to being governor.

Some Cahill advisers are saying that the party has drifted to the left and that’s why Cahill wants to become an independent. Do you buy that argument?

I don’t buy it at all. The party’s in the same place it’s always been. The reason why Tim Cahill is changing his party affiliation is that he’s blocked through the Democratic primary.

It’s not only that he would need to get a lot of signatures to get on a ballot at the state convention, but there’s really a larger problem there: If he was in the Democratic primary, there’s a good likelihood that he would lose.

The reason for that is, even though Deval Patrick is unpopular right now, the people that vote in the Democratic primary are disproportionately liberal, and they’re going to prefer Deval Patrick to Tim Cahill.

No independent candidate has won a statewide office in Massachusetts. Why make this move?

Uh, it doesn’t make sense to me. I think he’s impatient; I think he’s a young man in a hurry. It’s very difficult to be elected as an independent. You have to build an entire party organization — your own party — from the ground up. And there’s just not that many volunteers that I think are going to flock to Tim Cahill.

Nevertheless, every once in awhile, it does happen. Jesse Ventura in Minnesota is an example. So it’s not impossible, but it’s the longest of long shots.

Now Tim Cahill’s differences with the state Democratic Party here in Massachusetts are not recent. They go back to 2002, the year of his first statewide run.

Cahill is running to the right of Deval Patrick, he thinks there’s a centrist coalition that he can put together to take disaffected Democrats away from Patrick and still be centrist enough to also defeat the Republicans, who are obviously a very small part of the state’s electorate.

But what he might do by running as an independent is to help Deval Patrick. If he attracts disaffected Democrats, that could damage the Republicans and allow Deval Patrick to win in a three-way race.

Looking at that three-way race with Republican Christy Mihos and Democratic Gov. Patrick, does Cahill have a shot at winning as an independent?

I think it’s a long shot. But, first of all, I’m not sure that Christy Mihos is going to be the Republican candidate. Charlie Baker, who would be much more formidable, is looking at the race seriously. And if he runs, as opposed to Mihos, then Baker has a chance. So it’d really be a dog fight: Baker, Cahill and Patrick.

Against Mihos, then I think Cahill may have more of a shot, because Mihos was not impressive in the last campaign. He came across as something of an eccentric character, so he really has a challenge ahead of him to sort of reformulate himself and to become a more appealing candidate.

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"Mass. revenues plummet again: Fiscal year ends with $180m gap; Officials warily eye dwindling reserves"
By Matt Viser, Boston Globe Staff, July 8, 2009

State revenues took yet another plunge last month, ending the financial year $180 million below even the dourest projections and forcing leaders to choose between draining the state’s reserve account and making further cuts in a budget approved just last week.

June’s dismal returns, which top state lawmakers were briefed on this week, are the latest sign that Massachusetts has yet to turn the corner on the recession.

It offers a coda to a disastrous year, which saw revenue drop $3.2 billion below initial expectations and change so rapidly that revised estimates never caught up with reality.

“It’s just getting worse,’’ said Representative Charles A. Murphy, chairman of the House Committee on Ways and Means. “We’re certainly not done yet. We haven’t bottomed out, unfortunately.’’

Administration officials have yet to finalize the June revenue figures and are still examining different scenarios for making up the shortfall.

But in a preliminary review this week with lawmakers, administration officials reported that June revenue fell nearly $260 million below the most recent projections, according to two State House sources briefed on the meeting. They declined to be named because the session was private.

Because the state took in $78 million more than expected in May, the end-of-the-year gap is about $180 million.

“June is the final exclamation point on this unbelievably bad year,’’ said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded government watchdog. “This is the worst year-to-year tax drop . . . in more than 50 years. Maybe ever.’’

One likely solution for closing the gap is tapping state reserves. The state currently has about $800 million left in its reserve account, but $215 million is already budgeted for the current fiscal year, which started July 1. If officials plug the additional revenue drop with reserves, it would put the account at its lowest level since 1994. The state began the fiscal year with about $2.1 billion in that account.

The continued deterioration also puts the state in a precarious situation moving forward, and some are predicting it will require emergency budget cuts just one week after Governor Deval Patrick signed a $27 billion state budget for the fiscal year.

Economists and state budget observers warned several months ago that the state is in a multiyear cycle that will strain budgets until at least 2014. The state reserve account has been a cushion, but it is at such a low level that there is almost no room for error in the years ahead, a bit like going on a daylong hike in the desert with only half a canteen of water.

“The margin of error is really almost at zero now,’’ said Senator Steven C. Panagiotakos, chairman of the Senate Committee on Ways and Means. “Given that we really don’t have a lot left in the rainy day account, the governor and the Legislature are probably going to have to be back at [cutting] the budget at some point.’’

State officials made several rounds of cuts to the fiscal 2009 state budget, but never caught up with falling revenues. Nearly every type of tax the state collects - including income, sales, and corporate - fell below expectations.

Patrick has largely plugged the gap with one-time revenue sources, including federal stimulus money and state reserves. That approach means that the state can get through the next year, but it will require deep cuts if the economy does not recover quickly.

“It’s a terrible domino effect,’’ Widmer said. “This creates virtual certainty that we’re going to have four years of budget cuts.’’

To help alleviate the revenue shortfall for this fiscal year, lawmakers approved more than $1 billion in new taxes in a $27 billion budget that Patrick signed last week. Patrick also vetoed nearly $150 million in legislative spending proposals.

House and Senate lawmakers are weighing which of his vetoes to override, but want to wait to get a better read on revenue losses before deciding how to proceed. The revenue drop could raise questions about Patrick’s request for $269 million in additional spending, which includes $70 million to restore healthcare coverage for 30,000 legal immigrants the Legislature had cut.

“Any spending beyond what we’ve budgeted for is going to be very difficult,’’ Panagiotakos said.

Administration officials are currently going through a budgeting process to see if any agencies and departments did not spend all the money budgeted last year. There has been money left over in years past, which could help offset the revenue shortfall.

But that seems unlikely for the recently finished year, when departments went through several rounds of midyear budget cuts.

“We still have challenges,’’ Patrick said in a brief interview yesterday, when asked about the shortfall. “We’re not out of the woods yet.’’
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Matt Viser can be reached at maviser@globe.com.
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"Cahill’s switch leads to scrum for his office"
By Matt Viser and Andrea Estes, Boston Globe Staff, July 8, 2009

State Treasurer Timothy P. Cahill’s decision to leave the Democratic Party and possibly run as an independent candidate for governor set off a massive scramble yesterday as potential candidates for treasurer started making calls, openly discussing their intentions, and trying to stake a claim on frontrunner status.

Cahill, who seems all but certain to run against Governor Deval Patrick next year, said in an interview that he felt alienated by his party, which he says is out of touch with the concerns of average citizens.

“I just feel like I don’t fit,’’ he said. “I’m a fiscal conservative and have been railing at the spending and the taxing decisions over the past year. I don’t seem to be getting anywhere from inside the party, so maybe I can be more effective outside the party. We’ll see.’’

Almost as soon as news of his decision was announced, Democrats leaped at the possibility of a rare opening for a statewide office.

Former gubernatorial candidate and Democratic Party official Steven Grossman announced he will run for the post, a decision he said he made yesterday morning after learning of Cahill’s imminent defection from the Democratic Party.

“I thought it is the right time,’’ said Grossman, 63, of Newton, who ran for governor in 2002 and has led both the state and national Democratic parties. “I want to be out early and let people know I’m running. This is not a committee formation or a trial balloon. When I do something, I try to do it decisively and bring every ounce of energy I have.’’

Grossman, who said he will run even if Cahill seeks reelection as an independent candidate for treasurer, will probably join a crowded field. The names of several other potential candidates surfaced yesterday, including state Senator Mark C. Montigny, Democrat of New Bedford; state Representative Thomas P. Conroy, Democrat of Wayland; Plymouth County Treasurer Thomas J. O’Brien; and Norfolk County Sheriff Michael G. Bellotti. All confirmed in interviews that they are considering a run.

James E. Rooney, executive director of the Massachusetts Convention Center Authority; Suzanne Bump, Patrick’s secretary of labor and workforce development, Norfolk County Treasurer Joseph A. Connolly; and Neil M. M. Morrison, a former first deputy treasurer, were also said to be weighing a run.

Bump, a former state representative from Braintree, issued a statement that did not rule out a possible candidacy. “I love state service and the ability to problem-solve in the public sector,’’ she said. “I have made no decision to return to elective office.’’

The treasurer oversees the lottery, the investment of state pension funds, the school building authority, and all state borrowing, responsibilities that can give the office holder a platform to weigh in on policy and exercise political clout.

The move to fill Cahill’s shoes so quickly illustrates the political challenges that lie ahead for the treasurer, who plans to go to Quincy City Hall this week to remove his name from the Democratic rolls.

If Cahill does run for reelection as treasurer, switching to unenrolled could open the door for a bevy of well-funded Democrats to challenge him.

“A lot of people think this is a crazy move, and at the end of the day I’m going to come to my senses,’’ Cahill said. “I don’t think it’s crazy. I wouldn’t be doing it if I thought it was. I don’t think it’s political suicide.’’

Still, he said, “it’s been a nerve-wracking week for me.’’

Cahill said he has not made a final decision on whether to run for governor, but sounded all but certain that he will.

“I wouldn’t be putting myself through this if I didn’t think it would lead me to make a decision to run for higher office,’’ he said.

He called his decision to leave the Democratic Party the first part of a “two-step process,’’ and said he would try to build a campaign network to see whether he could mount a run against already established political parties.

“I don’t want to be a spoiler,’’ he said. “I want to be comfortable that there is a path.’’

“It’s more than a toe in the water,’’ Cahill said of his flirtations with a run for governor. “I’m going up to the cliff basically. But I haven’t dove off the cliff yet, honestly. But I wouldn’t be honest if I didn’t say I haven’t thought of higher office.’’

Cahill, a Democrat since he registered to vote at age 18, said he started thinking about leaving the party last year after he was the only statewide elected official not to be elected a delegate to the Democratic National Convention.

“It was a wake-up call for me in my standing in the party and what people thought of me,’’ Cahill said. “That made me stop in my tracks and think: ‘This is what they really think of you? Is this a message?’ ’’

Cahill said he still agrees with the Massachusetts Democratic Party on all social issues, and said his decision was based almost solely on how state Democrats reacted to the economic downturn.

“The debate this year within the party was which taxes to raise, not whether we should raise them,’’ Cahill said. “The taxes and the spending are symptoms of what ails us economically.’’

Cahill also appears to be trying out a possible campaign theme, that an independent could carry a new voice to the State House, where Republican governors have seen their policies disregarded with regularity and Democrats, he believes, have been unable to properly manage the recession.

“It’s hard for either side to govern effectively, and I think that’s been proven,’’ Cahill said. “Maybe it’s time for a different way. Maybe this is the time.’’

Meanwhile, Patrick reacted diplomatically yesterday to the news on Cahill, saying he was working hard to manage the state during the recession. The time for verbal jousting, he said, will come later.

“My focus continues to be managing us through this extraordinary challenging economic time, trying to do what we can to get the economy going again, and implement these new reforms,’’ he said.

“There will come a time when the campaign is for real, and we’ll engage then,’’ the governor said. “But for the time being, that’s my focus. I wish him well, as I do all the candidates, real and would-be.’’

When asked about Cahill’s criticism that Democrats have espoused too much of a “tax and spend’’ philosophy, Patrick told the Globe: “Look, all those old slogans are for yesterday. We’re governing for tomorrow.’’

Cahill tried to downplay the assumption that his defection is a calculated political move.

“If it was,’’ Cahill said, “we haven’t calculated it that well yet. I don’t have a campaign manager.’’
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Matt Viser can be reached at maviser@globe.com. Andrea Estes can be reached at estes@globe.com.
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"Patrick invites Cahill to 'bring is A game' in run for corner office"
By Jim O’Sullivan/State House News Service - wickedlocal.com/bedford - July 08, 2009

Boston, Mass. - Treasurer Timothy Cahill began laying out his campaign strategy Tuesday, saying that if he opts to run for governor after his exit this week from the Democratic Party the state’s economy would be his “sole focus.”

“Until we get that right, it doesn’t make sense to plan how we’re going to solve education problems, or how we’re going to solve health care problems,” Cahill said.

Gov. Deval Patrick welcomed Cahill’s growing overtures to a gubernatorial campaign, brushing off as a “canard” Cahill’s charge that Democrats hewed to a tax-and-spend philosophy, and issuing a warning Tuesday: “He should bring his ‘A’ game.”

Patrick advisers continued to say they were pleased with what most insiders see as the entrance of an unaffiliated candidate who could chop up the opposition vote in the November 2010 election.

Cahill said recent tax hikes enacted by Patrick and the Democrat-controlled Legislature and past conflicts with party leaders had prompted him to make what he called “a life-changing decision.”

“We didn’t do any polling,” Cahill said. “This was just an internal decision that I had to make, given the direction of the state, and my kind of instinctual call on what’s going to put me in the best position to effectuate change.”

And he had an answer for Patrick, saying, “I will try to find it and bring it.”

Cahill also picked up rearguard pressure from longtime Democratic power broker Steven Grossman, who said he planned to run for treasurer in the Democratic Party, potentially boxing Cahill between well-funded Democrats in both races the treasurer has said he is considering.

Cahill called it “a little surprising” that Grossman entered the race so quickly, the Newton businessman telling the News Service of his plans less than 24 hours after sources leaked Cahill’s decision. The treasurer said Grossman’s move “could be” part of a coordinated move by party leaders to squeeze him.

“Wouldn’t be the first time, won’t be the last time,” Cahill said in the lobby of the UMass Club before addressing the Downtown Boston Rotary Club.

Cahill rounds out a gubernatorial field that now includes Patrick and Republican businessman Christy Mihos, with GOP heavyweight and Harvard Pilgrim CEO Charlie Baker eyeing a run.

“It’s risky.”

Political observers said the second-term treasurer would have had trouble meeting the 15-percent threshold needed at next year’s party convention to land on the primary ballot, calling the party exit a calculated move intended to keep Baker from swooping in and snaring political independents, the state’s largest voting blocs, and fiscal conservatives.

“His only play is to keep Baker out and then run against a lesser Republican,” said one senior Democratic lawmaker, speaking on condition of anonymity.

During a full day of media interviews, Cahill repeatedly acknowledged the unorthodoxy of his departure, telling the club he had to “convince people that I am more than just a spoiler.”

“Yeah, it’s risky,” Cahill said. “It’s not without risk. It’s never been done before. I like challenges.”

Cahill also offered a glimpse of what could be a blunt candidacy, telling the business group of about 20 people, “I’m not pander-free. It’s part of the genes of being a politician. You tend to say certain things.”

The Quincy Democrat said he may have faltered in pushing a fiscally conservative message he thinks state policymakers needed to hear.

“I’ve been unsuccessful in this past year in getting that message across, and maybe some of it is unsuccessful because I haven’t been able to really articulate alternatives to raising taxes, at least not in a forceful way,” Cahill said.

He added, “If the governor wants to spend, we know the Legislature’s going to want to spend. At the end of the day, that’s why we’re broke, because nobody’s willing to say no.”

Cahill said he would likely need to double the $2.89 million in his campaign kitty to gain a foothold.

Patrick sharpened his rhetoric during the day, starting softly and later leaning into Cahill more. Speaking with reporters outside an ethnic newswire event in his press room, Patrick toughened his tone, appearing to welcome Cahill’s criticism of the tax hikes Patrick has approved.

“He can do whatever he wants,” the governor said. “There are views on both sides, on multiple sides on every issue. If he’s going to be a candidate, then fine. We’ll talk about all that during the course of the campaign.”

The tax-and-spend criticism, Patrick said, “is old and it’s tired, and all the labels and all the shorthand of politics and political speech is not very useful at a time when we’re dealing with unprecedented challenges.”

Most senior Democrats who spoke with the News Service Tuesday said they expect Cahill will run for the top job, including two veteran Quincy Democrats, assistant House Minority Leader Ronald Mariano and Sen. Michael Morrissey, who both said they were “surprised” with his defection.

Cahill said he planned to announce his intentions “probably right after Labor Day.”

The treasurer said he knew he would struggle to sign up campaign strategists, most of whom are affiliated with one of the major parties.

“If I end up doing this, I need to have a team, which I don’t have,” he said.

He told the News Service, “The field of potential consultants and strategists may have shrunk dramatically and the word may be out from both parties: don’t help this guy.” Asked what types of operatives he expected to hire, Cahill said, “someone nationally probably, maybe outside of Massachusetts, but certainly someone local as well, probably a number of local people.”

Cahill declined to say whom he had consulted before his decision. “I’m not going to give you names, but I have some people who are close to me, obviously my senior team who came in with me,” he said.

Asked whether he had looked to prototypes for an independent run, Cahill cited former Maine governor Angus King, an independent; Lowell Weicker, a former Connecticut congressman who left the GOP and was elected governor; and New York City Mayor Michael Bloomberg, who was a Democrat before winning election as a Republican, then leaving the GOP in 2007.

Personally pro-life, politically pro-choice

During a telephone interview, Cahill outlined stances on social issues, saying he was open to sanctioning capital punishment in Massachusetts.

“I would be open, if the Legislature wanted to reinstate the death penalty under certain circumstances,” Cahill said. Asked the circumstances, he replied, “I don’t want to get into specifics.”

The treasurer said he was “socially moderate, not very far from the party orthodoxy, personally pro-life or opposed to abortion from a religious point of view, but I wouldn’t impose those views on the state or on the law, so in effect, from a political standpoint, pro-choice.” He said he favored “marriage equality.”

Cahill said he would downplay the social issues angle of the campaign: “I won’t spend a lot of time talking about it, because if I run in this next election cycle it will be based on the economy because that’s what people care about the most.”

Cahill called the corporate tax rate “very high” and the state’s income tax rate “pretty good.”

He said he had suggested the state consider paring spending by backing off its universal health care effort, aid to cities and towns, and education – three nearly sacrosanct areas of state spending that have all seen reductions amid the current budget crisis.

“We can’t be all things to all people,” Cahill said.

Both Patrick and Cahill, whose offices have engaged in a months-long, occasionally subterranean skirmish, said they did not think there was bad blood between them.

“Not from my perspective, no, I don’t know why there would be,” Patrick said.

Cahill said, “Not personally … We’ve got policy differences, philosophical differences on what government can and should provide.”

Cahill also began drawing fire from lawmakers, who have bristled at his knocks against their fiscal policies.

Rep. Daniel Bosley (D-North Adams), who helped lead the charge last year against Patrick’s casino plan and has criticized Cahill’s recent proposal to introduce slot machine parlors, questioned how Cahill could fault the state’s recent tax hikes as a detractor from the Lottery, which provides vital local assistance, while pushing expanded gambling as an economic solution.

“This is the same guy who said you’ll see a couple-years fluctuation when we introduce casinos and then we’ll get right back to where we were before,” Bosley said. “Well, you can’t have it both ways.”

New gambling, Bosley said, would hurt the Lottery more deeply than a sales tax.

“You can’t say it’s one way on sales tax, and criticize us and the governor, and then say it’s not going to have the impact from slot machines or casinos,” he said.

Mariano, who has known Cahill for decades, said Tuesday he was “surprised, not totally surprised” with Cahill’s decision to leave the party. Morrissey echoed Mariano, saying Cahill’s strategy remained unclear.

“Obviously, you’re not going to change parties and not run for governor,” Morrissey said. “Obviously, you’re not going to run for treasurer as an independent.”

Mariano said the exit, despite widespread displeasure in the Legislature with Patrick, will likely discourage Democratic officeholders from backing Cahill, a prospect some have privately considered in recent months.

“I think it makes it harder for real Democrats to get behind him, but I don’t think he cares about that,” he said. Mariano, who said he had not spoken with Cahill about the move, added, “I never did think he’d leave.”

Cahill deputies expect him to change his party status at Quincy City Hall Wednesday at about 8:30 a.m.

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The American Spectator

Campaign Crawlers
"Cahill's Charge"
By W. James Antle, III on 7.13.2009

BOSTON -- When it comes to good government, hope and change can only get you so far. That's the lesson being learned in Massachusetts of all places, as Barack Obama's mini-me, Gov. Deval Patrick, promised voters something new and instead delivered the sequel to Michael Dukakis.

It is not all Patrick's fault, of course. The return of one-party rule to Beacon Hill has unleashed the 90 percent Democratic legislature's worst tendencies, which include corruption and an insatiable hunger for tax revenues. So far, the damage has mostly been limited to a 25 percent increase in the sales tax to 6.25 percent and a constitutionally dubious attempts to keep Massachusetts residents from fleeing to tax-free New Hampshire stores.

But that won't be the end of it: with the budget left unbalanced and the liberal legislators left unchecked, they'll come back to the gasoline tax and even the income tax. Welcome back to Taxachusetts, where a 2000 voter-approved reduction in the income tax rate to 5 seems dead and Patrick senses an "appetite" for a new graduated income tax.

During his 2006 gubernatorial campaign, Patrick successfully road-tested many of the same themes Obama later rode all the way to the White House. For example, Obama's "Yes We Can" was but a slight modification of Patrick's "Together We Can." The fact that the government can't may be enough to revive a nearly moribund Massachusetts Republican Party, which boasts no statewide elected officials, no members of the congressional delegation, just 5 out of 40 state senators, 16 out of 160 state representatives, and the worst showing ever against John Kerry last year.

Last week, health care chief executive Charles Baker announced he would seek the Republican nomination for governor. Well known on Beacon Hill for his stewardship of Harvard Pilgrim and service in both the Weld and Cellucci administrations, the Boston Globe described Baker as "a virtual stimulus package for the state GOP."

Baker joins convenience store magnate Christy Mihos, who took 7 percent of the vote running for governor as an independent in 2006. (Republican Kerry Healey, who served as lieutenant governor under Mitt Romney won 35 percent to Patrick's 56 percent.) This time the longtime Republican is seeking the GOP nomination.

A recent Rasmussen poll shows Patrick vulnerable to both men. Mihos takes 41 percent of the vote to the Democratic incumbent's 40 percent. Patrick gets 41 percent against Baker, whose 36 percent could grow with his name recognition. A WBZ TV/Survey USA poll earlier pegged the governor's disapproval rating at 56 percent.

Yet it's not just Republicans who smell blood in the water. Right before Baker told fellow Republicans "I'm in," Massachusetts Treasurer Timothy Cahill changed his party affiliation from Democrat to "unenrolled" in what may be a prelude to an independent run for governor. Cahill has also positioned himself as a fiscal conservative who believes Patrick and the legislature having taken the easy way out by raising taxes rather than cutting spending.

Cahill is no fringe candidate. The former Democrat has won two terms as treasurer, beating a credible Republican candidate in 2002 while the top of his ticket was losing to Romney. He is also a proven fundraiser with $3 million in cash on hand as of June 15, compared to the governor's $484,000. But is Cahill for real?

Predictably, Republicans say no. "The letter next to his name doesn’t make a difference," Massachusetts GOP spokeswoman Tarah Donoghue told the Globe. "It’s the same broken promises and disappointing leadership….Nothing will change." The state party was quick to add a "Tim Cahill -- still a Democrat!" section to its website, detailing what it characterized as sweetheart deals, solicitations of political money from companies doing business with the treasury, and votes for inflated pensions while serving as Norfolk County treasurer.

"In today's Boston Globe, State Treasurer Timothy P. Cahill says 'I just feel like I don't fit' in the Democratic Party as he declares himself unenrolled," said the GOP statement. "The Massachusetts Republican Party says: 'Tim, you're still a perfect fit!' Just review Cahill's shady and dubious ethics record as part of the establishment.…The trademark characteristic of a Beacon Hill Democrat."

The commonwealth's most prominent advocate for lower taxes and less government, though an unabashed Charlie Baker fan, didn't dispute Cahill's fiscally conservative bona fides. "He says he's a fiscal conservative and I have no reason to doubt him," Barbara Anderson, director of Massachusetts' Citizens for Limited Taxation, told TAS. "Since he's been treasurer, he's said the right things: he's opposed tax increases and proposed reforms."

Baker, Anderson says, is "fabulous" and "someone so brilliant we thought he would be president of the United States, but he's got to start somewhere." Nevertheless, she says Cahill "has been a pleasant surprise" as treasurer.

"Is Tim Cahill a straw?" asked veteran Boston Herald columnist Howie Carr, using a synonym for spoiler. "Not a deliberate straw, of course, but there’s an old saying: The best straw candidate is the one who doesn't know he's a straw."

