ACEC/MA Government Affairs Update: December 2016
Next ACEC/MA Government Affairs Committee Meeting: January 20, 2017
10 AM at Aldrich Center at The Engineering Center.
For call-in information, contact email@example.com
New Legislative Session Starts in January
December 2016 is the last month of the 2015-2016 legislative session. The Massachusetts House of Representatives and the Massachusetts Senate are meeting in informal session during this month to enact noncontroverial legislation. All bills filed in this session that have not been enacted will end at the end of the session on December 31, 2016. The 2017-2018 Legislative session begins in early January 2017. The bill filing deadline for this new session is January 20, 2017.
Baker Issues 9c Cuts, Prompting Response from Legislature
On December 6, Governor Baker announced $98 million in unilateral cuts to the state's budget, referred to as 9c cuts, in a move that his administration says will remedy the gap between projected revenue and authorized spending.
Governor Baker suggested cutting the budget now would help ensure it is balanced come June, but said he would be flexible if revenue growth strengthened. Tax collections are up only 2.2 percent this fiscal year, which is less than expected, and has contributed to a roller coaster of ups and downs forcing budget leaders to react month-to-month to fluctuating revenue performances. Speaker DeLeo has since said he expects to pass a supplementary budget by January or February in effort to restore at least some of the $98 million Baker cut from the state budget and has vowed to work with members of the Ways and Means Committee to determine if the state takes in enough revenue in December to allow spending on the cut items.
Revenue Hearing to Project FY2018 Tax Revenues
On December 5, the Joint Committee on Ways and Means and the Executive Office of Administration and Finance hosted a panel of experts to testify on the State's Fiscal Year 2018 tax revenue projections . At the hearing experts included representatives from the State's Department of Revenue, Massachusetts Taxpayers Foundation, Northeastern University's School of Public Policy and Urban Affairs, Treasurer Deborah Goldberg, the Beacon Hill Institute and UMass Dartmouth Public Policy Professor Dr. Michael Goodman. The experts warned of continued uncertainty with forecasting tax revenue due to overall economic conditions. The Massachusetts Taxpayers foundation estimates that state tax collections will grow by only 2.65% in FY 2018. Additionally, they estimate tax revenues will increase by about $687 million in fiscal 2018 to $26.64 billion. The Foundation also expressed concerns over the incoming Trump Administration and international political and economic tensions for the future of tax revenue increases.
Senate President and Speaker Reach Agreement on Rules
In early December, Senate President Rosenberg and House Speaker DeLeo announced that they had reached an agreement over the rules that will govern the next legislative session that starts in January 2017. The major changes include moving up the deadline for committees to report out bills from the third Wednesday in March to February 1 in the second year of the session and requiring that bills be referred to the branch where they originated as they are reported from committees. The changes are significant as debate over rules reform slowed legislative activity for the first several months of the 2015-2016 legislative session.
Neal to serve as Ranking Member of House Ways and Means
U.S. Representative Richard Neal has become the top Democrat on the powerful Ways and Means Committee. In early December, Rep. Neal became the minority leader in the Committee with a vote of the Democratic House caucus. Some of the biggest expected battles under the new Trump administration will have to pass through the Committee, as it holds sway over taxes, trade, and entitlement programs like Medicare and Social Security.
House Committee on Bonding, Capital Expenditures and State Assets Hearing
Economists, budget analysts and Baker administration officials presented different perspective at this December 13, 2017 committee hearing on Massachusetts's capital budget and whether the state is investing enough in its infrastructure.
The House Committee on Bonding, Capital Expenditures and State Assets held the hearing. Chairman Rep. Antonio Cabral (D-New Bedford) asked those who testified to address the following question: "How should we weigh the trade-offs between potential returns on our infrastructure investments and the costs to taxpayers needed to support those investments?"
The state's Capital Debt Affordability Committee reported by December 15 that Massachusetts can afford $2.26 billion of bonding for capital spending in fiscal year 2018, an increase of about $70 million or 3.2 percent over the current year, The committee determined an administrative bond cap of $2.26 billion "balances demand for state infrastructure investment with recognition that increasing fixed obligations may limit fiscal flexibility in the future," and the recommended level of debt "falls within targeted debt service to revenue ratio levels."
After at least five years of $125 million increases, the maximum allowable amount, the Baker administration held capital spending flat for FY2016 and put a freeze on plans for a big expansion of the Boston Convention and Exhibition Center. In FY2016, the committee approved a $65 million, or 3 percent, increase in bonding for capital spending.
"Massachusetts has huge public infrastructure investment needs. The latest American Society of Civil Engineers report card found the conditions of Massachusetts roads and bridges cost each motorist $478 a year," Cabral said. "There are also other important needs outside of transportation not commonly considered when talking about capital projects: our courts, education, information technology, sewerage, parks and recreation, just to name a few."
