Nearly 100 days after its original due date, the House and Senate on Wednesday struck an agreement on a major economic development spending package that could be on Gov. Charlie Baker’s desk by the end of the day Thursday.
But in their announcement of the nearly $3.8 billion bill (H 5374) that will also serve as a final fiscal year 2022 supplemental budget, House Speaker Ronald Mariano and Senate President Karen Spilka also said they had abandoned the tax rebates, cuts and reforms the House and Senate had agreed to this summer and had included in the economic development bills that were unanimously approved in each branch in July.
“Today, House and Senate leaders reached agreement on an economic development package that will help ease the financial strain brought on by challenging economic conditions in Massachusetts and across the country, thus closing the books on Fiscal Year 2022,” Mariano, Spilka, and Ways and Means Chairmen Aaron Michlewitz and Michael Rodrigues said in a joint statement. “Among many vital investments, the agreement provides relief for rising energy costs, boosts housing production, provides much needed immediate assistance to the MBTA, and allocates meaningful funding for hospitals and human service workers, all while promoting economic growth through support for our small businesses and investments in our communities.”
The bill, which is technically a conference committee report and as such cannot be amended when the House and Senate take it up Thursday, both strikes ideas that have already been approved in each branch and adds ideas and proposals that have not been considered in either branch. It will be considered during sessions when roll call votes are not allowed, debate is uncommon, and bills can be blocked with a single objection.
The legislation includes $1.4 billion for the human services sector ($350 million for financially-strained hospitals, $225 million for provider and worker rate increases, $200 million for ongoing COVID-19 response, and $195 million for nursing facilities and rest homes), $540 million to support clean energy and climate resilience programs (including the electric vehicle rebates that were created, but not funded, in this year’s climate bill), and $409.5 million to support affordable housing, according to a Senate summary.
The package would also funnel another $112 million towards the troubled transit system. The Legislature has already authorized $666 million for the MBTA to make safety fixes ordered by the Federal Transit Administration, and the supplemental budget that Baker filed in August called for $200 million for the T.
The nearly $3.8 billion bill will spend down what remains of the state’s fiscal year 2022 surplus and deploy $500 million in federal American Rescue Plan Act (ARPA) funds, less than half the amount of ARPA money that the House and Senate planned to use in July. The economic development package, by virtue of wiping out the state’s surplus, will also allow the comptroller to close the books on fiscal year 2022, which ended June 30. The Legislature usually passes a separate close-out supplemental budget to do that.
“To use our revenue resources as best as possible, the decision was made to combine them to do the economic development and spending and to close the books, and do it as judiciously as possible,” Spilka told the News Service. “So yes, we spend all of the state surplus but we still leave $1.75 billion in ARPA funds for next year and for other areas … we realize there are still many more needs of our residents and communities.”
In July, both branches approved their own economic development bills unanimously. The House bill (H 5034) carried a bottom line of about $4.3 billion and the total was $4.57 billion in the Senate version (S 3030). But in the final week of July and in what was expected to be the final days of negotiation around a compromise package, top Democrats hit pause when they were stunned by the revelation that state government owed nearly $3 billion in refunds back to taxpayers under a mostly-forgotten 1980s voter law known as Chapter 62F.
But pointing to “financial uncertainty in the year ahead,” they also said that they have decided to limit spending in the new bill to one-time investments only, a move that apparently doomed about $500 million per year in permanent tax relief that both branches approved a form of this summer and another $500 million that the original economic development packages would have spent on one-time rebates for middle-income earners.
The lawmakers said that their new bill, combined with the $2.941 billion in excess state tax revenue that Chapter 62F is returning to taxpayers starting this week, represents “an unprecedented combination of economic investment and relief that will create needed breathing room for families and individuals feeling the pinch of inflation.”
Spilka said she is “disappointed that it doesn’t include more of the permanent progressive tax relief” that the Senate had in its bill, but she also claimed that “there is a huge tax relief package as part of this bill.” She was referring to the Chapter 62F checks, which the Baker administration began sending out Tuesday.
“I do want to stress that we do include $3 billion in immediate tax relief in this bill. It’s under 62F but the checks are going out, they’re starting to go out this week,” Spilka said. “That’s $3 billion in immediate tax relief, tax rebates, to the residents of Massachusetts, possibly the largest single tax relief package in the history of Massachusetts.”
The bill includes a section that would direct the comptroller to transfer enough fiscal 2022 surplus money to a specific account to fund the 62F checks, though the Baker administration has said such a step would not be necessary for it to start sending the checks.
“House and Senate leaders are committed to revisiting the issue of broader, more permanent tax relief next session,” the Democrats said. “This will help to ensure that our discussion of permanent tax relief can and will be informed by the views of a newly elected Legislature and Governor, while considering the looming challenges facing the Commonwealth.”
Gov. Baker was asked earlier Wednesday about tax relief and reform being a part of the eventual economic development package and said he was hesitant to comment until he was able to see what the House and Senate would agree to, but said he thought their original plan was a good one. Once the details of the agreement were known, Baker’s office said the administration is glad the Legislature is moving forward.
“However, it is extremely disappointing to learn that lawmakers no longer support any permanent tax relief for Massachusetts families despite reaching consensus on a much needed tax cut plan just a few months ago. Since then, costs have continued to skyrocket for families while the Commonwealth’s financial position gets stronger and stronger,” Baker communications director Sarah Finlaw said. “The Commonwealth has a record budget surplus and can afford to provide permanent tax relief, deliver tax rebates under 62F and make economic development investments all at the same time.”
Mariano said Wednesday afternoon that the House will take up the economic development conference committee report when it meets Thursday morning. He said he thinks the intention is for the House and Senate to take all the votes necessary to get the bill to Baker’s desk by the end of the day.
Spilka was less certain of the timeline for passage. She said she had been sharing information on the agreement with senators Wednesday and would hold a caucus before Thursday’s session.
“I think that people have vetted this over the past four months, it’s been no secret what was in the bill. And there’s a lot of important items in there for members as they’re back home fighting to get reelected. I think there’s a self interest in making sure that some of these projects get done,” Mariano said when asked how he prepares to try to move a bill through his chamber without opposition.
Spilka noted that the July economic development bill passed the Senate unanimously and said she has “not heard any objections to anything that was included and this includes most of what was in that bill.”
“There are some real critical needs — hospitals are in severe need, human service workers across the entire state and the providers are in critical need of salary increases, nursing homes, community health centers, and all of the other areas I mentioned — there are critical needs this bill addresses to ease the strain brought on by COVID and really help so many different sectors and so many different residents,” the Senate president said. “It’s very broad-based and I do believe this bill will strengthen Massachusetts’ economic and financial footing and set us on a path for a continued recovery post COVID.”
While it’s unclear how much resistance they will display on Thursday, Republican lawmakers have viewed the targeted tax relief as a critical piece of the economic development bills, and Maura Healey, the Democratic nominee for governor, has also urged lawmakers to pass their tax relief measures.
“I assume the House will be taking it up tomorrow,” Spilka said. “We will have to see and we will try to do it as fast as reasonably possible.”
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