Anderson was skeptical that Cahill would spoil a serious challenge to Patrick, pointing to the commonwealth's history of tuning out independent candidates and focusing on the major-party gubernatorial aspirants as Election Day draws nearer. "The Republicans are going to have a primary and be in the news," she says, while Cahill's move also means the Democrats won't have a primary. Anderson also questioned how much of a mark Cahill had left with voters as treasurer.

Cahill's impact on the governor's race remains to be seen. But so far, it looks like Deval Patrick was the straw that broke the taxpayer's back.
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W. James Antle, III is associate editor of The American Spectator.
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TRYING TO THWART SUIT
Grace Lee, a top deputy for state Treasurer Tim Cahill (left), called the Rhode Island gaming company’s lawsuit “meritless ... filed by a disgruntled company.’’
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"US judge rejects Cahill bid to block lawsuit: Treasurer faces arguments he had ‘pay to play’ plan"
By Frank Phillips, Boston Globe Staff, July 28, 2009

A federal judge has rejected a request from state Treasurer Timothy P. Cahill to block a lawsuit that asserts that he engaged in a ‘’pay to play’’ scheme in awarding a $21 million state Lottery contract.

The decision last week by US District Court Judge Joseph L. Tauro clears the way for a Rhode Island gaming company’s lawyer to subpoena records and put Cahill and other close associates under oath in the $20 million lawsuit, which the treasurer’s staff argues is frivolous and has worked to stifle.

Tauro’s order, made without comment, was issued just days after Cahill publicly announced he was leaving the Democratic Party and would consider running for governor next year as an independent. If he cannot thwart the suit or settle it out of court, the legal proceedings could probe his fund-raising activities and the behind-the-scenes role of his close friend Thomas F. Kelly, one of his chief fund-raisers.

“Now we will find out what the facts are through an aggressive discovery process,’’ said Lee Blais, the attorney for Bingo Innovative Software, which had sought to contract with the Cahill-controlled state Lottery Commission in 2007 to develop an electronic bingo game. The firm asserts that Cahill never awarded Bingo Innovative the contract because the company had failed to raise enough campaign funds for him.

“They set up a pay-to-play scheme, and my clients didn’t pay enough, so they didn’t get to play,’’ Blais said.

Cahill’s top deputy, Grace Lee, said Bingo Innovative has provided no evidence of a “pay to play’’ scheme. She said the gaming company is acting out of spite because the Lottery did not find the company’s proposal for an electronic bingo game financially feasible.

“This is a meritless suit filed by a disgruntled company, for a contract that was never awarded to any vendor by the Massachusetts State Lottery,’’ Lee said, pointing out that a State Ethics Commission inquiry into the contract found no wrongdoing in the procurement process.

“We intend to explore and prosecute any and all viable counter claims,’’ Lee said. ‘’This will include the cost of this litigation.’’

At issue in the case is Kelly’s role in the awarding of an earlier, separate Lottery contract to print scratch tickets. He collected, without public disclosure, about $200,000 over a five-year period from Scientific Games, which had hired him to help land the scratch-ticket contract because of his relationship with the treasurer and Lottery director Mark J. Cavanagh.

Cahill has said repeatedly that he knew nothing of Kelly’s financial arrangements with Scientific Games or of Kelly’s pressure on its executives to hold a fund-raising event for him.

While he worked for Scientific Games, Kelly was also under contract with Bingo Innovative to help that firm win Lottery work, even when the two firms were bidding on the same electronic bingo contract in 2007. Under his agreement, which also was never made public, Kelly stood to make more than $2.4 million if Bingo Innovative was awarded the work, according to the company’s projected sales, the Globe reported in January.

Last April, the treasurer’s office released a letter it received from the State Ethics Commission, saying that its inquiry into the awarding of the Scientific Games contract in 2004 found no violations of ethics laws.

The Globe reported last year that Cahill’s decision to give the contract to Scientific Games was made against the advice of his senior staff that the company’s role be scaled back. Scientific Games paid Kelly $3,000 to $4,000 a month as part of its lobbying effort to win the contract, because of his close relationship with Cahill.

The payments to Kelly had been directed through Regan Communications, the politically connected Boston public relations firm, which the gaming firm hired to help it win the contract.

Regan has said that Kelly was hired to provide information about expanding gambling in Massachusetts, not to lobby for Scientific Games.

Kelly only registered as a lobbyist in 2008 after the Globe article appeared. Scientific Games fired Kelly last December, after the Globe reported about his work for Bingo Innovative.

While Cahill and the Lottery pondered the scratch ticket contract in 2004, Kelly was prodding Scientific Games executives to donate to Cahill’s political committee, according to sources involved in Cahill’s fund-raising circles.

The executives said they would not donate until after the contract was awarded, the sources said. Three months after the contract award, the firm threw a fund-raising event in New York that raised Cahill $20,000.

The Lottery Commission, which Cahill chairs, voted in April to pay up to $300,000 in legal bills to defend the treasurer and Cavanagh, after the attorney general’s office declined to take the case because of potential conflicts of interest.

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"Cahill calls for action on Pike lawsuit: Advocates settling over toll litigation"
By Andrea Estes, Boston Globe Staff, July 28, 2009

State Treasurer Timothy P. Cahill joined the battle over turnpike tolls yesterday, urging the governor and attorney general to take “immediate action’’ toward resolving a lawsuit filed by Massachusetts Turnpike commuters who contend that their tolls have been illegally diverted to pay the cost of the $15 billion Big Dig.

“This matter is extremely time-sensitive,’’ Cahill, chief financial officer of Massachusetts, said in a letter asserting that the state should act before an Aug. 6 hearing, at which a Middlesex Superior Court judge could issue an injunction ordering the state to stop spending turnpike tolls on Big Dig expenses.

The letter did not recommend any specific action. Amy Birmingham, Cahill’s deputy chief of staff, said Cahill is asking the sides to delay the hearing and try to settle the case.

Turnpike Authority executive director Jeffrey Mullan said he was “disappointed that the treasurer has chosen to insert himself in an active lawsuit in a way that could compromise the Turnpike Authority’s defense.’’

“The Turnpike Authority’s legal team is vigorously defending against the litigation, which would cause excessive harm to the taxpayers and tollpayers of the Commonwealth,’’ Mullan said.

In the past two months, he said, the administration has set a course that avoided a toll increase and prompted credit rating increases that will save the state $190 million.

The plaintiffs argue that even though the state’s new transportation law, which took effect July 1, requires the state to stop the practice, toll proceeds are still being funneled to the Big Dig.

Executive Office of Transportation spokesman Colin Durrant said the state has not stopped spending toll money on the Big Dig, adding, “We’re still evaluating and analyzing all sections of the enormous transportation reform legislation.’’

Cahill said in the letter that he is concerned that once the state takes over the Turnpike Authority Nov. 1, it could be on the hook for hundreds of millions of dollars, including the more than $400 million the tollpayers say they paid in illegal tolls over the past three years.

Cahill also suggested that the state could be saddled with a bill for hundreds of millions of dollars more if a bank that loaned the Turnpike Authority money through a complex investment called an interest rate swap demands immediate repayment. But Governor Deval Patrick’s administration said last week that the interest rate swap controversy had been resolved.

The treasurer, who recently left the Democratic Party, is mulling a run for governor as an unenrolled candidate. He would not comment yesterday on the letter.

But his general counsel, Grace Lee, said that he did not write the letter to take on the governor. “It was not politically motivated, but financially motivated,’’ she said.

The governor’s office declined to comment, as did a spokeswoman for Attorney General Martha Coakley.

Former attorney general Scott Harshbarger, who is helping the more than 2,000 tollpayers who have so far signed onto the lawsuit, praised Cahill for “seeking to find a positive and constructive solution now for this decade-long turnpike toll inequity.

“We hope the treasurer will be joined by Governor Patrick and legislative leaders . . . in solving this as a matter of public policy, rather than by litigation,’’ he said in a statement. “This is the best and cheapest way to ensure a comprehensive, expedited, open, honest, and fair resolution.’’

Sandra Murphy, a nurse from Natick who is a lead plaintiff in the suit, said, “I am so glad to see Beacon Hill is again hearing us and glad someone in a leadership position like Tim Cahill is saying it is time to take our efforts seriously.’’

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"Massachusetts pension fund posts big loss"
By Todd Wallack, Boston Globe Staff, July 28, 2009

Hurt by the steep declined in the stock market last summer, the Massachusetts state pension fund reported its worst year in its modern history.

The fund lost 23.6 percent, or $12.8 billion, in the fiscal year that ended June 30, 2009, according to Michael Travaglini, executive director of the Massachusetts Public Reserves Investment Management Board, which runs the state pension fund. Assets are now down to $37.8 billion.

Historically one of the top public pension funds in the country, Massachusetts is now likely to rank among the worst performers for the past year among all major funds tracked by Wilshire Associates. It is also the first time since 2002 the fund performed worse than average.

The Massachusetts fund has a higher percentage of its money in stocks of foreign companies--25 percent--than other public funds, and a lower level of bond holdings, which accounts for why it ranked so low over the past year. In the fiscal year, the state's foreign stock portfolio lost 31 percent, while it's much smaller bond account gained 4.3 percent.

"Given those weightings," Travaglini said, the state fund "will outperform during bull markets and underperform during difficult equity markets."

Travaglini said the board will re-evaluate its investment strategy at its next meeting on August 5, 2009.

Some of the poor performance was attributed to failings of fund managers hired by the state agency. Four fund managers were fired within the last year including one--Austin Capital Management--that lost $12 million to convicted swindler Bernard L. Madoff. And in April, the pension fund replaced its long-time alternative funds consultant, Cliffwater of Marina del Rey, California, with Ennis Knupp & Associates of Chicago.

Travaglini said the fund would have lost only 20 percent if it had simply invested its money in index funds -- rather than hand-picking stocks and other investments.

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YES: Jan Schlichtman is backing Tim Cahill’s demand. Photo by Matt Stone.
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"Tim Cahill fuels fight to cut out tolls footing Big Dig"
By Hillary Chabot, Wednesday, July 29, 2009, www.bostonherald.com - Local Politics

State Treasurer Tim Cahill called on Pike poobahs yesterday to lower the tolls, saying a 25 percent hike in the sales tax that takes effect Saturday will pay off any lingering Big Dig debt.

“Going forward, at least to November, there is no need for toll revenue to pay the debt,” said Cahill, pointing to the $275 million from the sales tax hike that’s committed to the Pike. “It’s pretty clear that the money the Legislature has already dedicated to the Turnpike will cover the Big Dig debt.”

Pike officials are still using money collected from the tolls to pay off Big Dig debts, something legislators abolished when they crafted the transportation reform bill. But they insist they still need that revenue to maintain the tollway’s roads and bridges.

Cahill, who is considering running against Gov. Deval Patrick, acknowledged the Pike’s operating costs, but said that since the agency doesn’t have to pay off the Big Dig debt, it should be able to lower the tolls.

“There’s a valid argument to lowering the tolls,” Cahill said.

Cahill’s comments came after a strongly worded letter to Patrick and Attorney General Martha Coakley pushing for a speedy resolution on a class-action lawsuit that claims drivers on the Pike shouldn’t be paying off Big Dig debt.

Lawyer Jan Schlichtmann and other members of the lawsuit held a press conference yesterday supporting Cahill’s call to settle the case before Aug. 6. That’s when a Middlesex Superior Court judge will rule on an injunction forcing the Pike to stop collecting tolls that pay for Big Dig debt.

Patrick administration officials indicated Monday that Cahill’s letter damaged the state defense against the lawsuit, but Daniel Winslow, former Gov. Mitt Romney’s counsel - who is representing the plaintiffs in the lawsuit - strongly disagreed.

“The facts of this case aren’t in dispute,” Winslow said. “There’s nothing the treasurer could or did say that could harm the state’s case.”

Cahill said he only got involved in the issue because the state will be taking over the currently quasi-independent Pike in November.

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"Cahill: Into the Turnpike toll fray"
SHORT FUSE - A BOSTON GLOBE EDITORIAL - August 2, 2009

It’s unfair to Mass. Pike commuters that they pay disproportionately for the Big Dig, but the answer to the problem lies in the Legislature rather than in a class-action lawsuit against the Turnpike Authority. Last week, state Treasurer Tim Cahill unwisely sent Governor Patrick and Attorney General Martha Coakley a letter requesting “action toward a resolution’’ of the suit and urging the state to sit down with the plaintiffs’ lawyers. But the authority’s lawyers presumably want to beat the suit, and the treasurer’s call for negotiation could undermine that effort. Another sign that Cahill’s letter was a bad idea: The plaintiffs’ lawyers are thrilled about it.

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State Treasurer Tim Cahill. (Photo by John Wilcox).
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"PRIM and improper as usual in hack haven"
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By Howie Carr, Columnist, www.bostonherald.com - Thursday, August 6, 2009
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Charlie Baker and the Republicans have been trying to figure out how to cut state Treasurer Tim Cahill down to size so he can’t run for governor as an independent.

I think this morning we’ve given the GOP Exhibit A against Cahill - the payroll of Cahill’s Pension Reserves Investment Management board. It’s Cahill’s baby, and of the 24 people on it, 13 make between $100,000 and $322,000.

Which wouldn’t be quite so outrageous if the PRIM board last year didn’t lose $12.8 billion - 23.6 percent of the state’s investment portfolio. Bill Veeck, the old-time baseball executive, used to say that it wasn’t the high cost of talent killing the game, it was the high cost of mediocrity.

In the case of PRIM, at this point we’d all settle for some mediocrity, because it’s the high cost of utter incompetence that’s killing the pension fund.

The job descriptions of eight PRIM employees contain the word “senior.” None contain the word “junior,” for obvious reasons. A senior fill-in-the-blank always get paid more money than the junior.

Anyway, now we have this document dump, this payroll-palooza to deal with, and once again, I implore you, the readers, to help us out. Drop a dime. If you work for one of these agencies, and have been frustrated by the sloth and lethargy (not to mention the six-figure salaries) of your better-connected layabout hack bosses, now is your opportunity for revenge.

In the Dreaded Private Sector, it’s been a killing ground the last couple of years. In the hackerama, nothing . . . has . . . changed. Excuse me, one thing has changed - they’re all making more dough.

One exception, and I need to find out today what’s up. Vicki Mucci, the girlfriend of House Speaker Bob DeLeo, is a secretary at the MWRA’s Deer Island treatment plant. I see her recorded as having an annual salary of $47,151.11, and yet her 2008 MWRA earnings are listed as $21,823.19.

Let’s look at Massport. In 2001, after 9/11, the Herald obtained a Massport payroll. Yesterday, I compared the two payrolls, and guess what - all the same old same olds are still in action (or is it inaction?) at the same old stand.

As you know, the boss of the PRIM board is Mike Travaglini, who makes $322,000 a year (before bonuses). His brother used to be the president of the Senate, Bobby Trav, and they’re from Eastie, home of Logan airport, which is run by Massport.

In 2001, I wrote about how a woman named Pauline Sulprizio worked in Trav’s State House office, while her husband, Steve, had a job at Massport paying $71,603. Steve is still at Massport, only now he makes $105,207.

Pauline was replaced in Trav’s office by Karen Buttiglieri, whose brother-in-law is named John. In 2001, John made $52,624 at Massport. Now he’s up to $75,784.65 a year. Did I mention that John’s father, Sonny, used to employ Bobby Trav as a precinct captain in Mayor White’s Ward 1 machine?

Oh, and guess what - in 2009, there’s another Buttiglieri on the Massport payroll. Caroline Buttiglieri, a “public service rep,” makes $41,809. Say, you don’t suppose . . .

Diane Modica used to be the city councilor from Eastie after Trav moved to the Senate. Her cousin Mike was making $52,604 in 2001. Now he’s up to $80,732. Eight years ago, I wrote about a Massport hack couple - Lenore Filipe and Lou Hinckley. At the time, their combined salaries were $204,509 a year.

Now Mr. and Mrs. Hinckley are grabbing a total of $254,657.69 a year. And behind that comes the pensions.

How many people in the DPS get pay raises these days? Damn few. Yet the hacks just keep collecting. Jim Rooney is the boss of the Mass. Convention Center Authority. Nine months ago, we wrote about his brother Joe, who after a nationwide search was hired at the MCCA while his brother was acting executive director. Last December Joe made $70,609. Now he’s up to $72,113.

Okay, that’s not a PRIM-board number, but still, it beats the 8 percent pay cut the bowtied bumkissers on Morrissey Boulevard just had to swallow. Then there’s Mike Kineavy, Mumbles Menino’s $141,000-a-year hack coatholder at City Hall. His aged mom Ann was listed last year as making $2,208 at the MCCA. This year they’ve got her “projected” pay as $22,880. What recession?

You know how the pols running against incumbents always ask the question: “Are you better or worse off than you were X number of years ago?”

To which the hackerama can answer, truthfully, with a resounding “Yes! Yes! Yes!”

The hacks are following the teachings of the late Rev. Ike: “Don’t wait for pie in the sky by and by when you die. Get yours now, with ice cream on top!”

Now it’s your turn. You can bust ’em. Drop us a dime, and we’ll handle the rest.

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GAME ON: State Treasurer Timothy Cahill, right, announces the new Patriots-themed lottery ticket yesterday while Robert Kraft, the team’s owner, looks on. (Photo by Matthew Healey)
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"Lottery kicks off Patriots ticket"
By Thomas Grillo, Wednesday, August 12, 2009, www.bostonherald.com - Business & Markets

Massachusetts State Lottery officials and the New England Patriots hope to score a touchdown with the NFL’s first instant lottery ticket.

The Pats $5 scratch ticket offers the chance to win a dozen instant prizes of $1 million, more than 4,000 VIP ticket packages and team merchandise featuring Tom Brady and Tedy Bruschi jerseys. The grand prize will be second-chance drawings for five pairs of lifetime season tickets.

“We think the Patriots ticket will compete against our all-time best tickets - the $5 Red Sox ticket and the Harley-Davidson ticket,” said state Treasurer Timothy Cahill. “We like to partner with winners.”

Ticket sales are expected to generate more than $151 million and reward players with $116 million in prizes. More than $22 million from the tickets sold will go to the state’s cities and towns.

Cahill said he did not know how much money the Pats will earn from ticket sales.

“I don’t know what the exact dollar figure will be. I don’t have the specifics, but it’s in the millions,” he said. “The Patriots do not get any upfront money.”

Jonathan Kraft, president and chief operating officer for The Kraft Group, said the team typically does not license its logo without upfront payment.

“This is the only time the Patriots have ever licensed their logo and not received a substantial upfront payment,” he said. “If these tickets don’t sell, the Patriots earn nothing.”

But Kraft declined to specify the maximum amount of cash the team could earn if the scratch tickets sell out.

Pats cheerleaders will hand out scratch tickets from 4:30 to 5:30 p.m. today at Faneuil Hall and North Station while the team mascot will hand out tickets at South Station.

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"More bad poll numbers for Patrick"
By Frank Phillips, Boston Globe Staff, August 14, 2009

The latest quarterly poll from MassInsight, a nonprofit research institute, spells more bad political news for Governor Deval L. Patrick: His job-approval numbers have plunged to levels not seen in decades for a Massachusetts governor.

In a survey of 445 residents, taken last month and released this week, only 19 percent of respondents gave him a positive job rating, while 77 percent rated it fair or poor. One percent said he was doing an excellent job. Those numbers are significantly worse than last month's Globe poll, which also found him to be struggling politically.

The good news for Patrick is the poll shows that he runs even with GOP candidate Charles D. Baker and state Treasurer Timothy P. Cahill, the former Democrat now plotting a potential independent candidacy, in a three-way general election race. Baker gets 19 percent, Patrick 20 percent, and Cahill, 20 percent.

If Cahill doesn't run -- although his associates say he is planning an announcement around Sept 10 -- Baker and Patrick run almost even in a two-way race, the Republican getting 35 percent and the governor getting 32 percent. If Christy Mihos were the GOP nominee, the poll indicates, he would get 16 percent, and Patrick and Cahill would get 24 percent each.

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"Political Circuit: Sounds like Cahill's in"
Boston.com - August 21, 2009

State Treasurer Timothy P. Cahill has not officially entered the 2010 governor's race yet, but the way he's talking these days it sure sounds like a done deal.

“We’re interviewing people that would help run the campaign, high-level people…good, solid people with national reputations,” Cahill said in an interview. “We’re getting there. The response has been good.”

Cahill said he got a good reception this week at Hampden County Sheriff Michael Ashe's annual clambake in Agawam.

“I had some Democrats coming up and saying some good things,” he said. “I still need to convince people it is possible [to win], but nothing I’ve seen in the last two months tells me it’s impossible to do.”

Cahill says he is planning to make an official announcement during the latter half of September. But it sounds as if that announcement is, in fact, coming.

“I want it to be a little more planned out than Charlie’s was,” Cahill said, referring to the roll-out of Republican Charles D. Baker's campaign last month. “His was obviously put together pretty quickly.”

Baker told the world he was running for governor in a Babson College conference room, with a white dry-erase board in the background.

-- MATT VISER

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State Treasurer Timothy P. Cahill
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"Cahill to announce candidacy for governor"
By Andrea Estes, Boston Globe Staff, September 8, 2009

State Treasurer Timothy P. Cahill will announce that he is running for governor on Wednesday, according to several people close to his campaign.

Cahill has scheduled an 11:30 a.m. press conference at the Omni Parker House Hotel in Boston. He will kick off the campaign at a fund-raiser Thursday night at the Adams Inn in Quincy.

The lifelong Democrat has been state treasurer since 2003. He moved toward an independent candidacy for governor in July when he dropped out of the Democratic Party and became an unenrolled voter.

“I just feel like I don’t fit the party,” Cahill said at the time. “I’m a fiscal conservative and have been railing at the spending and the taxing decisions over the past year. I don’t seem to be getting anywhere from inside the party, so maybe I can be more effective outside the party. We’ll see.”

Polls taken by the Globe and Cahill showed he would do well in matchups with the other candidates, if the election were held now.
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www.boston.com/news/local/massachusetts/articles/2009/09/10/cahill_jumps_into_race_for_governor_vows_to_lower_taxes/
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Photo by Matthew West
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"Timothy Cahill warns of Calif.-style crisis, calls for more cutbacks: ‘Sounding the alarm’"
By Thomas Grillo, September 17, 2009, - www.bostonherald.com - Business & Markets

Gubernatorial hopeful and Massachusetts Treasurer Timothy Cahill said the Bay State faces a fiscal catastrophe that could rival California and blames Gov. Deval Patrick and the Legislature for the mess.

“I’ve been sounding the alarm for 18 months about revenues,” said Cahill, who launched his bid for governor as an independent last week. “Unfortunately, the message has not been heard on Beacon Hill or by the executive branch.”

Cahill, who made the remarks to a group of business leaders yesterday, said the state’s rainy day fund has dwindled to $500 million from $2.3 billion on Patrick’s watch. He compared the impending crisis to California’s budget woes, where Gov. Arnold Schwarzenegger faced a $60 billion shortfall, forcing billions in dramatic budget cuts.

Cahill said he opposed the recent increase in the sales tax to 6.25 percent and believes lawmakers should have cut spending instead. But he declined to identify any areas where he would trim the budget.

In a statement, Bob Bliss, spokesman for the Executive Office for Administration and Finance, said, “While the Treasurer is busy making speeches, the governor is working on the side of people in Massachusetts - many of whom are still struggling. The governor is protecting funding for education and affordable health care, while making investments that will create jobs and position us for a strong economic recovery. The administration has had to manage a $7 billion budget gap over the past two fiscal years amid an unprecedented global recession.”

Bliss also said that, while other states struggle to resolve their budget deficits, Patrick signed a balanced budget with significant cuts, layoffs, a responsible draw on reserves and use of federal recovery funds.

Cahill yesterday also took credit for changing agreements with Lehman Bros. - just before the investment bank collapsed a year ago this week - to help the state avoid the worst of the credit crunch.

State Rep. Charles Murphy (D-Burlington), the House Ways and Means chairman, dismissed Cahill’s remarks. “The treasurer is just engaging in petty politics,” he said. “He’s running for governor. For him to suggest that he sounded the alarm is comical. We are in the midst of a global economic meltdown and Tim did not see this coming.”