There was general agreement at the hearing that Massachusetts has a backlog of infrastructure needs, but the witnesses were not in harmony over whether the state should, or can afford to, increase its capital budget to meet those needs.
Jennifer Sullivan, the Executive Office of Administration and Finance's Assistant Secretary for Capital Finance, explained the modeling and stress tests the Debt Affordability Committee used to reach its recommendation for FY18 and detailed the administration's "long-term view" of its asset portfolio.
"We also take very seriously the responsibility that our growth trajectory on the capital budget must be set at sustainable levels ... we have to balance our needs with our available resources, preserve that flexibility in the discretionary budget that is so essential," she said. "We're focused on protecting our credit rating and ensuring that our decisions don't burden future generations."
Michael Goodman, MassBenchmarks co-editor and executive director of the Public Policy Center at the University of Massachusetts Dartmouth, said lawmakers should expect that interest rates will soon rise, making capital borrowing more expensive, as will the prices of the materials and labor necessary for capital projects. The state should act now to avail itself of the present advantageous conditions, he argued.
"I do think there is room for additional growth in the bond cap, especially if you redirect some of the revenues otherwise being invested in lower return areas," he said, specifically citing the state's film tax credit as money that could be put to better use. "In light of the need and in light of the likely increase in the cost of borrowing, and I think in areas where we know we're going to have to spend this money sooner or later, I think it's prudent to try to front-load those investments while the interest rates are still allowing you to get as much bang for your buck as possible."
André Leroux, executive director of the Massachusetts Smart Growth Alliance, said his organization would like to see the state increase capital spending by the greatest amount allowable in fiscal 2018, $125 million.
"The bottom line for us in terms of the bonding issue is really that we need a higher level of capital investment than is presently being considered for FY18 and the years immediately beyond," he said, citing a shortage of affordable housing, aging infrastructure and climate change as the greatest threats to the state economy. "We're not fiscal experts ... but I think we can say that our economy is at risk by not spending enough money on these areas."
The Massachusetts Taxpayers Foundation disagreed, and its president said that the Debt Affordability Committee's recommendation to increase capital spending next fiscal year by about 3 percent makes the most sense.
"Given that revenue growth that we're projecting for fiscal year 2018 are about 2.6 percent, so making sure that the capital budget doesn't grow at a higher rate than overall tax revenue growth I think is pretty important," Eileen McAnneny said. "I think their $70 million (increase) is in that ballpark." McAnneny on Tuesday also renewed MTF's call for "a rigorous review of the cost and value of projects" to be made public before any money is allocated in a capital plan, an annual review to "reestablish the timelines, costs, benefits, and value" of each project, and a detailed accounting of project expenditures from any state agency that receives capital funds.
In September 2016, the House Committee on Bonding, Capital Expenditures and State Assets concluded that because of low interest rates and the state's AA+ bond rating, the cost of long-term borrowing "has not been as cheap as it is now in the lifetime of most people working in Massachusetts" and the state should borrow more money to make capital investments.
Here is a re-cap of the key legislative races for the 2017-2018 Massachusetts Legislature:
Berkshire, Hampshire, Franklin and Hampden District
Newcomer Adam Hinds (D-Pittsfield) defeated Christine Canning (R, Lanesborough) to win the State Senate seat vacated by State Senator Ben Downing.
Cape and Islands District
In the close race for the State Senate seat vacated by State Senator Dan Wolf, Democrat Julian Cyr (D-Truro) defeated Anthony Schiavi (R-Harwich). Cyr earned an endorsement from President Obama late in the campaign.
Norfolk, Bristol and Plymouth District
State Representative Walter Timilty (D-Milton) decisively defeated third party candidate Jonathan Lott for the open State Senate seat vacated by Brian Joyce.
2nd Essex and Middlesex District
State Senator Barbara L'Italien (D-Andover) decisively defeated challenger Susan LaPlante (R- Lawrence) to win a second term in the Senate in one of the targeted seats Republicans looked to overturn.
State House of Representatives
9th Essex District
In one of the more closely watched races in the House, State Rep. Don Wong (R-Saugus) held off a spirited challenge by newcomer Jen Migliore to maintain his seat in the House.
4th Middlesex District
State Rep. Danielle Gregoire (D-Malborough) won decidedly against challenger Paul Ferro (R-Malborough).
31st Middlesex District
State Rep. Mike Day (D-Stoneham) defeated second time challenger Caroline Colarusso (R-Stoneham).
3rd Plymouth District
In the open seat vacated by former State Rep. Garett Bradley, former Hull Selectwoman Joan Mechino (D-Hull) defeated Kristen Arute (R-Hingham).