Weld Faces a Fiscal Mess But Pledges No New Taxes

WILLIAM WELD is not yet governor of Massachusetts, but he's already struggling with the state budget and tax crisis that helped bring down Gov. Michael Dukakis. The fiscal difficulties are not limited to the Bay State. In Michigan, Republican governor-elect John Engeler is facing a $1 billion deficit as he takes office. New York Gov. Mario Cuomo (D) is laying off thousands of state workers and has canceled his inauguration ceremony to deal with his state's budget crunch. Governors and governors-elect all over New England have similar problems on their hands.

Mr. Weld, a Republican, won his first legislative victory last week when the Democrat-dominated state General Court (legislature), meeting in a lame-duck session, voted to delay implementation of a sales tax on business services until March 1. The tax had been scheduled to take effect Dec. 1.

Soon after winning election, the governor-elect called for repeal of the tax - part of a $1.2 billion tax hike enacted last summer to balance the state's books. But Democrats balked. They agreed instead to a delay to give Weld time to develop a plan for spending cuts that would cover the estimated $71-million to $300-million loss that would result from eliminating the tax.

Business and professional groups had sued to halt the levy, which taxes 594 business services. But the state Supreme Judicial Court ruled it constitutional in July.

The legislature enacted the compromise measure against the objections of the Dukakis administration. But Mr. Dukakis reluctantly signed the bill into law Friday. ``I'm not a fan of the service tax,'' he reportedly told a news conference after meeting with Weld. ``(But) I believe that postponing this tax is not sound fiscal policy.

``The burden now is squarely on Bill Weld,'' he said.

The tax debate is heightened by differences over the amount of the state's current deficit. The administration estimates it at about $50 million, while legislative estimates go as high as $500 million.

The shifting sands under the state's finances complicate Weld's task of developing a program and assembling a new administration. To date, he and and Lt. Gov.-elect A. Paul Cellucci have announced only three appointments - Weld campaign chairman John Moffitt was named chief of staff; Cellucci campaign manager Mary-Lee King will be chief policy advisor; and Mark Robinson, a Weld prot'eg'e in the United States attorney's office and the US Justice Department, will be chief of staff.

Weld has also created two transition committees, one on personnel and one on fiscal management. He says he hopes to announce at least some Cabinet appointments on Dec. 10. Outgoing House Minority Leader Steven Pierce, Weld's GOP primary rival, is expected to accept a Cabinet post.

Weld reiterated in a talk to the Massachusetts Business Roundtable last Thursday that his solution to the fiscal crisis will be to cut spending, downsize state government, and increase revenues through economic development, not new taxes.

``I've taken the pledge. We are not going to raise statewide taxes for four years,'' Weld declared.

The governor-elect noted that his ability to use the line-item veto - that is, to veto only sections of a bill rather than the whole measure - gives him an anti-tax tool that President Bush does not have at the federal level. GOP gains in the state Senate will help him sustain such vetoes, he said. But he also said he would try to work with Democratic legislative leaders on mutually acceptable spending cuts rather than take a confrontational approach.

Weld said his fiscal committee is ``working on a serious package of proposed cuts'' which would allow him to balance the fiscal 1991 budget and calm Wall Street jitters about the state's fiscal health. He will also propose tax relief measures, including an increase in the investment tax credit, a tax credit on research and development, and a reduction in taxes on business assets held for more then five years, he said.

While he will not specify the cuts he has in mind, Weld said that ``we must reexamine our entitlement philosophy and eligibility criteria'' for human services. He hopes to move Medicaid to a managed-care system and said he has assurances from US Secretary of Health and Human Services Louis Sullivan that the state could get speedy approval of the change. A managed-care system is based on health-maintenance organizations, while the current system allows individuals to choose any physician they wish.

Weld also said he may create a post of ``super-secretary'' of economic affairs who would be responsible for economic development, tourism, banking, and insurance. This would combine the responsibilities of several current Cabinet posts.