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SHOW THEM THE MONEY: People whose firms do big business with the Massachusetts pension fund have showered more than $1 million on candidates for governor and state treasurer over the past two election cycles.
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"Political pension pals: Finance firms’ employees pony up campaign cash"
By Jerry Kronenberg, Wednesday, September 30, 2009, www.bostonherald.com - Business & Markets

State Treasurer Tim Cahill, Gov. Deval Patrick and their predecessors and rivals have reaped huge contributions from people whose firms do business with the state pension fund, the Herald has found.

A Herald review shows that workers at companies tied to the fund have given at least $1 million since the 2002 election cycle to candidates for treasurer and governor. Those are the two elected officials who appoint members to the fund’s board of directors.

Donors include top executives at Fidelity Investments, State Street Corp. and other firms that either had big contracts with the $41 billion pension fund at the time or later bid for business.

“These companies are making an investment in political capital,” said Edwin Bender of the National Institute on Money in State Politics. “It’s not green money (that donors want). It’s the power and influence that elected officials can exert over (pension contracts).”

Big political donations - and sometimes outright kickbacks - have long plagued the public-pension business, where favored companies can reap millions of dollars in investment-management fees.

Bender said firms that hope to befriend governors and treasurers often rely on workers to make donations, as Massachusetts and many other states ban direct corporate giving. Even a few thousand dollars of employee donations can get firms noticed, as workers can only give $500 per candidate each year and can’t legally seek company reimbursement.

A Herald review of public records has found that donations to Massachusetts pols have included:

some $270,000 from employees of Boston law firm Mintz Levin, which has long served as the pension fund’s main outside counsel. Donations include more than $70,000 to both Patrick and Cahill, as well as $45,975 to former Republican Gov. Mitt Romney. Mintz staffers also gave $2,525 to Romney’s presidential campaign while he was still governor.

about $166,000 from employees of Fidelity Investments, which oversees part of the pension’s “junk bond” portfolio. Romney netted the lion’s share of donations ($54,498), followed by $41,175 for former Attorney General Thomas Reilly, a 2006 Democratic gubernatorial hopeful.

nearly $100,000 from workers at Bank of New York/Mellon, which earned $458,000 in brokerage and custodial fees from the pension fund in fiscal year 2008. Top recipients of aid include Cahill ($24,700) and 2006 GOP gubernatorial hopeful Kerry Murphy Healey ($16,903).

Some donations are probably coincidences - money that well-paid workers at big firms give to their favorite candidates - but others seem calculated.

For instance, the political action committee of State Street - which oversaw $5.7 billion of Massachusetts pension funds as of June 30 - donated to Cahill and his GOP rival in 2002. So did David Weinstein, Fidelity’s then-chief of government relations.

Cahill, who’s running for governor, seems especially good at attracting out-of-state money.

For example, top executives at New York’s Ascend Venture Group, which has unsuccessfully bid for state pension business, have each given him the maximum $500 contribution year after year. Similarly, 75 percent of Cahill’s 41 Bank of New York/Mellon donors live outside Massachusetts.

Such monies raise eyebrows, because governors and treasurers control a near majority of the pension’s nine-member board.

Cahill chairs the board and appoints one additional member, while Patrick can sit on the board or name a substitute and will pick an additional member in 2010.

Still, pension Executive Director Michael Travaglini denies that politicians influence contracts.

He said deals require competitive bids, majority board approval and the endorsement of the fund’s staff and outside consultants.

Travaglini added that auditor KPMG reviews all deals once a year. (The Herald found that workers at KPMG have donated $13,815 since 2002 to gubernatorial and treasurer candidates.)

Firms whose workers have given money deny any wrongdoing.

“Many of our employees regularly (contribute) to candidates for public office, and employees are free to donate to the candidates of their choice,” Fidelity spokesman Vin Loporchio said.

Politicians likewise claim contributions haven’t influenced them.

“There is no relation between campaign contributions and Treasury operations,” Cahill spokeswoman Alison Mitchell said.

Patrick spokesman Stephen Crawford said the governor’s financial-services donors “support the governor because they understand that he has prepared Massachusetts to emerge from the current economic crisis.”

But Bender said governors and treasurers often play behind-the-scenes roles in contract awards.

He added that even if elected officials don’t help donors, merely taking their money creates “the appearance of impropriety. (Politicians are) raising the question of whether (they’re) really doing things in the public’s best interest.”

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State Treasurer Tim Cahill meets with supporters at Mazzeo’s Ristorante in Pittsfield Wednesday as he conducts a fundraising trip to support his run for governor as an independent candidate. (Scott Stafford / Berkshire Eagle Staff)
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"Cahill's campaign hits home"
By Scott Stafford, Berkshire Eagle Staff, Thursday, October 1, 2009

PITTSFIELD -- Massachusetts Treasurer Tim Cahill brought his gubernatorial campaign to the Berkshires Wednesday in a bid to win financial and political support in what many consider to be Deval Patrick territory.

The fundraiser at Mazzeo's Ristorante was his first visit to the county since he announced his candidacy as an independent several weeks ago, although he had made a number of campaign stops here in his two runs for state treasurer as a Democrat.

During an interview before the gathering, Cahill said the reason he is running for governor is rooted in the recession.

"I want to solve the financial problems that are facing us and get the economy back on track," Cahill said. "A 9 percent unemployment rate is unacceptable, and it's affecting everything that we do in government."

Cahill said he unenrolled his affiliation as a Democrat because "I felt that when we focus on party first for solutions we miss a lot of the big solutions that are necessary to solve our economic problems. We should be able to look beyond the party for solutions ,and we should be able to work with both sides."

Cahill, 50, said the primary issue facing the Berkshires is the unemployment rate and the lack of opportunity and a lack of choices for gainful employment.

"That needs to be addressed, and I think we can do that by lowering taxes as opposed to raising them," he said.

Over-regulation is a barrier to business development, Cahill said, and as an entrepreneur, he wants to lower those barriers and create a friendlier environment for businesses to flourish.

A resident of Quincy, he said he opened a small restaurant there called Handshakes when he was 23.

Cahill said his call for lowering taxes in the midst of a revenue crisis for the Commonwealth would actually raise revenue by allowing people to spend more of their money and businesses to employ more people, thus increasing revenue from both sales taxes and income taxes.

"If we get people back to work and are able to shave 2 or 3 percent off the unemployment rate, that will raise our revenues, because the number one source of revenue for our state is income tax," Cahill said. "And when people don't work, they don't pay income tax."

Cahill said Gov. Deval Patrick has shown "great instincts" and noted that he has supported him in the past.

"But I just think that growing government and trying to do more in the public sector is just not working today in this environment," he said. "I don't blame him for the recession, but I think some of his responses, putting taxes on businesses and increasing the sales tax, is counter-productive and not the solution I would look to."

He pledged to run a positive campaign.

"It's not about beating up on the incumbent governor as much as it is about presenting a different philosophy," Cahill said.

He noted that more than 50 percent of Massachusetts voters are independents.

"I want to give them someone to vote for," Cahill said.
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To reach Scott Stafford: sstafford@berkshireeagle.com - or (413) 496-6241.
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www.topix.net/forum/source/berkshire-eagle/TKDK3CQDAQ3D3RRD8
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"Timothy Cahill rips state’s universal health: Says president should take heed in national debate"
By Hillary Chabot, Saturday, October 3, 2009, www.bostonherald.com - Local Politics

Wading into the contentious national health-care debate while sharpening his gubernatorial campaign focus, Treasurer Timothy Cahill blasted the state’s landmark plan and warned President Obama that a similar scheme could bankrupt the country.

“If universal health care is breaking us, what’s it going to do to the federal government?” Cahill told the Herald yesterday.

The treasurer, who’s running for governor as an independent, said the state’s universal health-care plan - the brainchild of former Republican Gov. Mitt Romney, approved by a Democratic Legislature - mistakenly focused on insuring all state residents first and controlling costs second. As a result, Cahill said, the plan has been a major drag on the state budget.

“Health-care spending has exploded, and unless the federal government continues to reimburse us, we cannot afford it,” Cahill said. “But who’s going to bail the federal government out? Probably us, the taxpayers.”

A report by the Massachusetts Taxpayers Foundation, a business-based organization that supported health-care reform, found that Bay State spending on the health-care overhaul has increased by about $88 million annually since the law was passed.

Out of the $10 billion spent on health care in the state’s fiscal 2010 budget, $1.7 billion is spent on the health-care reform.

Obama has made a bold bid to push health-care reform through Congress before Christmas, even recently pressuring Beacon Hill to approve a temporary senator in a bid to secure another reform-friendly vote.

There are several different national bills under consideration, but the U.S. Senate Finance Committee’s health-reform bill released yesterday has aspects similar to the Bay State’s. Americans would be required to get insurance or face a penalty, while poorer citizens would be eligible for subsidized care.

U.S. Rep. William Delahunt (D-Quincy), who’s on the front lines of the health-care debate in Washington, D.C., said those who suggest the Bay State’s plan is too costly “don’t get it,” adding that a healthier population will lower health-care costs.

Jon Kingsdale, who heads the state’s Health Connector Authority, said the law is “not a budget-buster,” considering health-care costs were out of control before the reforms.

But Joseph Antos, health-care policy expert at the conservative American Enterprise Institute, said providing health insurance to everyone ultimately costs a lot.

“There’s no free health reform,” Antos said. “The bills that are working their way through Congress run $1 trillion. That’s a lot of money, and there’s really only two ways to find that money - cut federal payments to Medicare or increase taxes.”

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"Timothy Cahill scores Powerball win for Bay State: Just the ticket!"
By Hillary Chabot, Saturday, October 10, 2009, www.bostonherald.com - Local Politics

Treasurer Tim Cahill, rebounding from an earlier rebuff, has scored a Powerball bonanza that finally will give Bay State lottery players a chance to play the popular multimillion-dollar numbers game - and help plug a gaping hole in the beleaguered state budget, the Herald has learned.

“This is great for lottery players and for local aid,” said Cahill, announcing that the multistate game could be available in the Bay State as soon as January. “There will be more drawings, more chances to win and more huge jackpots.”

Powerball officials voted Wednesday to let Massachusetts begin offering the game, which could bring in between $25 million and $40 million annually for cities and towns.

The revenue estimate range is so large because of the game’s rich prizes, which can soar into the hundreds of millions. It hit a record jackpot of $365 million in 2006.

Cahill’s coup comes as Beacon Hill budget scribes this week estimated a grim $600 million revenue shortfall for this fiscal year.

“This is a great bonus,” said state Senate Ways and Means chairman Steve Panagiotakos (D-Lowell). “Money found is better than money lost, especially these days.”

Powerball, which is operated by the Multi-State Lottery Association, offers $1 tickets for Wednesday night and Saturday night drawings, with players picking five numbers between 1 and 59, and an additional Powerball number from 1 to 39.

Cahill said the lure of a big Powerball win could goose business for all of the state’s lottery games. “I think it’s going to help overall to bring up sales, because the more big jackpots we have, the more players we get,” he said.

The new game is a face-saver for Cahill, who is running for governor as an independent. The treasurer was sharply criticized earlier this year when the 33-state Powerball consortium rebuffed Massachusetts. Lawmakers had included the expected Powerball revenues in the budget and had to scramble to balance the books.

“Even though we were defeated the first time, we kept on trying because it’s important for the citizens that we get as much revenue as we can,” Cahill said.

The lottery sold $4.443 billion in fiscal 2009, with a profit of $859.4 million going to cities and towns.

Wednesday’s Powerball vote means the 12 states that currently offer Mega Millions can now also sell Powerball, and the 33 states that sold only Powerball can sell Mega Millions.

Massachusetts would be the last New England state to join Powerball.

The most recent Powerball jackpot was $189 million, according to its Web site. The $365 million record jackpot was shared by six Nebraska meat plant workers.

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"Cahill asserts Patrick failed budget test: Treasurer says his advice on shortfall unheeded"
By Andrea Estes and John R. Ellement, Boston Globe Staff, October 22, 2009

RANDOLPH - State Treasurer Timothy P. Cahill, seizing on the Massachusetts budget crisis as he ramps up his independent campaign for governor, accused Governor Deval Patrick and legislative leaders yesterday of responding too slowly and predicted the shortfall this year could balloon to more than $1 billion.

In his strongest attack yet on Patrick’s leadership, Cahill said the governor and state lawmakers ignored his warnings about overspending last year and put together a budget that relied on overly optimistic revenue projections.

“Our budget is built on phantom figures and based on a hope and a prayer,’’ Cahill said in a speech to the South Shore Chamber of Commerce in Randolph. “We’re 21 months into this recession, and he’s developing a plan now. It should have been done at least last year.’’

Cahill said that without a dramatic improvement in state revenues as a result of an improved economy, the budget deficit this year could hit $1.4 billion, more than double the $600 million figure Patrick predicted last week.

“I’m not trying to be Chicken Little,’’ Cahill said in an interview later, denying that he would exploit the budget emergency to advance his campaign. “I’m just trying to be realistic.’’

Patrick did not respond to requests for interviews. In an e-mailed statement, Patrick spokesman Kyle Sullivan called Cahill’s remarks “ill-informed and inaccurate.’’

“Governor Patrick’s stewardship during this time of global economic crisis has helped put Massachusetts on a road to recovery and in a far more favorable position than other states to come out of this downturn stronger than before,’’ he said. “The governor has made the tough choices necessary to protect core services like education and health care, services that reflect our values and vision for the future. Unlike the treasurer, we recognize the importance of supporting these initiatives and the role they play in ensuring the Commonwealth continues to be a national leader.’’

Patrick’s secretary of administration and finance, Jay Gonzalez, also strongly disputed Cahill’s charge that the administration, which repeatedly sliced the state budget over the past year to bring it into balance, has consistently underestimated the severity of the crisis.

“I don’t know where the treasurer is getting his estimates,’’ said Gonzalez, adding that the administration consulted key economists in government, academia, and private industry. “We took the highest end of the range in terms of the potential revenue shortfall, which was $600 million, to be conservative.’’

He added, “It’s important to note that every economist in the country has had a hard time over the past year-and-a-half forecasting the extent to which the economy was going to fall.’’

Cahill said his comments were made in response to the governor’s announcement last week that the state’s financial crisis was worse than it looked just weeks ago. The governor said that his administration had already eliminated 1,400 jobs, but may be forced to cut up to 2,000 more.

The treasurer said he is opposed to giving Patrick authority to unilaterally cut local aid to cities and towns, a power Patrick has requested from the Legislature. He said the governor should reduce spending in the executive branch agencies first.

Cahill said he does not know of a single state employee who has been laid off. In fact, he asserted, the Patrick administration actually added jobs in 2007 and 2008, nearly 2,000, according to statistics he said he received from the Human Resources Division of the executive branch.

“They claim to have laid off people and made cuts; we haven’t seen it,’’ Cahill said. “We [in the treasury] have fewer employees than we had in 2006. If they had done the same, we wouldn’t be in the mess we’re in now.’’

State budget officials countered that the number of executive branch employees has dropped, not increased, over Patrick’s term. In January 2007, when Patrick took office, there were 44,881 executive branch employees, according to his administration. On Oct. 10, they said, there were 44,635. More than 1,600 jobs have been cut, administration officials said, and 761 people have been laid off.

According to the state Department of Labor and Workforce Development website, the number of state employees overall increased after Patrick came into office. When he was sworn in, there were 115,000 state employees. The number peaked in December 2008, at 118,000, and has been steadily dropping ever since.

Michael Widmer, president of the Massachusetts Taxpayer Foundation, a nonprofit business-funded watchdog group, agreed that there is a risk that revenues for the rest of the year will not meet the governor’s current projections. But, he said, it is unfair for Cahill to say that the administration should have known months ago how severe the fiscal crisis would get.

“If one knew 12 months ago the scale of this, it would have been best to make a series of cuts all at once,’’ Widmer said. “Revenues dropped more dramatically than anybody had forecast. It would have been difficult to foresee the extent of the problem. It has been the same in state after state. Massachusetts has acquitted itself better than other states.’’

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"Cahill says he rebuffed request to be Baker’s No. 2"
By Andrea Estes, Boston Globe Staff, November 11, 2009

State Treasurer Timothy P. Cahill, who is mounting an independent candidacy for governor, said yesterday that he had rejected entreaties from supporters of Republican rival Charles D. Baker to quit the race and serve as Baker’s running mate.

Cahill said he turned down the proposal, made Friday in a phone call from Joseph Nolan, an NSTAR executive active in Baker’s campaign, to Cahill’s chief of staff. That call, Cahill said, came a few weeks after another Baker supporter, former Weld administration official Mark Robinson, made a more general inquiry to another Cahill aide.

The pairing of the two self-described fiscal conservatives could have posed a strong challenge to Governor Deval Patrick, whose reelection hopes, according to early polls, could rest on a three-way race.

Cahill said that while he was not exactly insulted that Baker, who has never run for statewide office, would ask him to be his lieutenant governor, he was taken aback.

“I feel like I have every bit as much right to run for the top job as he does,’’ Cahill said in an interview. “And I would hope people would respect that.’’

A spokesman for Baker said that no one from the campaign had made a formal offer to Cahill.

“We intend to select a running mate, but it’s an internal process among the candidates, campaign staff, and consultants,’’ said the spokesman, Rob Gray. “Those are the only people who speak for the campaign, on this or any other issue.’’

Nolan could not be reached for comment.

Robinson said the topic came up in an off-handed way at a purely social lunch with a Cahill aide, and he said he had not discussed the matter with Baker beforehand.

But Cahill said it was evident to him that Nolan and Robinson were emissaries from the Baker campaign. He said Nolan even referred to the Baker campaign as we.

“It’s pretty clear they want me out of the race and preferably on Charlie’s team,’’ he said.

Cahill’s decision not to team up with Baker is decidedly welcome news for Patrick, who stands to benefit politically if the race includes two challengers who split the anti-incumbent vote. The campaigns of Baker and Cahill acknowledge that a three-person race next fall helps Patrick, because Baker and Cahill are likely to divide the moderate and conservative vote. Convenience store magnate Christy Mihos is also running for the Republican nomination.

A recent Suffolk University poll showed that Patrick, if the election were held today, would beat both Cahill and Baker. But together their support was greater than Patrick’s.

Patrick campaign spokesman Steve Crawford dismissed the prospect of a Baker-Cahill team, saying: “Deval Patrick is running on a proven ticket with [Lieutenant Governor] Tim Murray and on their record working under difficult circumstances to get Massachusetts back on track. What other people choose to do is up to them.’’

Cahill and Baker each believe that he has the best shot at beating Patrick. Cahill argued yesterday that Baker’s chances are greatly diminished by his presence in the race.

“The biggest impediment to his winning is me,’’ Cahill said. “It’s going to be extraordinarily difficult for a Republican to win with a fiscally conservative former Democrat running as an independent who polls very well and has always been supported by independents, conservative Democrats, and even some Republicans.’’

If Baker thinks he has the edge, Cahill said, he is wrong.

“I’ve run successfully statewide twice before,’’ the treasurer said. “I got the most votes of any statewide officeholder in 2006. I have $3 million in the bank and have had strong fund-raising. I’ve been in elective office for 22 years and elected in 11 elections. I know what I’m doing. I have a good feel for this business.’’

He added, “I think the timing is right for me.’’

A Baker campaign adviser countered that elections around the country have shown that an independent candidate for governor cannot win.

“Cahill will be lucky to hit 10 or 15 percent; he just doesn’t know it yet,’’ said the adviser, who asked for anonymity to discuss the campaign. “The election in New Jersey just showed that third-party candidates can’t win and are bound to come in third, especially if you have a lack of fund-raising, which Cahill’s first two months running for governor have demonstrated.’’

In New Jersey, Republican Christopher Christie beat incumbent Jon Corzine, becoming the first Republican to win statewide office in 12 years. The independent candidate, Christopher Daggett captured only about 6 percent.

Even with millions in the bank, the Baker adviser said, Cahill cannot raise enough between now and the election to run a winning campaign.

“With no personal wealth and no party committees available, he can’t win,’’ the adviser said. “Anyone who has run a campaign for governor before will tell you that. It’s not enough resources.’’

While Baker might want Cahill as his running mate, Cahill said, he had no intention of returning the offer.

“He said he’s running for governor, and I take him at his word,’’ Cahill said. “He’s not running so he can set himself up to be lieutenant governor any more than I am.’’

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GOING HIS OWN WAY
Cahill’s decision to give the contract to Scientific Games came against advice from his staff that the company’s role be cut back.
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"Cahill’s legal costs soaring: He and lottery head fight suit on bid dispute"
By Frank Phillips and Walter V. Robinson, Boston Globe Staff, Boston Globe Correspondent, December 18, 2009

State Treasurer Timothy P. Cahill and his lottery director have racked up $393,000 in publicly funded legal costs over the last seven months and are on track to spend another $500,000 as they use two elite law firms to defend themselves in a lawsuit accusing them of rigging contracts in exchange for campaign donations.

Though state officials at times rely on outside counsel in litigation, the legal expenses in this case, for nine attorneys working at premium hourly rates, appear to be unusually high and could climb to more than $1 million if the dispute endures without an out-of-court settlement.

The Lottery Commission already voted last month to authorize tripling the original legal budget, to $900,000, to fight the $20 million federal lawsuit, which Cahill aides say is without merit. But the current expenses cover only the early skirmishes in the suit, which has political ramifications for Cahill, a former Democrat who is running for governor as an independent. The legal work has involved only a handful of preliminary motions, minor document filings, and several court hearings. Only one deposition has been taken so far.

In its suit, Bingo Innovative Software of Rhode Island alleges that Cahill and the executive director of the Massachusetts State Lottery, Mark J. Cavanagh, rigged contracts in a “pay to play’’ scheme that favored the huge international gaming company Scientific Games International. Bingo contends that Scientific Games, the state Lottery’s longtime supplier of scratch tickets, was given preferential treatment in a separate $22 million contract five years ago, in exchange for donations to Cahill’s political account. Cahill has said those accusations are baseless.

Grace H. Lee, Cahill’s in-house legal counsel, said the decision to hire outside counsel in February was forced on Cahill because Attorney General Martha Coakley, concluding that her office faced potential conflicts, decided it could not defend him or Cavanagh. At the time, the State Ethics Commission was investigating Cahill and the contract issue and could have referred the case to Coakley for prosecution.

“The attorney general made that decision out of an abundance of caution,’’ Lee said. “This is not a situation we sought.’’

The potential conflicts that prompted Coakley to decline to take the case have not existed for some time. One of those investigations, the Ethics Commission’s review of Cahill’s role in the Scientific Games contract, ended several weeks after the contract with the private law firms was signed. The other potential conflict involved Secretary of State William F. Galvin’s review of possible lobbying activities by Thomas F. Kelly, Cahill’s close friend and political associate, who was secretly paid by Scientific Games to help win its contract. Galvin has not referred the case to Coakley.

The issue of Cahill’s legal bills comes as the Legislature wrestles with its own large legal bills, which taxpayers are also funding. The House has been embroiled in a controversy over $378,000 that it has paid so far to a Boston firm for representing the chamber in the federal investigation of former speaker Salvatore F. DiMasi. Bending to demands from his colleagues, Speaker Robert A. DeLeo agreed to hire a private attorney or auditor to review the bills.

Cahill, who oversees the lottery, decided on one week’s notice to give the legal work to two politically connected law firms: Mintz Levin, which has done millions of dollars of bond work for the treasurer’s office, and former attorney general Scott Harshbarger and his firm, Proskauer Rose LLP.

Four lawyers at Proskauer Rose have represented Cahill, including Harshbarger, charging $500 an hour. Cavanagh has used a five-member legal team from Mintz Levin at $484 an hour.

Those rates fall in the top range for Boston law firms. The secretary of state’s securities division paid $300 an hour for a Boston firm, Sloane & Walsh, to represent it in court appearances on a case related to convicted swindler Bernard Madoff. It cost the taxpayers $45,265.

’’Litigation is expensive, and good litigation is costly,’’ said Robert M. Delahunt Jr., the lead attorney for Mintz Levin on the Cahill lawsuit. ‘’We are being extremely, extremely efficient and careful as we can with the public monies here.’’’

Harshbarger did not return calls seeking comment.

A review by the Globe of the US District Court filings shows that the two law firms have done some parallel work. On April 3, the two firms filed separate motions to dismiss the lawsuits. Each firm filed with its motion a 19-page legal memorandum, one signed by Harshbarger and three other lawyers at Proskauer Rose, and the other by Delahunt and two other Mintz Levin attorneys. Because the claims in the lawsuit against both men were essentially the same, so too were the legal arguments to dismiss.

The Globe reported last year that Cahill’s decision to give the contract to Scientific Games was made against advice of his senior staff that the company’s role be cut back. Scientific Games began payments of $3,000 and $4,000 a month to Kelly as part of lobbying to keep its state work, because of his close relationship with Cahill. The payments to Kelly were directed through Regan Communications, the politically influential public relations firm hired by the gaming firm.

While Cahill and the lottery pondered the contract, Kelly was pushing Scientific Games executives to donate to Cahill’s political committee, according to sources involved in the procurement process. The executives said they would not donate until after the contract was awarded. Three months after the award, the firm threw a fund-raising event in New York that raised $20,000 for Cahill.
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Political rival Charles Baker said Timothy Cahill (above) should give back the public money he has spent on legal fees. (Pat Greenhouse/Globe Staff/File)
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"Cahill promises suit to recoup hefty legal fees: Case motivated by politics, he says"
By Frank Phillips, Boston Globe Staff, December 19, 2009

State Treasurer Timothy P. Cahill defended spending $393,000 in public money on private lawyers to defend him and his lottery director against a $20 million federal lawsuit, saying yesterday that the legal help is protecting taxpayers.

Cahill said that he expects to win the lawsuit, filed by the Rhode Island gaming firm Bingo Innovative Software, and that he intends to sue the company to recover legal costs. The suit accuses Cahill and Mark Cavanagh, the executive director of the Massachusetts State Lottery, of rigging lottery contracts in exchange for campaign contributions.

“We expect to save the taxpayers of the state of Massachusetts $20 million,’’ Cahill said in a statement released by his political aides. “After we defend this frivolous lawsuit, we will go after Bingo Innovative to recoup our legal fees.’’

The Globe reported yesterday that the cost of the case, originally budgeted for $300,000, had grown significantly, with another $500,000 expected in payments to the Mintz Levin and Proskauer Rose law firms. The firms are using up to nine lawyers, working at premium rates of about $500 an hour, to litigate the case, which is in its preliminary stages.

Cahill and his aides have attributed the large legal fees to a decision by Attorney General Martha Coakley not to represent them in the case; Coakley opted out because of potential conflicts of interest, given that other state investigations of Cahill’s activities were underway and could have been referred to her office.

A Coakley spokeswoman said her office would have no comment.

Cahill declined requests from the Globe for an interview, but told State House News Service, “I’m not going to turn my back on the taxpayers just because I’m running for governor.’’

Cahill left the Democratic Party last summer and announced he would run for governor as an independent. He told State House News Service that the suit is baseless and was filed to “embarrass me politically.’’

The legal spending came under fire yesterday from a Republican gubernatorial rival, Charles D. Baker, who called on Cahill to reimburse the state treasury for the fees and said Cahill and Cavanagh should “pay the bill going forward.’’

“After Massachusetts taxpayers have been hit with higher taxes and unbridled spending by the Patrick administration, Treasurer Cahill is adding insult to injury by forcing taxpayers to pay the tab for defending him against pay-to-play charges,’’ Baker said in a statement.

“Something is seriously wrong’’ when political leaders believe it is acceptable to have taxpayers foot the bill for such legal defenses, Baker said. “We need a change in leadership right now.’’

Cahill said Baker had no standing to criticize him, adding that the GOP candidate and his running mate, state Senate minority leader Richard R. Tisei, had been part of the Republican oversight of the Central Artery Project, which ran billions over budget.

“It’s ironic that Baker and Tisei, who oversaw the Big Dig, are criticizing someone else for wasting taxpayer dollars,’’ Cahill said in his statement.

Bingo Innovative Software has accused Cahill and Cavanagh of directing a $22 million contract to supply scratch tickets to international gaming company Scientific Games International in 2004, in exchange for political contributions. Bingo Innovative did not bid on that contract, but has used the deal to argue that the odds were stacked against the company when it sought subsequent state work.

At issue is Cahill’s relationship with Thomas F. Kelly, one of his chief fund-raisers and closest friends. Kelly secretly collected about $200,000 over a five-year period from Scientific Games, which had hired him to help the company land the lottery contract. Cahill has repeatedly said that he knew nothing of Kelly’s efforts to pressure Scientific Games executives to hold a fund-raising event for him or of Kelly’s financial relationship with the firm.

During part of that time, Kelly was also under contract with Bingo Innovative to help the firm win lottery work, even when the firms were bidding on the same electronic bingo contract in 2007. Under his agreement, which was never made public, Kelly stood to make more than $2.4 million if Bingo Innovative were awarded the work, according to the company’s projected sales.
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Paul Loscocco
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"AP source: Massachusetts treasurer taps GOP running mate"
Associated Press, January 6, 2010

BOSTON (AP) -- State Treasurer and gubernatorial candidate Timothy Cahill has tapped former Republican state Rep. Paul Loscocco of Holliston as his running mate. That's according to a person familiar with the decision who spoke to the Associated Press.

Cahill is a former Democrat running as an independent.

A moderate, Loscocco voted against allowing a proposed anti-gay marriage initiative from reaching the statewide ballot. He also voted in favor of a bill allowing police officers to stop drivers solely because they are not wearing seat belts and against a plan to allow slot machines at each of the state's race tracks.

He chose not to seek re-election in 2008.

Democratic incumbent Gov. Deval Patrick is running for a second term, while Charles Baker and Christy Mihos are seeking the Republican nomination.

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"Paul Loscocco leaves GOP to join Cahill ticket"
By Noah Bierman, Boston Globe Staff, January 7, 2010

HOLLISTON -- State Treasurer Timothy P. Cahill today tapped former Republican lawmaker Paul Loscocco as his running mate in a bid for the governor's office, with both men leaving their longtime political parties to run on an independent ticket.
Loscocco, a conservative legislator and lawyer from Holliston who served eight years in the Legislature, formally left the GOP today because he said, "the two-party system has failed us." Loscocco will run for lieutenant governor as an independent, following the lead of Cahill, who left the Democratic Party last year shortly before he announced his bid for governor.

"I don't think either one of us are throwing our 20-year history of party overboard," Cahill said as he introduced Loscocco at the Holliston Historical Society. "We're just trying to get beyond" the entrenched partisan bickering.

Loscocco grew up in the Republican Party idolizing Ronald Reagan, he said, but the state now needed to move beyond partisanship to combat "the worst economic crisis my generation has ever seen." Instead of Reagan, however, Loscocco today paraphrased George Washington, who warned against political parties and group labels.

The former lawmaker also defended his past support for the gubernatorial campaign of one of Cahill's rivals, Republican Charles D. Baker. In the fall, Loscocco and his wife each gave Baker the maximum $500 contribution allowed by law. Loscocco was also a member of the host committee for an October fund-raiser for Baker in Ashland. Despite his past support, Loscocco said today that he never wanted to be on the ticket with Baker.

Loscocco represented Holliston from 2000 to 2008, when he did not run for reelection, citing family considerations.

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Timothy P. Cahill, a candidate for governor, said he wants to cut taxes on individuals and businesses to help revive the economy. (David L. Ryan/Globe Staff)
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"Cahill seeks support outside system: Looking for help in independent run for governor"
By Eric Moskowitz, Boston Globe Staff, February 14, 2010

QUINCY - As state Democrats gathered in caucuses yesterday to begin electing the delegates who will eventually choose the candidates for the primary ballot, former Democrat Timothy P. Cahill stood on a bench outside his Quincy headquarters and asked for help bypassing that system.

“We’re avoiding all of that party business,’’ said Cahill, the state treasurer and an independent candidate for governor, addressing a crowd that spilled into the main lobby at the formal opening of his campaign office. “We’re avoiding all of these special interests, and we’re going right to the people.’’

Cahill can avoid the primaries and go right to the November ballot by gathering 10,000 certified signatures from registered voters. He asked the crowd yesterday to help him reach that figure well before the August deadline.

The cheering hall of more than 200 seemed ready to oblige, calling out “Go, Tim, go!’’, a cry reminiscent of the “Go, Scott, Go!’’ cheers that followed once-little-known state lawmaker Scott Brown in his upset bid last month in the special election for US Senate.

Cahill said Brown’s candidacy, which successfully captured the antigovernment and anti-establishment sentiments of many middle-class voters frustrated by the recession, changed the way other candidates and voters view his campaign: not as a quixotic quest to become the first candidate outside the party system to be elected governor of Massachusetts, but as an independent, free of the baggage of the Democratic and Republican establishment.

“This race, and people’s perceptions of me and this campaign, has changed dramatically since Jan. 19,’’ Cahill told reporters. “Where Scott Brown was defining himself as an independent Republican, I’m an independent independent.’’

Like Brown, Cahill said he wants to cut taxes on individuals and businesses to help revive the economy, and he talked about ending “business as usual’’ and taking government back from those in power, in the name of the people.

Cahill’s running mate, Paul J.P. Loscocco, touted Cahill as an established conservative on taxes and spending.

“Tim is not somebody that’s been around recently singing ‘fiscal responsibility.’ He’s been somebody with a strong record,’’ said Loscocco, a former Republican state representative from Holliston who, like Cahill, changed his registration to unenrolled recently. “He’s about fiscal responsibility, about making the tough decisions, about bringing some accountability to government on Beacon Hill.’’

But the 51-year-old Cahill, a registered Democrat from age 18 until last summer, made it clear he was not positioning himself as a Republican. He said no party claims ownership on the push for lower taxes and restrained government, and he said he welcomes Martha Coakley supporters as well as Brown voters.

Cahill is running in a field that includes the Democratic incumbent, Governor Deval Patrick, as well as Republican candidates Charles D. Baker Jr. and Christy Mihos. Although the inspirational quotes on the white boards in Cahill’s office included one from Patrick - “If he wants to run, he’s going to have to bring his A game’’ - Cahill avoided talking about the others specifically yesterday, saying, “It’s not going to be about tearing the other guy down, it’s really about trying to get as many votes as you can and convince as many people as you can that your message is the right message.’’

But just to be clear, he told reporters, he’s got the inside track on the Brown-style message. “We’re all calling ourselves independents now, but there really is only one true independent in the race, someone who left the party before it became fashionable.’’

The gathering yesterday included members of both parties and unenrolled voters; it was heavy on residents of Quincy, Cahill’s longtime home, but included people from a variety of communities. Supporters also tuned in through web cams, with a bank of laptops on a side table representing live gatherings in Springfield, Holliston, and other locations.

The campaign estimated that nearly 1,000 people came through the doors during the five-hour open house, and about a quarter of that number was on hand when Cahill spoke in late morning. He spent most of the day drifting through his suite of campaign offices and the lobby of this refurbished candy factory-turned-office-building, greeting old friends and newer supporters over coffee, doughnuts, and muffins - with a spread that featured an established chain as well as an independent outfit from Quincy.

Cahill faces obvious obstacles as an independent - among other things, he does not have access to either party’s valuable database of voters - but his message resonates with people, said James Sheets, who served six terms as mayor of Quincy and is also a former Democratic state representative.

“This is just the tip of the iceberg,’’ said Sheets, a Cahill supporter who broke with his party to endorse Brown last month. “People are going to vote to take their government back.’’

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"Cahill navigating uncharted waters: No independent has won statewide race"
By Brian C. Mooney, Boston Globe Staff, March 15, 2010

Now comes the hard part for state Treasurer Timothy P. Cahill, the political renegade running for governor.

There is no roadmap or handbook for the Democrat-turned-independent. He is a virtual solo act, lacking the natural base of activists and interest groups major-party candidates enjoy. There will be no huzzahs at a convention of the faithful, few, if any, shared fund-raising lists, and little chance at major endorsements that generate publicity and volunteers.

No independent candidate has won a statewide election in Massachusetts. None has come close.

But none of that seems to faze Cahill, who considers himself well equipped for this combustible environment. If this campaign were a referendum on chutzpah, Cahill would be ahead in the polls, not trailing incumbent Democrat Deval Patrick and the leading GOP challenger, Charles D. Baker, as a recent Rasmussen Reports survey indicated.

“I’ll outwork my opponents; I think I’ve shown the ability to do that,’’ Cahill said in an interview. “And I honestly think people are looking for something different, truly different.’’

“No one’s ever done it the way I’m doing it,’’ he said. “I’m not some unknown, and that usually is working against independents.’’

Cahill, 51, has won two statewide elections, one for Norfolk County treasurer, and seven for an at-large City Council seat in Quincy. “I have more campaign experience than my two opponents combined,’’ he said.

He also has $3.3 million in his campaign account, more than Baker or Patrick. Most was raised when he still had a “D’’ next to his name and before he became a lame duck, however, and Cahill has been dogged by media reports that some of his money originated from firms seeking treasury business.

A Democrat for 30 years until he left the party in July, Cahill has always been something of a maverick — a conservative, at least on fiscal matters, in a party dominated by liberals and mandarins who view him as an overachiever.

The closest thing Cahill has to a blueprint is Republican Scott Brown’s electrifying upset in the January special election for US Senate. Brown cleaned up among independent voters to defeat the Democrat, Attorney General Martha Coakley.

“The lesson is that anything is possible, and the politics of Massachusetts is much less settled than people thought,’’ said Cahill, who last year tried to recruit Brown to be his running mate. (Brown declined and is supporting Baker.)

Cahill ultimately chose Paul Loscocco, a former Republican state representative from Holliston. Loscocco, who served as cochairman of John McCain’s 2008 presidential campaign in the Bay State, initiated talks that led Cahill’s campaign to land four top-tier operatives from the McCain campaign to work for the independent ticket. Cahill’s media consultants, Tad Devine and Julian Mulvey, are veterans of many Democratic campaigns.

An accomplished retail politician, Cahill has a direct style and moves easily on the campaign trail as he prospects for support in diverse environments. On Wednesday, he outlined his economic platform for about 65 leaders of the Massachusetts Building Trades Council in Plymouth, and the next day met with a Tea Party organizer in Boston and addressed leaders of the Massachusetts Chiefs of Police Association.

A busy day of politicking Friday began in his hometown of Quincy, where Cahill worked the crowd before a forum with leaders of The Arc of the South Shore, an advocacy group and service provider for people with developmental disabilities. The group is mobilizing against more proposed reductions in state funds that provide half of its $7 million annual budget.

“More cuts could really cut into the safety net, and some people will fall through,’’ Daryl Ann Cook, the organization’s executive director, told an audience of about 50. “We need to send a message to our elected officials to preserve basic services.’’

Cook wasn’t specifically addressing her remarks to Cahill, but she might as well have been. Cahill has proposed drastic measures, including a rollback of state income and sales taxes to 5 percent, which would slash annual revenues by about $1.5 billion.

Running on supply-side economic principles, Cahill says deep tax cuts are the way to make the state more competitive and stimulate new businesses, jobs, and tax revenue. Every state agency and program would be on the table for possible offsetting spending cuts, he said.

How would Cahill balance the need for cuts with those of people who need state services?

“These people want a fiscally responsible government, too,’’ he said. “They pay taxes . . . If you’re going to provide state funds, you need to create revenues by putting people back to work’’

Cahill often invokes voter registration statistics to buttress his rationale for an independent candidacy. Democrats outnumber Republicans more than 3 to 1, but so-called unenrolled voters now constitute 51 percent of the electorate. The numbers, however, do not mean that most voters represent the equivalent of an independent party. Polling data invariably show that most think of themselves as either Democrats or Republicans but shun a partisan label.

“It’s a mistake to think of that big bucket of registered independents as being truly independent or up for grabs, because most of them are Republicans or Democrats in their voting behavior,’’ said Andrew E. Smith, director of the Survey Center at the University of New Hampshire, which conducts polls for the Globe.

If history is indicative, Cahill faces a steep climb. In 1992, presidential candidate H. Ross Perot tallied 22.8 percent of the vote in Massachusetts, finishing third as an independent. In 1980, independent presidential candidate John B. Anderson tallied 15.2 percent of the vote in the Bay State. In 2006, Christy Mihos, who this year is running as a Republican, won less than 7 percent as an independent gubernatorial candidate.

The most significant victories by independents were not in statewide contests: J. Joseph Moakley’s ouster of fellow South Bostonian and first-term US Representative Louise Day Hicks, a Democrat, in 1972; and George Bachrach in 1980 unseating state Senator Francis X. McCann, a 13-term Democrat, in a district that included parts of Cambridge and Boston. Both, however, were running as independents in name only to avoid crowded Democratic primaries.

Cahill is aware of the odds. Last year he clipped a Globe story in which an unnamed Baker operative said he “will be lucky to hit 10 or 15 percent.’’ Cahill keeps it in his wallet as a motivator.

“Becoming an independent better suited my personality; I’ve always been independent, even within the Democratic Party,’’ he said. “I didn’t do this as an act of political suicide.’’

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"Cahill attacks health care law: Candidate says it’s bankrupting state; Calls national plan repeat of a mistake"
By Michael Levenson, Boston Globe Staff, March 17, 2010

State Treasurer Timothy P. Cahill, an independent candidate for governor making a play for fiscally conservative voters, said yesterday that the state’s universal health care law is bankrupting Massachusetts and will do the same nationally if Congress passes a similar plan.

“If President Obama and the Democrats repeat the mistake of the health insurance reform here in Massachusetts on a national level, they will threaten to wipe out the American economy within four years,’’ Cahill said at a press conference.

In seizing on the issue, Cahill was seeking to insert himself into a fight that Governor Deval Patrick picked last week with his Republican rival, Charles D. Baker, former chief executive of Harvard Pilgrim Health Care, whom Patrick accused of doing nothing to stop dramatic premium increases that he said are crushing small businesses and families.

With Baker defending the state’s health care plan, Cahill’s comments illustrate how the treasurer, despite his longtime membership in the Democratic Party, may attempt to run to the right of Baker as all three candidates jockey for voter support this year.

Cahill, whose criticism of the 2006 health care law began in earnest last summer as he plotted his candidacy, toughened his rhetoric yesterday, saying the plan “has nearly bankrupted the state.’’ His criticism echoed that leveled by Senator Scott Brown during his run for US Senate and by congressional Republicans trying to stop Obama’s plan.

“It is time for the president and the Democratic leadership to go back to the drawing board and come up with a new plan that does not threaten to bankrupt this country,’’ said Cahill, who bolted the Democratic Party in July.

Many policy makers and candidates, including Patrick, have acknowledged that while the state law has succeeded in extending coverage to about 97 percent of residents, it has not lowered insurance premiums, which have continued to rise sharply. But Patrick said yesterday that the treasurer is wrong again to assert that the law, which was signed by Governor Mitt Romney, is sinking the state’s finances.

“Independent analysis has shown that health reform in the Commonwealth has added about 1 percent to the state budget,’’ Patrick told reporters.

Baker, who released a 10-point “government reform plan’’ yesterday, agreed with Patrick that the state law is not bankrupting Massachusetts.

Like Patrick, Baker cited a report issued last year by the Massachusetts Taxpayers Foundation, a business-backed watchdog group, that found the cost of the law to state taxpayers is about $88 million a year, less than four-tenths of 1 percent of the $27 billion state budget.

“Now, I think, is a good time to talk about reforming it, and rethinking some of the program components,’’ Baker said. “But I would not say so far it’s bankrupted the Commonwealth.’’

Baker went on to say he was worried a national plan could balloon the deficit and threaten federal funding for the Massachusetts law.

“That’s a legitimate thing we should all be worried about,’’ he said.

Cahill’s made his comments yesterday as Patrick’s administration kicked off hearings on the cost of health care. Cahill said he is not proposing to abolish the law, which he was largely silent on prior to last year.

“I’m trying to save it,’’ he said.

The Commonwealth Health Insurance Connector Authority, which was established to help residents find health insurance, has “totally failed’’ to create competition and connect people with affordable insurance, Cahill said, asserting that 68 percent of the residents it serves receive insurance at least partially subsidized by the state.

Asked for solutions, Cahill suggested “leveling the playing field’’ between hospitals that charge different rates for similar procedures, though he offered no specific remedy; increasing competition by allowing health insurers to sell plans across state lines; slashing benefits mandated under state law; and directing more patients to community hospitals, which can be less expensive.

Cahill also said he is open to scrapping the current fee-for-service system and paying providers a per-patient annual fee, called a global payment, to cover all of a patient’s medical care. State officials say that global payments, which members of Patrick’s administration have pushed, could take five years or more to fully implement.

Cahill said the law is sustained only with millions of dollars in federal aid, which he suggested the Obama administration is funneling to Massachusetts to help the president make the case for a similar plan in Congress.

“The real problem is the sucking sound of money that has been going in to pay for this health care reform,’’ Cahill said. “And I would argue that we’re being propped up so that the federal government and the Obama administration can drive it through’’ Congress.

Baker’s plan to reform government does not address health care, but seeks to make the state friendlier to businesses and abolish official perks that have sparked widespread public outrage. His plan proposes, among other items, to prohibit elected officials from simultaneously holding paid elected positions at the state and local levels, a practice Baker labeled double-dipping.

Some of Baker’s ideas — such as banning state agencies from hiring lobbyists and eliminating the Bunker Hill and Evacuation Day holidays — have also been embraced by Patrick. Others are changes long sought by Republican state lawmakers, such as loosening the union-backed Pacheco Law, which makes it difficult to privatize services, streamlining state regulations, and consolidating the agencies that issue licenses and permits.

Notable in Baker’s plan are provisions that would target problems that have arisen under the watches of his gubernatorial rivals.

Baker, for example, proposes eliminating bonuses for pension fund managers who oversee heavy losses and abolishing confidentiality agreements for state employees — issues for which Cahill’s office has been criticized. He also proposes abolishing vacation payouts for state employees who retire or are fired, an issue for which Patrick’s office has been criticized.

“In order to regain our footing in Massachusetts, we need to tighten our belts, reduce the bloated bureaucracy and reform state government,’’ Baker said in a statement.
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Michael Levenson can be reached at mlevenson@globe.com.
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"Cahill taps firms tied to state pension investor: A $100m deal came a day after a cluster of donations. The practice is not illegal, but some say it’s close to ethical edge."
By Aaron Lester, Michele Richinick, and Walter V. Robinson, Boston Globe Correspondents, March 21, 2010

They came in batches, nearly 250 checks, most for $500, from real estate lawyers, property managers, and realtors in far-flung states, all dedicated to the election of state Treasurer Timothy P. Cahill.

The contributions, almost all of them deposited on three separate dates in 2002, 2003, and 2005, total more than $100,000 — part of the $3 million war chest that Cahill is now tapping for his independent run for governor this year.

Nothing obvious connects Cahill to these donors, whose companies are based in such states as Texas, Missouri, Florida, and Colorado. But an extensive Globe review of Cahill’s aggressive fund-raising practices uncovered the common link: Michael A. Ruane, a Boston investment manager who employs those firms to handle the vast real estate holdings he has bought for his investors — and who counts the Massachusetts pension board as one of his clients.

Since Cahill became the board’s chairman in 2003, Ruane’s investment management firm has been allocated $500 million in pension funds to invest — and has earned $34 million in management fees.

In fact, the largest one-day infusion of Ruane-connected campaign donations, $40,250 from business associates and their relatives in 12 states, was deposited on Aug. 13, 2003, a day before the Pension Reserves Investment Management board voted unanimously to give Ruane’s company $100 million to invest.

Cahill and Michael Travaglini, the state pension board’s executive director, insist that there was no connection between the fund-raising and investment decisions and said that Ruane’s firm, TA Associates Realty, has been one of the pension fund’s best managers, even before Cahill’s time. Ruane’s company already handled $300 million from the state pension fund when Cahill took office.

Cahill, in an interview, expressed no qualms about receiving campaign contributions from companies that have or want business from the treasurer’s office and the five agencies he oversees, including the pension board.

In fact, he acknowledged that he and his campaign aides routinely seek contributions from such companies.

Soliciting campaign contributions from pension fund managers is legal, although the US Securities and Exchange Commission has proposed regulations that would bar those who invest public pension funds from donating to — or soliciting funds for — the politicians who pick investment managers.

“We sometimes just sit there and brainstorm . . . Who can we call? Who are the people that we think can raise money?’’ Cahill said, describing how he and his aides decide how to solicit campaign contributions.

“Some we do business with in the Treasury, some we don’t.’’

Cahill said he is aware that this could lead to a “bad’’ story because of the questions that might be raised about connections between campaign contributions and his decision-making. But he added: “The worst story is when you’re not fund-raising, and you’re not a viable candidate.’’

Ruane, 59, who has never made a contribution to Cahill, declined several requests for an interview. In several e-mail exchanges, he did not provide an explanation for the money donated by companies connected to his firm but asserted that he never raised any substantial funds for Cahill. For the Globe to suggest otherwise, he said, would be a “falsehood in reckless disregard of the facts.’’

How the funds are raised
Cahill, meanwhile, offered three conflicting descriptions of his dealings with Ruane.

On Dec. 9, he told the Globe that Ruane had raised funds for him, and “maybe’’ helped him with one fund-raiser, but wasn’t a “prolific’’ fund-raiser. Asked why so many Ruane-connected companies were listed on his campaign reports, Cahill replied: “I mean, obviously if they’re on there, it’s not because of Mike Ruane that I know of.’’

But a week later, Cahill issued a statement in which he flatly denied Ruane had ever raised funds for him. Ruane may have introduced Cahill to people who subsequently became donors, the statement said, but not until sometime in 2005 — after most of the donations in question had been made and the pension board had already allocated the additional $500 million to TA Associates. Aides who spoke to the Globe on condition of anonymity said the treasurer issued the statement after conferring with Ruane.

In January, however, Cahill inched closer to his first account, acknowledging that even before 2005, Ruane had “connected him with people who subsequently chose to contribute.’’

One of those people was Elizabeth K. Shef, a broker at a Dallas firm, Holt Lunsford, which manages and leases properties that Ruane’s company owns in Texas.

Shef, who donated $500 in August 2003 and another $500 in June 2005, said in a telephone interview that Ruane had asked company officials to donate. But she said she did not know why, and declined to comment further. It is unclear whether she had received a request directly from Ruane or had heard about his connection to the donation second-hand.

Widely publicized “pay to play’’ scandals around the country, some of them involving financial relationships between politicians who oversee state pension funds and those hired to make the investments, have already prompted 17 states to impose fund-raising restrictions on pension fund managers. In Rhode Island last August, Frank T. Caprio, who is also running for governor, returned $54,250 in donations from law firms Caprio had picked to do state business.

The SEC has yet to adopt its proposed rules — which Cahill said he opposes — and Massachusetts has not imposed any of its own restrictions.

Pamela Wilmot, executive director of Common Cause/Massachusetts, said a ban on campaign contributions from anyone who seeks or has state business is long overdue. Such restrictions are even more urgently needed, Wilmot said, for pension fund managers, who in Massachusetts compete vigorously to handle the state’s $43 billion in pension assets.

Given the enormous amounts of money at stake, Wilmot added, “the public has to have confidence that decisions are made strictly on the merits and that campaign contributions do not influence those decisions.’’

While the state has not imposed any specific restriction on fund-raising by politicians who oversee pension funds, existing state campaign finance laws do apply. Candidates are, among other things, required to make a good faith effort to collect and report the occupation and employer of all donors who give $200 or more in a calendar year, as a way to provide the public with a clear picture of who is financing elections.

Yet Cahill's public campaign filings are anything but transparent, with more than 4,000 donors -- including many of Ruane's business associates -- listed with little identifying information.

In many cases, the Globe was only able to connect individual donors to companies that had done work for TA Associates — a privately held firm that Ruane founded in 1982 — by searching through public filings and public announcements of business dealings, identifying the names of officers who work for the company, and then matching those names against Cahill’s campaign finance reports.

Using a similar method, the Globe found more than 100 donations from officers or relatives of officers of two other investments firms, Ivy Asset Management and Earnest Partners, who have been allocated $643 million in Massachusetts pension assets on Cahill’s watch.

The cross-matching turned up $46,500 in donations from officers of the two firms and their family members. In not one case did the campaign report list the donor’s occupation or employer. A spokesman for Ivy declined to comment. The chief executive of Atlanta-based Earnest Partners did not respond to a phone message left by a reporter.

In an interview, Cahill denied that there has been “any intent, personal intent’’ to deceive anyone about the source of donations. If that had been his intent, Cahill said, “then I wouldn’t have reported the donations at all.’’

In many cases, donors explicitly report their affiliation with companies that have reaped enormous benefits from Cahill’s office:

■ In 2007, Cahill’s office picked six Boston law firms to take turns doing lucrative bond counsel work. Since then, the two firms whose campaign donations dwarf the others — Mintz Levin and Edwards Angell Palmer & Dodge — have been given all the bond counsel work, while the other four firms have received no work at all. Mintz Levin has received the lion’s share of the Treasury’s legal work since 2003 — more than $4.6 million. Over the same time, the firm’s members have given or helped raise close to $200,000 for Cahill.

R. Robert Popeo, Mintz Levin’s chairman, said it’s normal for the firm’s members to “contribute to a client.’’ Without the 2007 competition, Popeo said, his firm would have fared even better: “If this was a meritocracy, we’d get all the business,’’ Popeo said.

Officials at Edwards Angell refused to answer questions about the $60,000 its partners have donated to Cahill. That included $22,600 in December 2008. A month earlier, the firm was picked to be counsel for a state bond offering. Since Cahill became treasurer, the law firm has been paid $1.1 million in legal fees.

■ In 2003, just three weeks after the Legislature decided to give Cahill control of the state Alcoholic Beverages Control Commission, the treasurer’s campaign hosted the first of many events that ABCC-regulated liquor distributors and retailers were solicited to attend. The total raised by Cahill from liquor interests since 2003: at least $150,000.

Cahill said he was unaware of the timing of the liquor industry fund-raiser, though he said: “I’m sure it was not a coincidence.’’

■ Cahill awarded the lucrative advertising contract for the Massachusetts Lottery, which he controls, to the Boston ad firm Hill Holliday in 2003, despite a staff recommendation that another firm, Mullen Advertising, was better suited, according to three officials who had first-hand knowledge of the decision. Since then, Hill Holliday executives and their spouses have donated more than $90,000 to Cahill. The firm has earned $9 million in fees because of Cahill’s decision.

Twice during his interview with the Globe, Cahill said he runs the state’s pension management agency. But he changed course when asked whether he himself made the decision to select the investment managers whose officers or associates contributed to his campaign. That could not happen, Cahill insisted, because though he chairs the board, he casts just one of its nine votes.

Cahill and Travaglini, who joined the pension board in February 2004, both asserted that decisions to allocate an additional $500 million to Ruane’s company in 2003 and 2004 were based on recommendations from an outside consulting firm.

The recommendations, they said, were then adopted by the pension board’s staff, its investment committee, and finally by the board.

Old-time connections
Ruane’s relationship with Cahill dates to Cahill’s term as Norfolk County treasurer, when Ruane’s firm invested some of the county’s funds.

During the 2002 campaign for state treasurer, an improbable win for Cahill, the candidate raised more than $1 million. And companies with business ties to Ruane helped make that victory possible. On Feb. 13, 2002, the Cahill campaign deposited checks totaling $20,065 from the officers of 19 firms in 10 states who do work for Ruane’s company.

According to Travaglini, and to records he made available at the Globe’s request, TA Associates and the four other real estate investment management firms that invest state pension assets all received increased allocations in 2003 and 2004 — prompted by a June 2003 state pension board decision to increase the percentage of pension assets invested in real estate.

But on March 27, 2003, three months before that decision and less than three months after Cahill took office, TA Associates, alone among the firms, was given an additional $200 million to invest.

On Aug. 13, 2003, the Cahill campaign deposited $40,250 from companies in 10 states that, according to Globe review of public documents, do real estate-related work for TA Associates’ commercial, industrial, and residential properties.

The next day, the pension board voted to give TA Associates another $100 million.

On June 3, 2004, TA Associates was awarded $200 million more. On June 8, 2005, the Cahill campaign deposted checks totaling $30,950 from Ruane business associates and their relatives, according to the Globe analysis.

Since 2001, TA’s performance, as measured by return on investment, has been second-highest among the five firms that manage real estate investments for the pension system. But in 2003 and 2004, when its allocations were increased from $300 million to $800 million, the company’s performance ranked next-to-last and last, respectively, among the five firms.

During the same period, one of the other real estate investment firms, J.P. Morgan, had its allocation increased by only $100 million, from $200 million to $300 million. Yet between 2003 and 2006, Morgan produced annual returns that averaged 23.1 percent, compared with 13.8 percent for TA Associates. During those four years, Morgan’s returns were 50 percent higher than the other four firms.

Travaglini, however, said short-term performance was of relatively little importance. The allocation decisions were focused more, he said, on the diversification of the state’s real estate investments and TA’s ability to successfully manage industrial properties. “We don’t focus on investment returns in any given year,’’ Travaglini said. “The worst thing you can do is to give more money to the hottest investment manager.’’

The Globe sought comment from the five Ruane-connected companies that sent the largest number of contributions to Cahill’s campaign [see accompanying chart]. All declined to comment or did not respond to e-mail or phone messages.

Cahill, though he offered differing explanations of his dealings with Ruane, was steadfast on one point: that whatever Ruane has done for him was unrelated to the $500 million that flowed to TA Associates in 2003 and 2004.

“Whether Michael was helpful to me, or not helpful to me — or whatever level he was helpful to me — they’ve done a tremendous job of managing money, in good markets and in bad markets,’’ Cahill asserted. “And that statement has nothing to do with Michael’s support of me.’’
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This article was also reported by Marino Eccher, Kelly Glista, and Pamela King for a course in investigative reporting at Northeastern University. Their work was overseen and this article was edited by Northeastern journalism professor Walter V. Robinson, former editor of the Globe Spotlight Team. Robinson’s address is wrobinson@globe.com. Confidential messages can be left at 617-929-3334.
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In his own words
"Excerpts from an extensive interview with Massachusetts State Treasurer Timothy P. Cahill about political fundraising and governmental decision-making"
The Boston Globe (online), March 20, 2010

ON WHETHER POLITICAL CONTRIBUTIONS GET THE DONOR ANYTHING IN RETURN:

"People have made political contributions and gotten business. ...There's two sides, as many, probably more, people that have made political contributions and not done business."

ON HIS STANDARDS FOR AWARDING CONTRACTS:

"What I try to do is look for, based on experience, look for the best individuals and the best companies that are providing services or pitching services to us and then put them through a process that is hopefully consistent, and I think it has been over the years, and if it isn't, or if we find out there are holes in it, we try to make it better as we go forward."

ON PICKING STATE CONTRACTORS:

"Some issues like hiring law firms and doing business with banks at the Treasury is just a recommendation that comes to my decision, which means I don't have to ask anyone else's permission... Having that ability of being the sole decision-maker is a tremendous responsibility and there are a lot of risks in it because it's hard to find the checks and balances."

ON THE DIFFICULTY OF KEEPING POLITICS OUT OF THE PROCESS:

"We try to clear as much off the table as possible about anything extraneous like fundraising or any of the other things that go along with my political job and try to break it down into the facts of the case, much like you would in a law case, and just try to find out what is the best company and what service are they providing."

"I am confident that we keep a very, very tight wall between my political career and my public life in terms of the decisions I make. It is probably the hardest thing that I have to do. But I think I do it well."

"I think I do as good a job as anyone can possibly do knowing that at the end of the day it is still very difficult when you're in a public position, you control significant amounts of public contracts, and you are still out in the business of raising money and being a political candidate, or at least a viable, future political candidate..."

"In terms of fundraising, one bad story is, geez, you've fundraised and these people you do business with, and what's the connection? That's a bad story. The worst story is when you're not fundraising and you're not a viable candidate. And that's why it's a challenge for us. If I'm not a viable candidate, it's generally because I have not been able to raise money and no one will take me seriously. If I've raised money, people want to know where, how, what's the process, why are people being nice to you? Is it because they like you or is it because you're doing something for them? So I have always been aware of that, and that real big challenge between being viable and being able to raise money because I'm not personally wealthy and cannot write a check for myself to run this business, to run my operation, my political operation..."

"But at the same time never deviating from the plan of trying to bring the best vendors and working with the best people in the industry, people who would get business regardless of whether they support me or they don't support me. I think I can honestly say ...that whatever people did for me or will do for me in the future will not influence the decisions I make as an elected official."

ON FUNDRAISING CHALLENGES:

"People have different motivations. Some are clearly looking for an advantage. But I have tried never to take advantage of that situation, tried to keep very much the wall separate between what they want and what they don't want. My general rule of thumb is that unless I have a relationship with someone... then I won't ask them for support. Doesn't mean that they don't get invited to events that my committee has."

"Generally what I have found is that companies that have traditionally, historically done business with the Treasury will be people who will contribute to treasurers. That's just how it goes."

"We don't just hire people to hire people and we don't hire people to take political advantage for myself. They've got to be able to provide a role."

"I've never made it a requirement, and never will make it a requirement, and nobody is under any obligation to contribute to me for any reason other than they want to and they feel that I'm a good elected official."

ON HOW HE DECIDES WHO TO SOLICIT FOR CONTRIBUTIONS:

"My brother-in-law (Campaign Finance Chairman Anthony S. Falco) handles a lot of that. And, again, I don't provide him a list... It just sort of comes up. A lot of fundraising comes from lists generated by other fundraisers."

"We don't have a hard and fast system. We sometimes just sit there and brainstorm. ... Who can we call? Who are the people that we think can raise money?"

"Some we do business with in Treasury, some we don't."

"We do things that others do, unless we're not comfortable doing them."

"We get business cards all the time. And the way we look at it, it's a free country. I can ask. They can accept or they can deny. They can not return my phone call."

ON HOW HIS BROTHER-IN-LAW DECIDES WHO TO SOLICIT:

"I don't know sometimes how [Falco] knows. He doesn't contact the office so I don't know if he talks to other people."

ON DECIDING WHO MIGHT QUALIFY FOR STATE BUSINESS:

"I can generally tell within 15 minutes of a meeting whether someone is worthy of sending down to PRIM, or to debt, or to one of my other departments or down to the Lottery based on what I'm seeing and what they have to offer and sort of their backgrounds."

ON WHY HE HAS SUCH A HIGH RATE OF NON-DISCLOSURE OF THE OCCUPATION AND EMPLOYER OF HIS POLITICAL CONTRIBUTORS:

"We probably could be more diligent about tracking them down and actually finding out."

"Maybe we're not aggressive enough. ...But it's not with any intent to hide anything."

"Maybe some people think that it's on purpose or we're trying to hide something, but that's not the case. ...There's been never any intent, personal intent, to deceive anyone or not give anyone the information. I will take responsibility for not having it as thoroughly as we do have it. If there was an intent to try to hide it, we would just not list those names. ...And if I was embarrassed by any of it, we wouldn't accept it. Compared to others, we're not doing as good a job as we could, and that's my responsibility."

ON HIS KNOWLEDGE OF HIS CAMPAIGN FUNDRAISING:

"I outsource as much of the fundraising as I possibly can because I don't want to be as intimately involved with that part of the business because I don't want it to interfere with what I do. I'd prefer not to know sometimes what people do for me because I don't even want the thought to cross my head if I can avoid it. ...Sometimes ignorance is not an excuse or a defense."

ON HOW LIQUOR INTERESTS WERE SOLICITED RIGHT AFTER HE TOOK CONTROL OF THE ALCOHOLIC BEVERAGES CONTROL COMMISSION:

"I'm sure it wasn't a coincidence. ...We had no direct involvement in getting the legislation changed. It was done at the Legislature's initiative."

"There was never any solicitation from me saying, 'Alright, let's reach out to these people, let's ask them.' ...Once people contribute, the easiest way to get to raise money is once you've raised it, to go back to the people who have contributed in the past."

ON WHETHER IT'S APPROPRIATE TO SOLICIT FUNDS FROM COMPANIES REGULATED BY THE ABCC, WHICH HAS LAW ENFORCEMENT POWERS:

"If I was to have a blanket prohibition against that, then I would not be a viable statewide candidate, and I don't want to take the ability of people who want to contribute to my campaign away from them to question any of their integrity or question my ability to separate the two."

ON HIS RELATIONSHIP WITH MICHAEL A. RUANE, WHOSE FIRM HAS BEEN GIVEN $500 MILLION TO INVEST SINCE HE BECAME TREASURER:

"I would say he's someone I've met through this business who I respect a great deal. He runs a great business and we're proud to have him as a manager of our funds because he does a great job for us."

ON WHETHER RUANE HAS RAISED SUBSTANTIAL FUNDS FOR HIM:

"He really hasn't. He hasn't. He hasn't. I know that someone told you this, but it's not the case. On a percentage basis, a very small amount. To the best of my knowledge, he helped with one fundraiser that we had back in 2004, 2005."

ON WHY OFFICIALS OF COMPANIES ACROSS THE COUNTRY WHO DO WORK FOR RUANE'S COMPANY APPEAR FREQUENTLY ON HIS FUNDRAISING REPORTS:

"If it's true, I mean obviously if they're on there, it's not because of Mike Ruane, that I know of. Again, when people make contributions to us, they're on the list, so they get solicited every year. And whether or not they give money or they don't give money is something that I don't generally know."

"To be honest with you, he helped me raise money one year. And that's all I do know. If people have given me money since then, it's because they've chosen to, not because Mike Ruane has made any phone calls. Nobody has, or nobody that I know of has, nobody on my behalf has called him... He is not a prolific fundraiser for me. And I'm certain of that."

"Whether Michael was helpful to me or not helpful to me or whatever level he was helpful to me, they've done a tremendous job at managing money, in good markets and in bad markets. ...But overall I think they're one of the best real estate firms that we invest with. And that statement has nothing to do with Michael's support of mine."
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“We have a very . . . firm wall, between the political and the professional in the way we run our operations,’’ Cahill said.
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"Cahill defends taking questioned campaign donations"
By Michael Levenson, Boston Globe Staff, March 23, 2010

State Treasurer Timothy P. Cahill, rebuked by his gubernatorial rivals for accepting campaign contributions from donors with business before the treasurer’s office, defended such donations yesterday as necessary for candidates of modest means.

“Unless I am personally wealthy, which I am not, or there is public financing, which there is not, you are forced to ask people and accept contributions, and it’s up to us, as politicians, to make sure there is no commingling, there is no crossover,’’ Cahill, an independent, told faculty and students at a forum at Suffolk Law School’s Rappaport Center for Law and Public Service.

Cahill said donations to his political account do not influence the decisions he makes as chairman of the state Pension Reserves Investment Management Board.

“We have a very tight wall, a very firm wall, between the political and the professional in the way we run our operations,’’ he said. “The folks at PRIM know nothing about what I do personally and what I do politically doesn’t influence my decisions at PRIM.’’

Cahill pointed to the board’s returns, which he said are in the top 10 percentile of state pension funds.

“The proof, in my mind, is in our returns and our results,’’ he said. “People who get business based on politics are not going to be able to perform and make you money — simple truth.’’

The Globe reported Sunday that Cahill had accepted more than 200 campaign donations from the officers of firms connected to a pension fund manager who has been allotted $500 million in state funds to invest since Cahill became state treasurer in 2003. The contributors shared a common connection: They or a relative worked for firms that handle the real estate holdings that Michael A. Ruane, a Boston investment manager, bought for his investors, including the state pension fund.

Cahill has been under fire for the donations from his two Republican rivals in the governor’s race. Cape Cod businessman Christy Mihos has said the contributions pose a “conflict of interest of the highest regard.’’ Former health care executive Charles D. Baker has said they reflect “a failure to be more transparent.’’

Yesterday, state Representative Karyn E. Polito, a Shrewsbury Republican who is running to replace Cahill as treasurer, said that if elected, she would require investment managers, underwriters, and other entities doing business with the Treasury or who seek to do business with the Treasury to disclose all political contributions their officers or senior managers made during the preceding 12 months.

“Our next state treasurer needs to insist on complete transparency and openness when it comes to the business practices of the Treasury itself, the Lottery, the pension fund, and all other operations,’’ she said in a statement.

At the Suffolk forum, Cahill also offered some of his harshest criticism yet of Baker, who was budget chief for governors William F. Weld and Paul Cellucci, accusing Baker of enabling massive cost overruns at the Big Dig and burdening the state with debt to pay for the project.

“He oversaw the Big Dig, which we are paying for today,’’ Cahill said. “As the [administration and finance] secretary, he can’t avoid it. He can’t tell everyone there were 50 people in the room. When you’re the A&F secretary, you are the governor’s chief budget writer. You are the governor’s CFO, which makes you practically the CFO of the entire state.’’

Baker spokesman Rick Gorka dismissed Cahill’s criticism. “Charlie was A&F secretary for four of those 24 years of the Big Dig, and the explosion in costs and how horrible it became was well after he left the administration,’’ Gorka said. “He was no longer part of the Big Dig.’’

Gorka said Baker had a “very strong record of reform,’’ and said, “Cahill is trying to deflect attention from his failed record of the last 3 1/2 years.’’

Cahill said he was raising the criticism to show that he, not Baker, is the real fiscal conservative in the governor’s race.

“Even though we both talk the same language, look at our records,’’ Cahill said. “Look at who has truly been a fiscal conservative.’’
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Michael Levenson can be reached at mlevenson@globe.com.
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(Wendy Maeda/Boston Globe Staff)
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A BOSTON GLOBE EDITORIAL
"Cahill donations raise specter of pay-to-play government"
March 28, 2010

IF ELECTED officials in Massachusetts are obtaining campaign donations through people with business before the state, they should be transparent about it. State Treasurer Tim Cahill’s failure to do so can only undermine public confidence in the forthrightness of his fundraising, and in the campaign-finance system more generally.

His war chest contains $100,000 that can be linked back — though only with great effort — to Boston investment adviser Michael A. Ruane, who manages hundreds of millions of dollars for the state’s main pension fund. As the Globe reported Sunday, Ruane himself did not contribute to the treasurer, who chairs the pension board. But out-of-state lawyers, property managers, and realtors who have worked for Ruane wrote nearly 250 separate checks to Cahill.

Ruane denied raising substantial amounts of money for Cahill. Cahill offered conflicting accounts, but has said that Ruane connected him with potential donors. One Cahill donor contacted by the Globe said Ruane had requested the contribution.

The public deserves a detailed accounting of where a candidate’s money is coming from. While candidates must try to report the occupation and employer of each donor, Cahill’s reports contain incomplete information. In the Internet era, political candidates should not be allowed to cash contribution checks without first collecting some basic information about the donors.

Cahill’s contributions also warrant a broader discussion about how to discourage elected officials from obtaining campaign money via would-be government contractors. Right now, such contributions are generally legal. Cahill said and his aides commonly solicit contributions from companies that do business with public offices that he oversees. He described his campaign team’s thought process like this: “Who can we call? Who are the people that we think can raise money?’’

To a candidate, this may sound like normal fundraising. But to companies that do business with the treasurer’s office, such a request can sound like a shakedown — or an inside track to government contracts. Either way, “pay-to-play’’ drives up costs and alienates companies that rightly resent such tactics.

The potential for abuse is greatest when the work in question is complex, involves large quantities of money, and is awarded not to the lowest bidder but according to a public agency’s subjective judgment. Managing state pension money meets all three criteria. Since Cahill took over, Ruane’s firm has received an extra $500 million in pension money to manage and has reaped $34 million in fees. By some measures, the company has performed well. Even so, the general public is in a poor position to assess whether the pension board chose the most deserving firm.

To combat the perception that campaign contributions are a prerequisite to government work, several states, including Connecticut, have banned contributions by companies seeking public contracts. In some states, only large contracts or no-bid contracts trigger the limits.

Such restrictions deserve a full airing in Massachusetts as well. In the meantime, Cahill and all other candidates should steer clear of contributions that, even if legal, do much to promote public cynicism.
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Political Circuit: "Cahill running mate backs away from health care vote"
By Michael Levenson, Boston Globe Staff, March 31, 2010

State Treasurer Timothy P. Cahill has been on a tear of late, saying the state’s universal health care law is bankrupting Massachusetts and blasting his Republican gubernatorial rival, Charles D. Baker, for supporting the law when he was chief executive of Harvard Pilgrim Health Care.

But there’s someone else who backed the law that Cahill hasn’t been mentioning: his hand-picked running mate, Paul Loscocco, who voted for the bill in 2006, when Loscocco was a Republican state representative.

In an interview, Loscocco who served in the House from 2000 to 2008, said he now regrets his vote, because, he contends, the Patrick administration has not implemented it effectively and has not done enough to hold down costs.

“I wanted everyone to have access to affordable health care, and if I had known back then, when I voted for it, what I know now about how it’s been implemented, I wouldn’t have voted for it,” said Loscocco, who left the Republican Party in January to join Cahill in running as an independent. “The promises just haven’t been fulfilled in many respects.”

The Massachusetts Taxpayers Foundation has said that the law, though it has not held down spiraling premiums, is costing the state less than 1 percent of its budget and has succeeded in extending coverage to about 97 percent of residents.

Loscocco, echoing Cahill, argued that the law is being propped up by federal funds and pointed to the escalating cost of MassHealth, a separate state and federal health insurance program for low-income residents that predates the state’s universal health care law. He said he did not see a conflict in the criticism Cahill is leveling against the law and his own support for the bill.

“I don’t think either one of us are saying let’s scrap the goal of the law or the good things that were part of it,” Loscocco said. “But we’ve got take care of the runaway spending and how it’s been implemented.”

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A BOSTON GLOBE EDITORIAL
"In show of faith, banks should limit interest to 18 percent"
April 16, 2010

IF BANK of America were a state bank chartered in Massachusetts, the most it could charge on credit-card interest is 18 percent. That’s not chicken feed, but it is much less than the knee-breaker’s rates it and other nationally chartered banks get away with. Now the Greater Boston Interfaith Organization is trying to get the bank to honor the state interest cap — and it has persuaded State Treasurer Timothy Cahill to agree to divest some of the money the state keeps at the bank if it does not.

There are larger issues at play here, with Bank of America fearing an influx of bad customers if it were the first major bank to cut its rates, but the bottom line is that interest rates over 18 percent are destructive. The GBIO and Cahill deserve credit for attempting to force the issue.

Cahill has said that if Bank of America doesn’t capitulate, he will use his prerogative as treasurer to disapprove the bank as a repository for one state fund that is actually managed by Fidelity. Over time, Fidelity credit analysts would allocate the approximately $200 million now at Bank of America to other banks, “with zero impact on the fund’s rate of return,’’ according to James A. MacDonald, the assistant treasurer for cash management. Cahill has said it would only be fair to threaten the same action against other big banks whose credit-card interest rates exceed 18 percent.

Despite its 50,000 members and past successes in advocating for causes like health care reform, GBIO will have its work cut out in getting major banks to accept the state’s cap. At a meeting with GBIO representatives last week, Bank of America officials said they would stick with their current policies. Banks fear that if one takes the lead in lowering its rate it could end up attracting deadbeat customers.

From the consumer’s point of view, there is concern that tight caps on rates could force banks to deny or severely limit credit to some customers. But it’s not a bad thing to keep plastic out of the hands of those who are clearly not credit-worthy. And a reasonable cap on interest would help keep families out of bankruptcy court.

The GBIO and Cahill have begun a worthwhile campaign that could build support for the national solution: passage of a bill pending in Congress that would cap rates at 16 percent.
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THE GOVERNOR’S RACE | BACK STORIES
"Cahill’s taste of business: Cafe’s highs, lows cemented his political path"
By Sarah Schweitzer, Boston Globe Staff, April 23, 2010

QUINCY — At age 22, Timothy P. Cahill was fresh off a failed run for Quincy City Council and on the hunt for a new plan.

He and his campaign manager, a buddy from Quincy High, hit on the idea of starting a business; something they could run themselves and spin into a chain, like the high-end coffee shops starting to catch on in Seattle.

They considered opening gyms with juice bars, but gyms were expensive start-ups, and they had little money. Then Cahill struck upon another idea: a free-standing smoothie shop.

This was 1981, and Quincy was a town of sub and pizza joints. But a smoothie bar was sure to catch on with state workers newly relocated from Boston. From there, Cahill thought, it would serve as a launching pad for an empire, much as single stores in Quincy had done for Dunkin’ Donuts and Howard Johnson’s.

“We thought we’d open a hundred stores and go national,’’ Cahill recalled in a recent interview at his gubernatorial headquarters, a former Quincy candy factory.

It was a bold assumption, born of youthful moxie, and it would take Cahill on a wild ride, with early triumphs and later disappointments. It would send him on a soul-searching hunt for the source of others’ business acumen and success. Ultimately, it would propel him on a new path, one that he now hopes leads to the governor’s office.

Cahill said he drew from the experience a deep understanding of the struggles of small businesses and confirmation that he was better suited for politics. Over his career, as city councilor, Norfolk County treasurer, and now as state treasurer, he would rely often on the political skills he learned behind the counter of a little cafe in Quincy.

For all his initial optimism about the business, Cahill had little assurance his scheme would pan out.

He had earned a political science degree from Boston University, but was living at home. He had made a decent showing in the City Council race months earlier, despite his campaign’s shoestring budget, but came up short. He had since taken a job as a security guard.

“It was a little embarrassing, as a recent college graduate, to be a security guard on the night shift,’’ he recalled.

But it was a means to an end, freeing up his days for building the smoothie shop in downtown Quincy with Ed Graham, his former campaign manager and high school wrestling teammate, and Joe Irvine, a campaign worker who had been on the high school wrestling team when Cahill coached part time during college.

The trio rented a 500-square-foot storefront, the former home of a travel agency across from the downtown’s great hope: Quincy Center Plaza, a 10-story office building under construction that was expected to bring 1,000 new workers and revitalize businesses struggling against competition from South Shore Plaza. The new workers, from the state Department of Education and Stop & Shop’s corporate offices, meant, too, that there would be sophisticates familiar with smoothies, or yuppie-malts, as they would become known in that era.

“We knew we wanted to be near that building,’’ Cahill said.

Cahill and his partners spent six months readying the space, installing counters and outfitting a kitchen. When it came time for a name, they agreed on Handshakes, a reference to smoothies, but also to a newspaper ad from Cahill’s City Council race showing two hands clasped together.

“It seemed like a happy name,’’ Cahill said.

The cafe opened in July 1982, offering limited seating on milkcrates. Cahill and Graham worked the counter, and Irvine manned the kitchen, baking croissants and muffins to go along with premium coffee and smoothies. They arrived at 4 a.m. each day. Handshakes developed a steady clientele of state workers, City Hall pols, and journalists from the Patriot Ledger. One customer, Tina Falco, would later become Cahill’s wife.

When a larger storefront became available across the street, Handshakes moved. The new cafe had more seating, an expanded menu with soups and quiche, and more employees, many high school and college-age women who reliably received roses from the owners on Valentine’s Day.

“It’s more like Harvard Square than Quincy Square,’’ Graham told the Patriot Ledger at the time, describing the food as “a little more continental flavor than the normal working lunch.’’

Cahill said in the recent interview, “Our attitude was, we were going to serve healthy food, but in a working-class environment.’’

After a few years, the trio decided to expand, opening stores in Weymouth and in a Quincy gym. Soon, they were scouting for another location and hoping to land funding from investors for additional expansion. But things hit a snag. The three men could not agree on the new store’s location, Graham said. Investor funding never came through; Graham and Irvine left the partnership.

“We just decided to go our separate ways,’’ Cahill said.

Graham recalled: “We had disagreements about how to go forward. We were all convinced we knew what was right.’’

Today, the men are not in regular contact.

The same year, 1987, Cahill made another run at politics, seeking the at-large council seat that had been vacated by the man who beat him in 1981.

“I still had the political bug,’’ he said. “If I had lost, it would have been all over and I would have focused on business. I wanted to see which one won out.’’

Cahill, then 28 and the father of two daughters, promised to make the city more family-friendly, an appealing overture to some who worried that Quincy had lost its core with the building of sprawling condominium complexes in the 1980s. He won, taking one of three at-large seats on the City Council.

But if his political career was ascendant, his business had begun to slide. The Patriot Ledger moved out of downtown and a recession hit, forcing Cahill to lay off workers and oversee both the kitchen and the register.

“That’s when it got tough and began to lose some of its allure,’’ said Cahill, who ultimately sold the Weymouth store.

Some of Cahill’s votes on the City Council that union workers took as antilabor didn’t help. When the council passed a symbolic measure in 1990, urging Quincy residents to vote against a statewide ballot question that would have cut taxes and forced sharp budget reductions, Cahill was the lone vote in opposition.

“He had an independent streak from day one,’’ recalled Larry Chretien, a fellow city councilor. “He didn’t mind if he was on the dissenting side of a vote.’’

His vote against advising residents on the ballot question did not sit well with state education workers, who launched an unofficial boycott of the cafe.

“That had an impact on business, but it also made me think about whether I could do both jobs,’’ he said.

The period of reflection led him to another question: What does it take to become a business tycoon?

So he delved into the stories of four legendary Quincy businessmen: Howard Johnson, the restaurant and hotel mogul; William Rosenberg, founder of Dunkin’ Donuts; Louis Grossman, the building supply store magnate; and Peter O’Connell, a partner in the development of Quincy’s Marina Bay.

The inquiry launched a yearslong research project that produced a book, “Profiles in the American Dream,’’ published in 1994 by the Christopher Publishing House in Hanover. The book focused on the four men’s successes, but also their struggles.

“I wrote the book because I had become fascinated by people who were very successful running their own business and I hadn’t figured it out,’’ he recalled. “I figured, if I can’t do it, maybe I’ll live through someone else’s life.’’

At the end of the book, he writes that he drew inspiration from a young Vietnamese man he had seen searching trash barrels.

It reminded him of how Grossman, as a new immigrant decades earlier, had made his start selling discards from the streets of Quincy.

“I understood that the possibility of realizing the American dream by finding value in someone else’s discarded junk is as real today as it was over a century ago,’’ Cahill said.

In 1993, as he finished the writing, Cahill sold the cafe.

“I didn’t want to become bitter,’’ he said. “Had I been as motivated or as smart as Howard Schultz,’’ founder of Starbucks, “who knows where Handshakes would be.’’

He had no other job lined up, just his part-time City Council position. Speculation swirled that he would run for mayor.

But Cahill held tight, watching and waiting for his next move.

Because of an editing error, an earlier version of this story gave Cahill's middle initial as "J." His middle initial is "P."
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"GOP launches ad attack on Cahill: Candidates swap charges over taxes"
By Michael Levenson, Boston Globe Staff, April 27, 2010

The Republican Governors Association, hoping to clear a path for Charles D. Baker, will launch a hard-hitting television and radio ad campaign today targeting state Treasurer Timothy P. Cahill, an independent who is trying to outflank Baker on the right in this year’s governor’s race, a spokesman for the association said yesterday.

The ad campaign, the first major ad buy of the gubernatorial contest, was made as Baker and Cahill battle to become the prime alternative to Governor Deval Patrick, who polls suggest is vulnerable.

“We’re going to be making the argument that Tim Cahill is just like Deval Patrick, but worse, with regard to his record on fiscal issues and being reckless with taxpayer money,’’ said Tim Murtaugh, a spokesman for the association.

Murtaugh declined to say how much the group was spending on the ads, but said it was a significant sum that would pay for airtime on cable and broadcast television, as well as radio.

The ad campaign, he said, was not coordinated with the Baker campaign, in keeping with federal campaign finance laws that prohibit independent groups from buying ads on a candidate’s behalf.

The organization chose to run the ads in Massachusetts “because we’re paying close attention, and we think it’s a good opportunity for a pickup,’’ Murtaugh said.

Cahill’s political director, Jordan Gehrke, wrote on Twitter last night that the ads showed that Republicans are desperate after a poll last week showed Cahill in second place behind Patrick.

The association ran a similar ad last year when the GOP candidate in the New Jersey governor’s race, Christopher Christie, was in a three-way battle. That ad also took aim at the independent candidate, Christopher Daggett, accusing him of being like the incumbent Democratic governor, Jon Corzine, “only worse.’’ Christie eventually won the race.

The ad targeting Cahill hits the airwaves as Patrick, Baker, and Cahill are trading some of their sharpest jabs to date over taxes and spending, and as House lawmakers take up a series of controversial tax measures.

Patrick took particular aim at Baker yesterday, accusing him of pushing lower state income and sales tax rates without explaining what programs he would cut to offset the loss of approximately $1.4 billion in annual revenue.

“I have to tell you, I have seen more examples of a lack of integrity out of that campaign, and this is just another one,’’ the governor told reporters, hours after Baker held a press conference outside the State House to blast Patrick for his fiscal management.

“Until they propose what . . . the public will do without, then we’re not going to have a serious conversation,’’ Patrick said, according to State House News Service.

At his press conference, Baker said he would cut 5,000 jobs, or about 10 percent of the executive branch, and begin “dramatically streamlining state government’s operating model.’’ But he did not say which programs or agencies would be targeted for reductions.

Instead, Baker and his running mate, Senate minority leader Richard R. Tisei, reiterated their vow not to increase taxes and criticized Patrick for signing an increase in the sales tax, from 5 percent to 6.25 percent, to help close a state budget gap last year.

“This is what happens when one party is in charge on Beacon Hill,’’ Baker said. “The first impulse when times get tough . . . is to push the tax button. The first impulse should be to reform.’’

Cahill fired back at Baker by releasing a statement slamming Tisei for voting against a proposed reduction in the state income tax in 2000.

“The dog-and-pony show today from the Baker campaign was a little amusing, considering Baker’s running mate, Richard Tisei, was the only Republican to vote against the income tax rollback in 2000,’’ said the statement from Cahill’s running mate, Paul Loscocco. “If the Baker campaign wants to focus this debate on the candidate’s records on tax cuts, we are happy to have that conversation.’’

Cahill, like Baker, said he supports reducing the income tax from 5.3 percent to 5 percent and the sales tax to 5 percent.

Tisei, a Wakefield Republican, said he has voted to lower the income tax more than a dozen times but voted against it in 2000 because he was concerned about cutting local aid. He suggested he now regrets the vote.

The back-and-forth over taxes was ignited after House Ways and Means chairman Charles A. Murphy proposed a measure last week that would have allowed cities and towns to raise taxes above the limit set by Proposition 2 1/2 to pay for property tax abatements.

Republicans said that the change could have increased property taxes by as much as $500 million. Patrick, Baker, and Cahill all oppose the measure, as does Senate President Therese Murray, who said yesterday that she, too, would oppose any such change. Yesterday, House lawmakers quietly killed Murphy’s plan on a voice vote without debate.

The House was slated yesterday to debate other measures pushed by a small band of Democrats that would remove the sales tax exemption for candy and soda, mirroring Patrick’s proposed budget for the upcoming fiscal year, and increase the tax on stock dividends and interest from 5 percent to 12 percent, a rate last used in the 1990s.

Supporters said the taxes would generate about $550 million to stave off deep cuts in public health programs, local aid, and other areas.

The House, however, is expected to reject the tax increases, said Seth Gitell, a spokesman for Speaker Robert A. DeLeo, who has pledged not to raise taxes in the House’s proposed budget for the upcoming fiscal year.
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State Treasurer Timothy P. Cahill decried the ads targeting his independent run for governor yesterday at his office in Quincy. (Yoon S. Byun/ Globe Staff)
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"Cahill fires back at GOP’s attack ads: Baker blamed for role in 3d-party messages"
By Michael Levenson, Boston Globe Staff, April 28, 2010

State Treasurer Timothy P. Cahill, targeted in a hard-hitting ad campaign by a national Republican group, blamed the attacks squarely on his Republican gubernatorial rival, Charles D. Baker, who he said is resorting to negative tactics to prop up his flailing campaign.

“Something must be wrong with the Baker campaign if they need to spend a million dollars on negative ads seven months before the election,’’ Cahill said yesterday. “It’s unprecedented.’’

The ads, which slam Cahill for his financial management and campaign fund-raising, are not the work of Baker’s campaign but of the Republican Governors Association, which has declined to say how much it is spending.

“It’s not our ad,’’ a Baker spokesman, Rick Gorka, said yesterday. “We didn’t coordinate. We didn’t know the timing, content, nothing.’’

The new television and radio spots landed on a day that saw the first major shake-up of the 2010 race, with Baker replacing his campaign manager with an operative more seasoned in Massachusetts politics.

Cahill responded to the new negative ad campaign by trying to take the high road. In a Web video that virtually duplicates an ad Scott Brown made to respond to negative ads against him in his US Senate race, Cahill implores voters to reject the attacks.

Borrowing Brown’s language and the kitchen setting Brown used, Cahill says he is running “to stand up to the party machine’’ and work “on behalf of every independent-minded voter in the Commonwealth.’’

“People are sick and tired of the old way of party politics,’’ Cahill says in the ad, which he recorded yesterday morning in his Quincy home. “Attack ads won’t fix our economy. Attack ads won’t create jobs for the middle class. They represent the past.’’

Governor Deval Patrick, who is also targeted in the ad by the Republican governors group, sought, like Cahill, to blame Baker for the attacks.

“The Baker campaign’s negative attacks are disappointing and sad,’’ Patrick’s campaign manager, Sydney Asbury, said in a statement. “We are just starting to recover from the global economic crisis faster and stronger than most other states, and we need Governor Patrick’s continued strong leadership and proven results, not more negative TV ads.’’

Meanwhile, Baker, fresh off a huge victory at the state GOP convention, shook up his campaign staff as he braced for the escalating three-way battle with Cahill and Patrick.

Baker chose Tim O’Brien, a veteran strategist who helped engineer his win at the convention this month and who managed Kerry Healey’s gubernatorial run in 2006, to replace Lenny Alcivar as campaign manager.

Baker aides downplayed any notion that the change signaled trouble in the campaign after a poll last week suggested that Cahill, an independent, was pulling ahead of Baker into second place behind Patrick. The aides said they made the change because O’Brien, a former executive director of the state Republican Party, has deep experience with Massachusetts politics, while Alcivar, a Washington political consultant, was new to the state.

“Lenny and the campaign mutually agreed that matching our opponents’ Massachusetts political experience at the top level would be beneficial to the campaign,’’ Gorka said in a written statement.

Alcivar said he still supports Baker and “will do anything I can to get him elected.’’

“This is a new phase of the campaign, and I think Charlie’s best chance to win is with a campaign manager with more experience in Massachusetts politics,’’ he said in a written statement. “We made a change that makes the most sense for me and my consulting business and puts Charlie Baker in the best position to win in November.’’

The Republican Governors Association campaign is the first major ad buy of the race. It accuses Cahill of spending $1 million on office renovations, losing billions of dollars in the pension fund while giving bonuses to his staff, and accepting thousands of dollars in contributions from donors whose “cronies’’ got millions in state contracts.

Cahill said in an interview that the ads from a “third-party attack dog’’ contain some charges that “stretch the truth, if they’re even truthful.’’

He said the pension fund has grown by $18 billion since he took office in 2003 and is in the top 10 percent of all public pension funds in its returns. The ad cites a Globe report that the pension fund lost 23.6 percent of its value, or nearly $13 billion, between June 2008 and June 2009, in large part because of steep declines in stock market.

The spot, dubbed “Reckless,’’ ends with side-by-side shots of Cahill and Patrick and says the former Democrat would continue Patrick’s policies as governor.

“Massachusetts has already lost four years,’’ the announcer says. “We can’t afford to lose anymore.’’

Baker’s campaign has been making a similar argument, dubbing Patrick and Cahill “two guys’’ who support “too many taxes.’’

Cahill said he expected the major parties to attack him with negative ads in the final weeks of the race, not in April.

“I guess it means we’re doing well, because for the past few months they just ignored us,’’ Cahill said. “They’re not ignoring us anymore.’’
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Michael Levenson can be reached at mlevenson@globe.com.
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"Tax breaks for start-ups - Tim Cahill: Exempt entrepreneurs for 3 years"
By Thomas Grillo, bostonherald.com - Local Politics, May 11, 2010

State Treasurer Timothy Cahill is raising the stakes in his bid to be the next governor by calling for a three-year tax hiatus for entrepreneurs who launch small businesses in Massachusetts.

In a speech to be delivered to business leaders at a Greater Boston Chamber of Commerce breakfast this morning, the independent gubernatorial candidate will propose eliminating taxes for start-ups of up to five employees to spur job growth.

“The goal is to create an entrepreneurial class of new businesses in Massachusetts that will create jobs and unleash the private sector,” Cahill said. “Let’s change the concept of how we incentivize and grow businesses in the state because what we’ve been doing hasn’t worked.”

Over the past 20 years, Cahill said billions in targeted tax credits have been given away to favored companies and industries at taxpayers’ expense. Under his plan, such credits would be phased out in favor of across-the-board tax cuts.

Historically, tax credits have been given out so big companies can stay big and stay in the state, Cahill said. But everyone else has to pick up the slack and we raise taxes on everyone else, he added.

In remarks Cahill is scheduled to give at the Boston Harbor Hotel this morning, he will introduce Commonwealth Entrepreneur Tax Relief, a proposal that allows start-ups to escape business income taxes, sales taxes on capital expenditures and unemployment taxes for 36 months.

“My approach is a one size fits all,” he said. “I don’t care if you’re a high-tech company or making hot dogs, we want incentives for entrepreneurs to start their businesses today and not wait for the economy to come back.”

Cahill’s challengers for the Corner Office in November will most likely be Gov. Deval Patrick and Republican gubernatorial nominee Charles Baker.

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"Campaign-year cotton candy from Cahill"
By Scot Lehigh, Boston Globe Columnist, May 12, 2010

TREASURER TIM is nothing if not an entrepreneur and inventor.

His principal product? Political action figure Tim Cahill, the independent gubernatorial candidate whose mythic powers let him glide through the prickly thickets that snag mere mortal hopefuls.

Speaking yesterday to the Greater Boston Chamber of Commerce, that protean pol presented himself as a champion rushing to the rescue of the state’s business sector — all the while dodging the real world choices his own plans would entail.

Cahill proposed waiving the state income tax on a start-up’s founder, exempting its business expenditures from the sales tax and forgoing the unemployment tax on its first five employees, all for a period of three years.

But when chamber President Paul Guzzi asked Cahill what his tax relief package would cost the state, the treasurer slipped the surly bonds of substance.

“I like to look at it as how much revenue can we gain,’’ said Cahill. Why, he added, “In 2003, our income tax was at . . . 5.6 percent. In 2007, it was at 5.3 percent. . . . We brought in more revenue in 2007 —income tax revenue —at 5.3 than we brought in at 5.6.’’

There’s one small problem here: The state income tax rate was actually 5.3 percent in both years Cahill cited. What the stronger tax collections really reflects, of course, is an improved economy. In 2003, the US unemployment rate was 6 percent; in 2007, it was 4.6 percent. As things improved nationally, they did here as well.

Cahill’s new proposals come atop his call for rolling the sales and income tax rates back to five percent. That alone would cost $1.5 billion in yearly revenue. He also wants to reduce the capital gains tax and the corporate income tax.

But when I asked him if he planned to specify where he’d cut the budget to accommodate his tax breaks, Cahill was noncommittal.

“We might,’’ he said. Shouldn’t a serious candidate do so? “Did the governor do it in 2006?’’ he said. “I don’t think he talked about where he was going to spend and where he was going to cut.’’

When I noted that the fiscal situation was considerably different when Deval Patrick first ran four years ago, and that the budget now has a sizable structural gap, Cahill maintained that the state had long had such problems.

“We’ll deal with that as we go forward,’’ he said.

That sort of vagueness is par for the course for Cahill. As he positions himself as an alternative for those put off by Democratic incumbent Patrick but suspicious of Republican Charlie Baker, Cahill is obviously trying to finesse issues that might alienate potential supporters.

When I inquired recently about his positions on several reform matters, the written answers his campaign provided either embraced an anti-reform status quo or were nebulous enough to be almost meaningless.

For example, though Cahill said he favors “the eventual movement of all municipal employees’’ to the state’s Group Insurance Commission to help reduce local health-care costs, he stipulated that “the terms should not be dictated but negotiated through collective bargaining.’’ That’s basically what we do now — and it hasn’t worked.

On flaggers versus police details, Cahill said he backed any ideas that would bring real savings, but then asserted that using flaggers hasn’t done so. (The Patrick administration says it has saved $10.9 million over 18 months.) “Given the choice of a flagger vs. a member of public safety if costs are the same, I would choose the public safety official,’’ he concluded.

What about repealing the anti-privatization Pacheco law? “If legislation expanding the concept of the Pacheco law is forwarded to me by the legislature, I will not oppose it if [it] promotes competition and keeps unqualified vendors from receiving tax-funded contracts,’’ Cahill said. Translation: Never fear, you union voters looking for a home, if lawmakers won’t act, I won’t either.

As Cahill showed yesterday, he’s an affable guy with a pleasant Main Street manner. But his dodging of difficult realities reduces his political pitch to little more than campaign-year cotton candy.
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Scot Lehigh can be reached at lehigh@globe.com.
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"Treasurer Cahill: Politics had no role in hirings"
By Glen Johnson, AP Political Writer, May 24, 2010

BOSTON --Independent gubernatorial candidate Timothy Cahill says patronage is a part of politics, but politics played no role in his decision to hire the wife and daughter of the state's probation commissioner.

The state treasurer said Monday he knows Probation Commissioner John O'Brien, and O'Brien has supported his political career in their hometown of Quincy. Yet he said that didn't influence his decision to hire O'Brien's wife, Laurie, and one of the couple's daughters.

O'Brien's hiring practices have been the subject of front-page stories in The Boston Globe.

"There's no personal relationship. He's not hanging out at my house or anything like that. He's a political supporter, or has been for a while, but that didn't influence the decisions I made about his members of his family," Cahill said of John O'Brien. "We had openings for positions. They applied for those positions. I've known Laurie O'Brien for a long time, because she's a Quincy resident."

Cahill also offered a defense of political patronage. Asked about descriptions of seemingly highly qualified applicants being passed over for jobs in favor of those related to politicians, the treasurer asked: "Does that not happen in government all the time?"

He added: "Obviously, it is part of the political process. It's an unfortunate part when it's been brought to this level." Cahill noted none of his family members work for O'Brien.

Gov. Deval Patrick, a Democrat seeking re-election, and Republican gubernatorial candidate Charles Baker said Attorney General Martha Coakley should investigate, but Cahill said that is not needed. Rather, he supports returning oversight for the department from the legislative branch to the judiciary.

"The Legislature really deserves the blame for this," said Cahill. "They shouldn't have made the move when they made it. They made it simply because they wanted to control the jobs."

He said if oversight is returned to the judicial branch, then it "could determine whether Commissioner O'Brien should stay or should leave, and they can reorganize the place around making it work for probation, making it work for public safety."

Cahill spoke after he and his wife, Tina, watched daughter Makena participate in a panel discussion about social media and political campaigns. The treasurer sat silently at the side of the room, but his wife asked a question during the event.

Later, the treasurer was picking up the endorsements of the patrolmen's and superior officer police unions in Quincy. He said after a month of negative ads against him by the Republican Governors Association, "It's nice to know that people are going to stand with you."

Patrick, meanwhile, was addressing students at a final candidate forum sponsored by Suffolk University's Rappaport Center.

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"Long arm of probation may reach Tim Cahill"
By Howie Carr, Columnists - www.bostonherald.com - May 26, 2010

Hackerama happens.

That’s how Treasurer Tim Cahill explains away the Probation Department. He’s the “independent” candidate for governor, and yet he’s up to his baby blues in this Democrat welfare scheme for payroll patriots.

As Cahill said Monday, “I think, you know, patronage hires exist at all levels.”

Especially your level, Tim.

“Um, so they may have to investigate everybody, including the governor and the attorney general herself.”

Remember that Tim was against the AG investigating the Probation Department before he was for it. See, Tim is this close to Probation Commissioner John O’Brien, who employs not one but two of Whitey Bulger’s nephews, one of whom is already collecting a pension from the MBTA.

Poor Tim. You can take the hack out of Quincy, but you can’t take the Quincy out of the hack.

“I never said I was a reformer,” he explained to me recently.

And so it is that Tim Cahill stood up for his dear pal and fellow career coatholder from Quincy, O’Brien.

“I don’t know what he’s done differently than what he was told to do by the Legislature.”

In other words, he was only following orders. The good news is, O’Brien has been suspended from his $130,000-a-year hack job. The bad news is, he’s looking at a $104,000 state pension. At age 53. Plus a Bulger-esque “severance” package no doubt.

More than a month ago on the radio, I started asking Treasurer Tim the circumstances under which he hired both the wife and the daughter of the uber-hack O’Brien. As he keeps saying this week, nobody made any calls. Just like when he hired the woman down at the Lottery for a six-figure salary who was the sister of one of his largest fund-raisers. He had no idea who she was - honest.

“I was at a funeral when I found out she was the guy’s sister,” he said, and of course, it’s all very believable. “She didn’t want anyone to know whose sister she was - she wanted to get the job on her own.”

Riiiiight. And so the real casualty of the probation crackdown appears to be Tim Cahill. He was already in freefall even before the only new revelation about him in the Globe - that he’d collected $5,900 in campaign contributions from connected probation officers just weeks before Mrs. Jack O’Brien got a job on his state payroll.

Another nationwide search!

Cahill can rail all he wants about the million-dollar radio-TV barrage by the Republican Governors’ Association. But sometimes Tim, as the Bard would say, the fault lies not in the stars, but in ourselves, that we are underlings.

You can’t cheat an honest man. If Tim didn’t have these hack skeletons rattling around his closet, his forehead wouldn’t be covered with flop sweat. He wouldn’t have needed to turn up his hole cards - his cop-union endorsements - so early in the fight.

Tim Cahill. Last week I said he had the soul of a Quincy city councilor. I stand corrected. He has the soul of an assistant chief probation officer.

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A BOSTON GLOBE EDITORIAL
"DeLeo, Cahill should stop downplaying Probation mess"
May 28, 2010

IF HOUSE SPEAKER Robert DeLeo and state Treasurer Timothy Cahill are unhappy about the conversion of the Massachusetts Probation Department into a hotbed of political patronage, they’ve done a great job of hiding it. And while DeLeo and Cahill have both denied doing anything wrong, their tepid responses to a gross violation of the public trust inspire little confidence.

As the Globe Spotlight Team reported this week, Probation Commissioner John J. O’Brien is at the center of a web of politically connected personnel moves and seemingly strategic campaign contributions. On Monday, when DeLeo met with Governor Patrick and Senate President Therese Murray to discuss what to do about the troubled agency, Patrick and Murray floated two competing ideas: Patrick wants to absorb probation into the executive branch; Murray prefers to let the judiciary handle the agency’s troubles. In contrast, DeLeo declined to criticize the department, and urged lawmakers not to act before seeing the results of a formal review — which might not be done before the end of this year’s legislative session.

DeLeo is vulnerable to criticism in the scandal; O’Brien’s department hired DeLeo’s godson. And while the speaker says he played no role in that decision, his wait-and-see approach bespeaks no particular urgency about fixing a department that is now accountable only to itself. The House leadership has also failed to embrace even a modest Senate measure to give the judiciary power to oversee 5 percent of the probation budget and to veto personnel moves in the department.

Cahill, a candidate for governor, is vulnerable as well. He hired O’Brien’s wife and daughter, and dozens of O’Brien’s employees have donated to Cahill’s campaign chest. The treasurer at least endorsed restoring probation to judicial control. Yet Cahill’s implication that patronage is a part of politics is infuriating. “Does that not happen in government all the time?’’ he asked, adding, “Obviously, it is part of the political process.’’ This is what he tells reporters when he’s running for higher office? His disclaimer — “It’s an unfortunate part when it’s been brought to this level’’ — hardly reassures of his commitment to hiring on merit.

Top officials can legitimately differ on how to fix the probation mess. But especially at a moment when schools and homeless shelters are under financial pressure, and when taxpayers have had to dig deeper, no one should accept the kind of patronage that Cahill takes as a given — and no one should downplay the need for immediate reform of the Probation Department.
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"Treasurer Tim Cahill reports no outside income"
By Associated Press, Local Politics, www.bostonherald.com - May 26, 2010

Independent candidate for governor Tim Cahill is reporting no outside income other than his salary as state treasurer and says he owns no homes other than his Quincy house and a second rental property in the city.

Cahill also reported no securities or investments and said he received no gifts in 2009 as part of his financial disclosure form.

Republican candidate Charles Baker and Democratic incumbent Deval Patrick did not immediately respond to The Associated Press requests for their forms.

The three top candidates have refused to release their state and local tax returns.

Green-Rainbow Party candidate Jill Stein did release her returns which showed Stein, a physician from Lexington, and her husband, Richard Rohrer, a surgeon, paid $76,985 in taxes last year on $324,665 adjusted gross income.

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"Cahill: Patrick `pandering' with Muslim meeting"
By Glen Johnson, AP Political Writer, May 27, 2010

BOSTON --Independent Timothy Cahill on Thursday accused Democratic Gov. Deval Patrick of "playing politics with terrorism" and "pandering" to the Muslim community by meeting with its leaders and supporting their requests.

In a statement, the state treasurer and 2010 gubernatorial candidate noted Patrick met with more than 1,000 Muslim leaders last weekend and indicated support for a variety of their initiatives.

They include having law enforcement officers meet with leaders to expand cultural awareness and urging employers to let Muslims leave work early on Friday afternoons for prayers.

The statement was one of the strongest yet from Cahill, himself a former Democrat now courting conservative voters in what is distilling into a three-way race with Patrick and Republican Charles Baker. The most recent poll in the race showed Patrick opening a double-digit lead on Baker, with Cahill plummeting following a $1 million negative ad blitz by the Republican Governors Association.

Baker, too, is courting fiscal and social conservatives.

"I fully support equal protection under the law for every American, regardless of race or creed, but this is political correctness run amok," Cahill said.

Noting two Muslim-Americans recently were arrested in Massachusetts in connection with the attempted Times Square bombing, Cahill added: "Gov. Patrick should stop playing politics with terrorism and focus on protecting all the citizens of this commonwealth."

The treasurer said Patrick should "look radical Islamic terrorism full in the face, call it what it is. ... Additionally, the governor must urge the leaders of the Muslim-American community to finally police these rogue elements and help apprehend those who would do us harm where we all work, raise our children and live our lives."

Cahill claimed a personal connection to attempted terrorism, describing himself as "someone who had a daughter near Times Square when that attack took place."

A spokesman for Patrick, the state's first black governor, labeled the comments "unfortunate." He also accused Cahill of "fear-mongering" and noted the governor also has met with Chinese immigrants, Hispanics and Africans in recent weeks.

"Deval Patrick is not going to be lectured by a politician who equates meeting with over 1,000 members of the Muslim-American community with `playing politics with terrorism,'" said spokesman Alex Goldstein. "As governor, he has been and will remain committed to meeting with all of the commonwealth's residents, regardless of religion."

Goldstein said the statement highlights "why the residents of Massachusetts will overwhelmingly reject the fear-mongering and negative political tactics of Tim Cahill."

Cahill is being advised by former top aides to Sen. John McCain, and his statement had national overtones echoing some of the Arizona senator's criticism of President Barack Obama and his Democratic administration.

"It comes as no surprise that Gov. Patrick is talking this way: In 2007, he naively attributed the 9/11 bombings to a 'failure of human understanding' in America," Cahill said. "Gov. Patrick's response echoes President Obama's conduct of American foreign policy in the face of aggression: blame America first, and apologize for our supposed sins."
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"Ex-aide to Cahill brokers bond deal: Political backer works for firm that won contract"
By Frank Phillips, Boston Globe Staff, June 24, 2010

A state water pollution control board that state Treasurer Timothy P. Cahill chairs has chosen Goldman Sachs to be the chief underwriter for a $455.9 million bond offering, a contract that was negotiated with a Goldman vice president who is a former top deputy to Cahill and remains one of his trusted political supporters.

The three-member board of the Massachusetts Water Pollution Abatement Trust made the decision with the consent of the two Patrick administration officials who also serve as trustees. The recommendation to give the work to Goldman came from the trust’s executive director, G. David Riedell, a Cahill appointee.

A key player in the negotiations was Neil M.M. Morrison, a Goldman Sachs vice president for municipal financing in New England. Morrison worked closely with Riedell as he developed his recommendation, introducing him to other Goldman specialists in the field of revolving fund bonds and other specialists. Morrison is currently working with the trust’s bond lawyers to hammer out the final details.

Morrison, a 36-year-old former Taunton city councilor, joined the Treasury staff after Cahill was elected to his first term in 2002, rising to first deputy treasurer. He left in 2006, but has remained politically involved with Cahill as the treasurer campaigns for governor.

Cahill aides insisted yesterday that there was no favoritism in the selection process and that Cahill did not play any role in the recommendations that went to the full board.

“The treasurer said nothing,’’ said Riedell, whom colleagues describe as a nonpolitical public official who has deep experience in public financing.

Riedell said he did, from time to time, brief Scott Campbell — Cahill’s former chief of staff and political confidant, who resigned in April to help run the treasurer’s campaign for governor — but added that Campbell never tried to influence the decision on which firm to use for the bond work.

Riedell said that before he made his recommendation to the board, he sought the input of the two trustees who represent the Patrick administration on the board: Scott A. Jordan, whom Riedell replaced as the trust’s executive director and who now works for Jay Gonzalez, secretary of administration and finance; and Steven J. McCurdy, who represents the Department of Environmental Protection. The board voted unanimously May 14 to contract with Goldman.

Morrison declined to comment on the trust’s decision. Goldman spokesman Michael Duvally said the firm would not comment.

Although Morrison and the trust are still negotiating fees with Goldman, the underwriting contract is expected to garner more than $2 million for the firm. The fees will range from $4 to $7 for each thousand-dollar bond that is sold. Moody’s Investment Service assigned its highest rating, AAA, to the bonds.

The trust provides capital financing to cities, towns, and other entities for water projects. It uses such bond offerings to raise money to finance the work.

The decision to contract with Goldman Sachs comes just two months after the Securities and Exchange Commission charged Goldman, one of the most influential and prestigious investment firms in the country, with fraud. The regulators charge that Goldman’s investment banking division created and marketed a mortgage investment that was secretly intended to fail.

The case has sparked an outcry against the New York-based firm. Goldman’s stock fell sharply after federal regulators announced the charges.

Goldman insists it has not violated any laws or regulations.

Riedell said that a major reason for his recommending Goldman was that the firm is a major trader of the federal government’s Build America Bonds, which have a relatively high yield and will be a central part of the bond package that will go to market next week.

“We can’t not do business with a firm because another area of the firm is under question,’’ Riedell said. “If we feel the municipal finance team is best suited to assist our coming to market, then it is in the best interest of the trust and the Commonwealth to use it.’’

He said he made that argument with Campbell, Cahill’s chief of staff, when he warned him of the potential risk of bad publicity for choosing the firm.

“He recognized they are a good firm, even with the headline risk,’’ Riedell said.

Goldman is also playing a far smaller role as a co-underwriter for a $250 million general obligation bond that Cahill’s office will sell on Wall Street in the next few weeks. It is not clear what share of the fee Goldman Sachs will get.
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Frank Phillips can be reached at phillips@globe.com.
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State Treasurer Timothy P. Cahill’s new television message references Republican attack ads that aired earlier this year. (Cahill Campaign)

"Cahill returns fire in new ads: TV, radio spots aimed at halting decline in polls"
By Noah Bierman, Boston Globe Staff, July 2, 2010

State Treasurer Timothy P. Cahill launched his first sustained television advertising campaign of the gubernatorial race yesterday, trying to reverse his precipitous slide in the polls and a drop-off in fund-raising.

The timing, on the eve of a holiday weekend when voters traditionally tune out of politics, is a calculated gamble reflecting his difficult situation.

Cahill had been squirreling away $3 million in his campaign account in hope of blitzing the airwaves closer to the November election. But political analysts say he risked entering the long summer stretch as a marginal candidate unless he did something to boost his popularity, following a damaging ad campaign by the Republican Governors Association.

Cahill’s ads attempt to portray him as an outsider and a populist. He left the Democratic Party last year and is running as an independent, though he is serving his second term as treasurer and was previously the Norfolk County treasurer and a Quincy city councilor.

In the television ad, Cahill, wearing a sky-blue shirt in front of his white Quincy house, says that “one of my opponents fights for big government’’ and “the other is a health insurance executive,’’ without naming Governor Deval Patrick, a Democrat, or Charles D. Baker, a Republican.

“They’re for them,’’ he says. “I’m for you.’’

He also invokes the Republican ads that have damaged his candidacy. “When they attack me, they attack all of us,’’ he says. “We deserve better.’’

Cahill’s ads are scheduled to run until at least the end of next week and could go longer, said Amy Birmingham, a campaign spokeswoman. Birmingham said a radio campaign will also begin tomorrow and will probably replace television on the day of July 4, when many voters are at barbecues or in their cars.

The radio ad depicts a dialogue with a voter in the booth of a busy diner, who gushes to Cahill, “My mother loves you! ‘Tim Cahill saved our schools. Tim Cahill saved the state’s pension fund. Tim Cahill, Tim Cahill.’ She wears me out.’’

Birmingham would not say exactly how much the campaign is spending, only that it is in the six-figure range. “It’s a major buy and it will be on numerous networks across the state,’’ she said.

Cahill was officially the first candidate on the air, having bought 15 seconds of air time during the Super Bowl in February. Baker launched the first major ad campaign of the race two weeks ago, a biographical spot paid for by the Republican Party that was designed to introduce him to voters.

Polls suggested that Cahill’s support is dropping, from second place earlier this year, to 14 percent in recent months, and then down to 9 percent in a Globe poll published Sunday. Cahill said in a radio interview yesterday that the polls are meaningless and that voters “are telling me: ‘Keep running. You’re speaking for us.’ ’’

Fund-raising has also been a problem. Recent filings show he raised just $63,707 in the month of June and spent $576,332.

“He really is desperate to get himself back in the game, make himself look viable,’’ said Tobe Berkovitz, a campaign consultant who teaches communications at Boston University. “The holiday weekend is a good time to do radio. It’s not really a good time to do TV or cable. I don’t know why they didn’t wait for another half a week.’’

Still, Berkovitz thought the ads, if not particularly inventive, are effective at framing Cahill’s campaign message.

Maurice Cunningham, a political science professor at the University of Massachusetts Boston, said Cahill preferred to delay buying ads, but still has a chance at competing in the election.

“He represents something distinct from the other candidates, and he’s trying to position himself to tap into the volatility of this political year,’’ he said. “And there’s certainly an opportunity for him to do that.’’

Baker, meanwhile, called yesterday for five televised debates between Labor Day and Election Day, saying he would prefer to debate Patrick one-on-one, but would let organizers decide the format. Cahill seconded the proposal, before Patrick said he wanted eight debates this fall.
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Michael Levenson of the Globe staff contributed to this report. Noah Bierman can be reached at nbierman@globe.com.
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"Cahill accuses ex-aides of plot to help Baker"
By Frank Phillips, Boston Globe Staff, October 8, 2010

In a politically explosive lawsuit, independent gubernatorial candidate Timothy P. Cahill accused his former top strategists and aides yesterday of conspiring to sabotage his candidacy, saying they orchestrated the defection of his running mate and plotted to give damaging information and internal campaign tactics to the team of GOP rival Charles D. Baker and the Republican Governors Association.

Drawing on a collection of e-mails, the Cahill suit, filed in Norfolk Superior Court, says that Baker campaign manager Tim O’Brien and staff members at the Republican Governors Association were actively soliciting negative information on Cahill from the former operatives. In a preliminary victory for Cahill, a judge issued a temporary restraining order late yesterday, blocking his former aides from sharing information about the campaign with his rivals.

The lawsuit, which could potentially reshape the contest as it enters its final weeks, offers a rare window into the inner-workings of the modern political campaign, showing in real time how Cahill’s former strategists and aides allegedly coordinated their departure and their efforts to use what they knew to help Baker. There is no indication in the lawsuit that Baker’s campaign initiated the contact, only that his aides were eager to receive any information they could.

Asked repeatedly on the campaign trail yesterday for comment on the lawsuit, Baker said he had not authorized anyone in his campaign to make overtures to the former Cahill aides to get inside information. Instead, Baker’s campaign portrayed the suit as a desperate attempt by Cahill to thwart the release of potentially damaging information about alleged misuse of taxpayer money by the Cahill campaign.

Cahill’s former campaign manager — Adam Meldrum, who is one of defendants in the suit — dismissed the allegations and made the same assertion, saying that Cahill was simply trying to prevent him from becoming a whistleblower. The other three defendants, former Cahill strategists John Weaver and John Yob, and former political director Jordan Gehrke, did not return calls for comment.

Cahill’s highly unusual legal action adds yet another bizarre twist to the final weeks of the 2010 gubernatorial race. This latest major development comes with polls showing a neck-and-neck battle between Baker and Governor Deval Patrick, with Cahill, the state treasurer, lagging well behind in third place.

The suit accuses Cahill’s former strategists, most of whom resigned from the Cahill campaign two weeks ago, of engineering the dramatic move last Friday by Paul Loscocco, a former Republican state lawmaker who was Cahill’s running mate, to abandon the ticket and endorse Baker. The suit contends that the strategists were working to get Loscocco to defect while they were still on Cahill’s payroll and a full two weeks before Loscocco made his startling switch.

“Paul will be given/offered a substantive lifeline,’’ Weaver wrote to Yob and Meldrum on Sept. 18, according to e-mails included in the suit. “Up to him to take it or not.’’ It was not clear what kind of lifeline Loscocco was being offered, or by whom, if he left Cahill’s campaign.

All three aides left the campaign within a week, with Loscocco soon to follow.

Cahill’s lawyers asked the court yesterday for an immediate temporary restraining order to prevent Weaver, a well-known national Republican political strategist; Meldrum; Yob; and Gehrke from giving any confidential information and documents to Baker and the Republicans.

In granting that request, Superior Court Judge Barbara A. Dortch-Okara ordered the four defendants not to disclose any information they may have obtained by working for Cahill until a full hearing Wednesday, with lawyers for the former aides present. During a 15-minute hearing, Cahill lawyer Joseph Demeo said the leak of any strategic information “could be devastating to the Cahill campaign.’’

The suit says the defendants possessed critical knowledge, including fund-raising plans, advertising schedules, and messaging tactics planned for the final weeks of the race. Until their departure from Cahill’s campaign, Weaver was working with Yob under an arrangement that had paid Yob’s firm at least $213,540 since March.

“The defendants . . . knew [and know] essentially everything there was to know about the campaign’s strategy and tactics for the final push to the election,’’ the suit says.

When they left, the suit says, Weaver and Yob promised Cahill “that neither of us would go to work for his opponents.’’

“Even as they made that promise, however, they were actively preparing to break it,’’ says the suit, which accuses the four former aides of breach of contract and unfair and deceptive trade practices.

But while the lawsuit was filed on legal grounds, its purpose seemed as much political. Cahill has been incensed at Baker and the Republican Party — specifically the Republican Governors Association, which has aired more than $2 million of negative ads against him — for attacking him during the race, and he has been arguing that Loscocco’s departure was part of a larger plot to discredit his candidacy.

Cahill wasted no time using the lawsuit to make a political point. “Recent events of this race have confirmed the very reason why I left the party system in the first place: Party leaders will go to any length to advance their own interests,’’ he said in a statement. “Their selfish and questionable actions have resulted in nothing but disappointment from the voters of our Commonwealth time and time again.’’

Meldrum, who followed Weaver out the door of the campaign, said the lawsuit was politics of another sort: damage control. He said he and his colleagues were planning to turn over evidence of wrongdoing in the Cahill operation that would prove he used taxpayers’ funds to finance his campaign.

“This is a political lawsuit filed by Tim Cahill to prevent me from taking whistleblower status and bringing to light their coordination with the Treasury office with regard to the taxpayer-funded ads that say how well the Lottery is run,’’ he said. “We have not taken reporters’ questions in recent days because we have been preparing to turn over evidence of illegal activity by Treasury employees and Cahill staff members to the attorney general’s office.’’

Baker’s campaign echoed Meldrum’s allegations, saying in a statement: “So far as we can tell from media reports, Tim Cahill has filed a lawsuit to prevent public disclosure of e-mails that indicate his campaign may have been illegally coordinating with state employees at the Treasury.’’

The Republican Governors Association issued a statement in response to the suit, but offered no denial to the allegations. “Tim Cahill will do anything to get his name in the papers, even sue his former staff,’’ spokesman Chris Schrimpf said in an e-mail.

The suit bases its allegations on e-mail communications among Weaver, Yob, and Meldrum, as well as Loscocco confidant Jason L. Zanetti, a Boston lawyer and lobbyist. The e-mails were obtained by the Cahill campaign from Meldrum’s personal and official campaign accounts, both of which were routed through the Cahill campaign server.

Baker and his staff have strongly denied pressuring Loscocco to leave Cahill’s side or offering any enticements, such as a future job in state government. None of the e-mails in the lawsuit contradict that denial, though they suggest the Baker campaign was actively seeking internal information about Cahill and his campaign that Cahill’s departing aides possessed.

“I spoke with Tim O’Brien just now,’’ Zanetti wrote to Weaver, Yob, and Meldrum in an e-mail sent last Sunday afternoon, just two days after Loscocco backed Baker, according to the lawsuit. “He wants to let the Paul story die on the vine. I wouldn’t mind at least one discussion with Adam and a reporter though about the ‘deep divisions’ between the camps, disrespect/distrust of Paul/his team, etc.’’

The e-mail continues: “The Baker folks would really appreciate any ‘hard evidence’ e-mails/documents that shows improprieties . . . Adam and I just spoke and he has some stuff.’’

Zanetti, according to the suit, also wrote of Cahill’s campaign, “I know there were lots of state employees doing political stuff when they shouldn’t have been but we need proof.’’ Zanetti then referred to the public reaction to Loscocco’s abrupt departure form the campaign. “We want to stop the ‘sympathy’ that this is generating’’ for Cahill, he wrote.

At one point, the suit alleges, Weaver instructed Meldrum to contact a Republican Governors Association staff member, identified as Dennise Casey, and “follow through’’ with “the e-mails and other things you have re: Cahill and coordination with lottery and ties to Patrick.’’

The suit said Meldrum immediately contacted Casey.

“The urgency with which the defendants and the [Republican Governors Association] viewed the process of extracting information about the Cahill campaign from the defendants is illustrated by the fact that Nick Ayers at the RGA then instructed Weaver to ‘have Adam and Dennise coordinate so I don’t slow things down,’ ’’ the suit said.

As a reward for resigning from Cahill’s campaign, the suit alleges, Meldrum was given a job by the Republican Governors Association, working on a campaign in New Mexico.

The suit also contends that Zanetti worked closely with Weaver and his associates to get Loscocco off the ticket. It says that Weaver, Yob, and Meldrum discussed the political risks and benefits Loscocco would face if he departed. “This has to be done in such a way as Paul’s future is protected,’’ Weaver wrote on Sept. 18, according to the suit.
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Brian Mooney, Noah Bierman, Michael Levenson, and Andrew Ryan of the Globe staff contributed to this report. Frank Phillips can be reached at phillips@globe.com.
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Former state treasurer Timothy P. Cahill left McKay’s Breakfast and Lunch in Quincy yesterday. (Bill Greene/Globe Staff)

"‘I’m not retiring; I’m just going on to the next thing.’: Happy to be out of the political spotlight, Quincy native reflects on campaign"
By David Filipov, Boston Globe Staff, January 20, 2011

QUINCY — Some politicians leave office with fanfare, ringing valediction, and I-shall-return bravado.

And then there was Timothy P. Cahill, who spent his last few minutes as state treasurer yesterday at McKay’s Breakfast and Lunch in his native Quincy, smiling and shaking hands with any well-wishers who approached his table. It was about 11 a.m. when he ordered a sausage-and-egg sandwich, an hour before his successor, Democrat Steven Grossman, was to be sworn in.

That Cahill was enjoying comfort food in his comfort zone was no accident. Two months after his improbable run for governor as an independent ended in a distant third-place finish, Cahill said he was glad to be out of the public eye. In a wide-ranging interview, a rarity since the election, he did not rule out a return to politics, but expressed relief to be leaving Beacon Hill. And he spoke frankly about the miscalculations and political naivete that doomed a long-shot campaign long before Election Day.

“We were writing the chapters of the book as we went along,’’ said Cahill, his natty campaign suit replaced by a casual v-neck. “I wanted to win, but I’m fine with the way it turned out. I am looking forward to breaking out and doing something else for a while.’’

After winning two statewide elections as treasurer, Cahill seemed to have built a political resume that would make him a strong Democratic candidate to run for governor one day, once his fellow Democrat, Deval Patrick, left office. Instead, in 2009, Cahill left the party to announce an independent challenge to Patrick, who at the time seemed deeply vulnerable.

Yesterday, Cahill reflected on a campaign that started out strong — he once was polling even with Patrick — and received what he had believed to be a boost by the surprise victory a year ago yesterday of Republican Scott Brown in the special election to fill the seat vacated by the late Senator Edward M. Kennedy.

“When Brown won, it was like, you could pull this off,’’ Cahill said.

Cahill said his campaign was caught by surprise by the attacks that came from the Republican side. As early as May, ads were running that cast the independent as “just another reckless Beacon Hill politician.’’ The campaign decided not to respond with negative ads, a decision Cahill now regards as a mistake.

“It’s clear now,’’ he said. “When you’re attacked, you’ve got to respond.’’

The learning experience did not end there. His campaign was rocked in October, when his running mate, Paul J.P. Loscocco, withdrew from the race and endorsed Republican Charles D. Baker. Some observers wondered whether the stunning defection might sound the death knell of Cahill’s campaign. The candidate initially thought the same thing when he took the call from Loscocco on Oct. 1 at 9:20 a.m.

“Politically, my whole life flashed before my eyes,’’ Cahill recalled. “I told him, ‘I hope you get something for this that’s worth it.’ ’’

He described that phone call as his worst memory from the campaign. His best memory was the press conference he held that day, when he announced, in a speech that was partly prepared, partly improvised, that he was staying in the race.

“Then it went downhill from there,’’ Cahill said. Still, he said, he was glad he stayed in the race until the end. “It allows you to move on, as opposed to quitting and never knowing how it would have ended.’’

Other lessons learned included the realization that not having a party meant “when things get tough, you don’t have a friend out there to back you up,’’ he said. “A party is almost like a family.’’

And for a man who burst onto the statewide scene in 2002 with his “Tim for Treasurer’’ campaign slogan, it was a revelation that only the last names of the gubernatorial ticket appear on the ballot for the general election.

“I was shocked to see ‘Cahill/Loscocco,’ ’’ Cahill said. “I remember how big Paul Loscocco’s name was on the ballot. and I thought, ‘That’s not good.’ ’’

Yesterday, Cahill ruled out an immediate return to politics. He said he plans to enter the private sector, probably in the field of finance, though he said he had yet to consider any concrete offers.

“I’m not retiring; I’m just going on to the next thing,’’ he said. He recalled that after he lost an election to the Quincy City Council in 1981 he went into business as a cafe owner and stayed out of politics for six years before running again [and winning.]

“What I love about politics is that at 52, I am still young,’’ Cahill said.

The end of the 2010 campaign left him with time to eat “three squares a day’’ after a year of late-night meals. He has time to work outl the former high school wrestling star has a regimen of pull-ups, dips, cardio and “50 to 100 push-ups.’’

On his bedside table is “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves.’’ . Reading, he said, is another hobby that has returned.

He was able to watch the New England Patriots’ disappointing playoff loss to the New York Jets. Last January, Cahill the busy candidate had no time to follow the team.

And he is happy to wake up and not see television news teams set up outside his house, just as he assumes that those who watch the news are happy not to see him.

“People saw enough of me, heard enough of me, and I think it’s in my best interests to keep quiet for a while,’’ Cahill said.

And with that, Cahill paid for his meal, shook a few hands, stepped outside, and drove off in his Grand Cherokee.

Grossman had been sworn in. And Cahill was just another private citizen.

David Filipov can be reached at filipov@globe.com.

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SUBPOENAS FOR DOCUMENTS
It is not clear what direction the federal investigation is taking, but Timothy Cahill’s campaign for governor is a factor.

"SEC looks at Cahill, Goldman Sachs link: Subpoenas focus on ex-treasurer, aides, bank official"
By Frank Phillips, Boston Globe Staff, January 24, 2011

The US Securities and Exchange Commission has delivered subpoenas to the state treasurer’s office in a wide-ranging request for documents concerning dealings between investment banking giant Goldman Sachs and former treasurer Timothy P. Cahill, onetime top staff members, and former campaign aides, according to an official briefed on the document request.

The agency’s subpoenas, which seek e-mails, phone records, schedules, files, and memorandums, come just over a month after Goldman Sachs removed itself from two state bond deals in Massachusetts following the disclosure that a vice president at the firm, Neil Morrison, was active in Cahill’s 2010 gubernatorial campaign, which could violate federal securities regulations. Morrison had previously served as a top deputy to Cahill in the treasurer’s office.

The SEC served the papers just before the close of business Friday, catching the new treasurer, Steven Grossman, and his staff off guard. A spokesman for Grossman said the treasurer would not comment on details of what federal regulators are seek ing but said his staff is quickly assembling the requested material.

“We are cooperating fully and promptly with the US Securities and Exchange Commission’s request for documents consistent with our commitment to running a transparent and accountable Treasury,’’ the spokesman, Al Gordon, wrote in an e-mail yesterday. “Due to the nature of this matter, we cannot comment further.’’

A spokesman for Goldman Sachs, Michael DuVally, said yesterday the firm would have no comment. Cahill also declined to comment, telling the Globe he had not yet been informed of the subpoenas. “This is the first I heard of it, so I can’t really comment,’’ he said.

The SEC also would not comment on the subpoenas.

It is not clear from the subpoenas alone what direction the federal investigation is taking. An official who has been briefed on the documents said that they refer specifically to Goldman Sachs and seek all communications between Cahill’s office and Morrison and the investment bank dating back to June 1, 2008. The SEC, the official said, also asked for documents from the state Lottery and School Building Assistance authority, both of which are under the treasurer’s control.

The breadth of the subpoenas suggests federal regulators could be looking at possible connections between Cahill’s work as treasurer and his gubernatorial campaign, which was the subject of a separate investigation launched last year by the state attorney general’s office.

Named in the subpoenas are Cahill; his former chief of staff, Scott Campbell, who left state government last year to help manage Cahill’s campaign; deputy treasurer Colin MacNaught, who oversaw bond issuances under Cahill; Amy Birmingham, a top aide on Cahill’s gubernatorial campaign; and political finance consultant Laurie Bosio, a major political fund-raiser for Cahill in his bid for governor.

Morrison’s role in the campaign, which he has downplayed, could trigger SEC regulations that sharply restrict public-finance bankers from contributing to political figures and elected officials who issue public bonds.

The Globe reported last June that Morrison negotiated a $455.9 million bond with a state water-pollution control board that Cahill chairs and operates within the treasurer’s office.

As part of a civil lawsuit Cahill filed against ex-advisers during the gubernatorial campaign, Morrison was identified as a “top political adviser’’ to Cahill. Documents filed in the suit included a copy of an e-mail that Morrison sent from his private account to two consultants for the campaign, in which he accepts, on Cahill’s behalf, the terms of a contract between the campaign and the consultants.

Such work could be considered an in-kind contribution to the Cahill committee. If it was done on company time and if its value exceeds the $250 limit set by the SEC, Morrison, under federal regulations, could face fines and lose his broker’s license. The e-mail was sent during working hours on Friday, Aug. 13.

Morrison, who is leaving his position at Goldman Sachs later this month, declined to comment yesterday when asked about the subpoenas or the campaign work. In an abbreviated response to Bloomberg News last month about the issue, he referred to his political role as minor. There was no “formal role with the Cahill committee,’’ he said.

The SEC could impose penalties on Goldman Sachs, including banning it from underwriting bond offerings by the state treasurer’s office for two years, according to federal regulations.

Complicating the issue is Morrison’s role in negotiating the bond deal with the Massachusetts Water Pollution Abatement Trust board last spring. The banking firm earned an estimated $2 million in fees on the deal. The subpoenas also seek documents from the trust and its dealings with Goldman Sachs.

Morrison, a former Taunton city councilor, joined the Treasury staff after Cahill was elected to his first term in 2002, rising to become first deputy treasurer. He left in 2006 and joined the Swiss banking firm UBS. He was hired by Goldman Sachs in July 2008.

The decision by the water-pollution control board to give Goldman Sachs the bond work last spring came just months after the SEC had charged Goldman, one of the most influential and prestigious investment firms in the country, with fraud in a federal suit. The regulators argued that Goldman’s investment banking division had created a system that allowed the company to bet against the mortgage securities it had sold to some of its clients.

In July, the firm paid a $550 million fine to settle the suit. It also launched an advertising campaign to repair its image.

Although some state agencies were concerned about contracting with the company, Goldman Sachs had also landed work last year managing bond sales for the MBTA and Massachusetts Housing Finance Agency. But late last year, Goldman Sachs, concerned about the revelations that Morrison was involved in the political campaign, suddenly withdrew.

Frank Phillips can be reached at phillips@globe.com.

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STEVEN GROSSMAN

"Grossman taps donors with state business: Quietly raised thousands despite transparency pledge"
By Frank Phillips, Boston Globe Staff, February 6, 2011

State Treasurer Steven Grossman, who won election last fall on a platform of transparency and reform, personally solicited campaign donations for the state Democratic Party last year from lawyers and executives of firms that now have business before him, seek treasury work, or are regulated by his office.

In turn, Grossman received hundreds of thousands of dollars in financial support from the party.

The link between Grossman and contributions to the Democrats recently came to light when his political committee detailed in campaign finance filings the extensive financial support it received from the party. Grossman and party leaders say they did not coordinate Grossman’s fund-raising and the party spending on his behalf, but the arrangement provided the candidate for treasurer a way to quietly raise more money for his successful race against Republican Karyn Polito.

Both Grossman and the state party said they were unable to provide a list of all the contributions he personally sought. A Globe review of party contributors revealed a host of donors who do business, are seeking contracts, or are regulated by the treasurer’s office. In some cases, Grossman acknowledged going to them for funds.

Among the funds Grossman helped bring in for the state party were thousands of dollars from executives of Scientific Games, the gaming firm that has a $12 million-a-year contract to supply instant tickets to the state Lottery, which Grossman now chairs.

He also solicited contributions from executives of liquor distributors, which are regulated by his office, and from at least one law firm seeking work with the treasury on pension fund litigation.

Neither Grossman nor the party broke any campaign finance laws, but they used what campaign finance reform advocates say is a loophole that allows politicians to skirt disclosure laws and limits on contributions to candidates.

In an interview, Grossman acknowledged that he made numerous calls to potential contributors but said his fund-raising was part of a joint effort with Governor Deval Patrick and other party leaders to build Democratic coffers for the fall campaign.

“Nobody should have any illusion that they would get special treatment from Steve Grossman for contributions to my campaign or the Democratic Party,’’ he said.

The Democratic State Committee revealed in its year-end report last month that it spent more than $728,000 on Grossman’s campaign, most of it on radio and television advertising in the final weeks of the race.

Grossman, a former state and national Democratic Party chairman, was the only candidate on the Democratic ticket besides Patrick who received substantial financial help from the party. Patrick, who raised the bulk of the party’s money, got $2.5 million for his gubernatorial campaign.

Suzanne Bump, the Democratic state auditor candidate who won a tough race against a Republican opponent, received no financial help, records show. Attorney General Martha Coakley got $46,890 in assistance from the party, and Secretary of State William F. Galvin received nothing.

Grossman and party officials said there was no formal arrangement between the treasurer’s campaign and the state committee.

“There was no explicit, ‘You help us, we will return the favor,’ ’’ said state Democratic Party chairman John Walsh.

But some of the biggest bills — $620,000 the party gave to Grossman’s media consultant, Joe Slade White & Co. — were paid about the same time the donations were deposited into the party’s account.

Grossman said the party determined that his candidacy was particularly vulnerable because Polito had the resources to mount a major advertising campaign. (Grossman, however, has contributed hundreds of thousands of dollars to his own political campaigns.)

“If the state party hadn’t leveled the playing field, we may well have ended up with a Republican in the treasurer’s office,’’ he said.

Walsh said, “I had to make a decision on how we used our resources. Polito was up early and with a lot of ads.’’

In Bump’s race, Walsh said, the party used its organization to help.

But the fund-raising structure raises questions about Grossman’s vow, both as a candidate and as treasurer, to be open, candid, and transparent. He was the first major candidate to post his ethics disclosure forms on his campaign website and says he will put state’s financial transactions on-line. During the fall race, however, the public could not know the extent to which the party was helping to finance his campaign, partly with the help of donors with an interest in treasury business.

By using the state party, Grossman not only avoided immediately revealing the source of some of his campaign funds; he was also able to circumvent the $500-per-person limit on donations to political candidates. Individuals can donate up to $5,000 a year to political parties.

Executives at some of the companies also contributed to Grossman’s predecessor, Timothy P. Cahill, but they gave to Cahill’s campaign committee. That limited the donations to $500 each and tied them, in public filings, directly to Cahill. In Grossman’s case, some executives gave to his campaign committee as well as the state Democratic Party.

After Grossman reached out to Scientific Games, executives gave the state Democratic Party at least $22,500. The firm, which provides lottery products around the world, wins its Massachusetts Lottery contracts through competitive bidding. Scientific Games was at the center of a controversy in 2008, when the Globe reported that it was raising campaign money for Cahill and paying a close associate of Cahill’s to lobby as the firm sought to keep its contract with the Lottery.

A spokesman said Scientific Games would have no comment.

Attorneys at a law firm that has been seeking state pension fund work, Barrack, Rodos & Bacine of Philadelphia, donated $20,000 to the state party at Grossman’s request.

Grossman said that Leonard Barrack, the lead partner in the firm, is a longtime friend who worked with him in Jewish philanthropy and Democratic Party fund-raising. Grossman said he had no knowledge of the firm’s interest in contracting with the state pension fund board, which he chairs. But he was adamant that the donations and his relationship with Barrack will make no difference in his decision-making.

At least two executives at liquor wholesalers — whose businesses are regulated by the state Alcoholic Beverages Control Commission, which is under the treasurer’s office — donated to the party at Grossman’s urging, Grossman said. Robert Epstein, president of Horizon Beverage, gave $5,000 on Sept. 29, while Harvey Allen, the chief executive of M.S. Walker Inc., gave $2,500 six days earlier.

Grossman said he has known both men for decades, partly through work in the Jewish community and socially. He noted that he opposed the November ballot question that repealed a liquor tax, which the industry — including both Allen and Epstein — strongly supported.

Other big donations to the Democrats came from two law firms that perform legal work for the state pension fund, donations Grossman said he did not solicit.

Lawrence A. Sucharow, chairman of Labaton Sucharow, a New York-based law firm that specializes in class-action securities lawsuits, said the $12,500 he and his partners donated has nothing do with trying keep its current contract, which, like other similar deals, is competitively bid. Sucharow said he and his colleagues make numerous political donations and said he does not recall who asked for contributions to the Massachusetts Democratic Party.

“If we ID people who fit the needs of our clients, we let our partners know that,’’ Sucharow said.

Grossman said he has never met Sucharow and did not solicit the donations.

Thornton & Naumes, a Boston firm that acts as local counsel for Labaton Sucharow on state pension lawsuits, gave the state party at least $28,000. Its cofounder, Michael Thornton, who donates to Democrats around the country, said he cannot recall who solicited the funds. Grossman said he did not ask Thornton for the money.

Frank Phillips can be reached at phillips@globe.com.

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Corporate political giving

Executives at several companies and law firms that have or seek business with the state treasury gave tens of thousands of dollars to the Massachusetts Democratic Party last year, which in turn helped fund Steven Grossman’s successful campaign for state treasurer.

Scientific Games

Holds a $12 million-a-year contract to supply the state Lottery, which Grossman oversees, with instant lottery tickets. Nine executives donated $22,500 between Sept. 23 and Oct. 26.

M.S. Walker Inc.

A liquor distributor, the company is regulated by the state Alcoholic Beverages Control Commission, which is under the state treasurer. CEO Harvey Allen donated $2,500 on Sept. 23.

Horizon Beverage

Also a liquor distributor, and also regulated by the state ABCC. President Robert Epstein donated $5,000 on Sept. 29.

Barrack, Rodos & Bacine

A law firm that has sought work with the state pension fund, which Grossman manages. Employees and spouses donated at least $20,000 on Oct. 20.

Labaton Sucharow

A law firm is on a small list of litigators the state pension fund uses. Lawyers gave $12,500 from Oct. 7. to Oct. 27.

Thornton & Naumes

The firm is local counsel to Labaton Sucharow on pension litigation. Lawyers gave $28,000 on Oct. 7 and 8.

SOURCE: Massachusetts Office of Campaign and Political Finance

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A Boston Globe Editorial
"Treasurer’s duty is to the state; fundraising for Dems must end"
February 10, 2011

STEVE GROSSMAN made his name in political circles as a fundraiser, rising to the chairmanship of the Democratic National Committee. The usual path for businessmen who procure millions of dollars for political candidates leads to a plush European ambassadorship; but Grossman, at 64, decided to devote his financial expertise to the decidedly less glamorous role of state treasurer — to be the rare figure who moves from behind-the-scenes power to a post of up-front accountability.

Now that he’s accountable, however, he must give up his role as superstar fundraiser. Uncertainty about whom he solicited for contributions and whether such donors will receive favorable treatment from his office threatens to cloud his tenure as treasurer.

He should have renounced his fundraising role when he announced he was running for elective office. Instead, he vowed to be unusually transparent about any fundraising activities. Yet that pledge was swiftly undercut in Sunday’s Globe, which reported that, as a candidate, Grossman personally solicited campaign donations for the state Democratic Party from lawyers and executives of firms that are regulated by the treasurer’s office, do business with it, or want to do business with it.

What Grossman did is not against the law, but he went against the spirit of it. State law sets a maximum donation of $500 per person to political campaigns and $5,000 a year to political parties. Grossman solicited donations for the party. The party, in turn, spent more than $728,000 on his campaign; Governor Deval Patrick was the only other Democratic candidate to receive substantial financial help from the party.

This arrangement allowed Grossman to camouflage some of his campaign fundraising activities and helped him to circumvent the limit on individual donations. It also created an unseemly entanglement between vendors and an aspiring public official. After Grossman approached the firm Scientific Games, for instance, executives donated at least $22,500 to the state Democratic Party. The firm has a multimillion-dollar contract with the state Lottery, which Grossman now supervises.

John Walsh, the state Democratic Party chairman said, there was no “you help us, we will return the favor’’ proviso that led the state party to give major assistance to Grossman but not to other statewide Democrats except Patrick. Even if that’s true — and it’s a leap of faith to believe that it is — this is a discouraging way for Grossman to kick off his tenure as state treasurer.

Grossman should immediately disclose which state vendors he solicited for contributions, either for himself or for the state party. Given his office’s enormous authority over state contracts, he has a special burden to make it clear that companies don’t have to make political contributions to work with the treasurer’s office.

Grossman promises that contracts will be competitively bid, and that no contributor to his campaign or the state party will get special treatment. But the problem isn’t that donors always get special treatment — though voters in Massachusetts will have to pay close attention to Grossman’s decisions in office. The problem is that Grossman’s fundraising activities could create the perception that would-be vendors and other interest groups need to pony up to be heard.

The only way to erase this perception is for Grossman to stop fundraising and give his full attention to his elected position. He should do so immediately.

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"AG right to bring case against Cahill"
The Berkshire Eagle, Editorial, April 4, 2012

The indictment Monday of former state Treasurer Timothy Cahill on corruption charges makes him the first statewide official to be so charged in more than a generation and is another blow to the image of Beacon Hill, which has been rocked by a recent Probation Department patronage scandal and the de parture of three consecutive House speakers under ethics clouds. Mr. Cahill will have an opportunity to defend himself but given the nature of the evidence, At torney General Martha Coakley would have been remiss if she had not brought her case before a Suffolk County grand jury.

Once a rising star in the Democratic Party, Mr. Cahill’s troubles began when he decided to launch a quixotic independent campaign for governor against Demo cratic incumbent Deval Patrick and Republican challenger Charles Baker. After Repub licans launched a $2 million ad blitz challenging Mr. Cahill’s job performance, the lottery responded with the largest ad campaign it had ever run extolling its effectiveness. This raised eyebrows at the time.

Internal emails obtained by The Boston Globe and other emails that emerged in a civil court case in 2010 suggested that Mr. Cahill’s political staff consulted with him and obtained his approval to use the lottery ads to boost his campaign. According to Ms. Coakley, her office’s 18-month investigation uncovered an "orchestrated effort by Treasurer Cahill" to coordinate the message and timing of the ads "to unlawfully assist his campaign for governor, instead of promoting the interest of the lottery and the taxpayers."

Mr. Cahill would probably still be treasurer today if his evident impatience hadn’t prompted him to run a long-shot independent campaign for governor against a popular Democratic incumbent. He now faces charges that he conspired to spend public dollars in a way designed not to benefit a public agency, the lottery, but to benefit his political ambitions.

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