Mass House Passes Bill to Unlock Funds to Compete for Federal Funding

As of June 30, 2023, the Stabilization Fund had a balance of $7.2 billion, according to the state comptroller's office.

Healey also issued an executive order to create a new office helmed by Quentin Palfrey, the director of federal funds and infrastructure, to sift through funding opportunities.

Rainy Day Fund Interest Eyed To Attract Fed $$$

Guv: "We Want Massachusetts to Win and Win Big"

Source: Alison Kuznitz, State House News Service

Gov. Maura Healey unveiled legislation in her ceremonial office on Thursday, Oct. 19, 2023 designed to help Massachusetts compete for billions of dollars in federal funding. She was joined (left to right) by Housing Secretary Ed Augustus, Energy and Environmental Affairs Secretary Rebecca Tepper, Lt. Gov. Kim Driscoll, Director of Federal Funds and Infrastructure Quentin Palfrey, and Administration and Finance Secretary Matt Gorzkowicz.

STATE HOUSE, BOSTON, OCT. 19, 2023.....Gov. Maura Healey on Thursday outlined a novel approach to competing for federal aid, proposing legislation that would use $750 million in interest earned on the state's bulging rainy day fund to help attract billions of federal dollars up for grabs in a competition among states.

Officials estimate that Massachusetts could secure more than $17 billion in aid through the federal Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act, and the Healey proposal would augment $2 billion in matching funds already identified with a new pool of revenue designed to leverage more federal aid.

"We have to be aggressive -- we know other states are, as well," Administration and Finance Secretary Matt Gorzkowicz said at a press conference with Healey in the governor's ceremonial office. "This legislation will help separate Massachusetts from the rest of the nation by putting substantial dedicated resources on the table. It will also send a clear message to Washington that we are serious and ready to move on these projects."

Healey unveiled legislation for a new fund that would make $800 million in state funding available over the next three years, aimed at supporting the state's ability to commit matching dollars for the federal programs.

The state comptroller's office said the rainy day fund had a balance of $7.2 billion as of June 30. The governor's office estimated that fund had a balance of $8 billion, which is in line with the $8.061 billion balance the comptroller's office said the fund will have once the Legislature closes the books on the fiscal year that ended June 30 and an annual financial report can be filed.

Healey's office said the fund's $8 billion balance could spin off $250 million a year in interest, which would be combined over three years with $50 million in income surtax revenue to expand the state's pool of matching funds to attract federal dollars. Gorzkowicz emphasized the administration would not pull money from the rainy fund itself.

Information provided by Gorzkowicz's office said officials would pursue "additional strategies should the need arise" to access funding beyond $800 million.

Healey's approach mirrors recommendations from the Massachusetts Taxpayers Foundation (MTF) last month to tap into surtax revenues and interest from the stabilization fund. In other potential strategies, MTF had advised the state to explore using surplus revenues in the transitional escrow fund or capital gains collections above a certain threshold for Massachusetts to muster enough state matching funds.

Doug Howgate, MTF's president, told the News Service the administration's plan "makes sense" and "does a good job of protecting the stabilization fund."

While Massachusetts has already identified about $2 billion for state matching funds, another $1 billion is needed to compete for all dollars available from Congress, Gorzkowicz and Healey said.

The three federal laws at play equate to more than $1.4 trillion in total funding available to states, municipalities, tribes, nonprofits and businesses, according to the Executive Office of Administration and Finance. Massachusetts is eligible for about $17.5 billion of that massive pool, including $11.1 billion for transportation and $4.8 billion for energy and environmental affairs, according to the office.

It's too early to predict how much of that grant funding Massachusetts could ultimately secure, Howgate said. But Howgate said the commonwealth is positioning itself for a "multiplier effect" or a "multi-billion dollar expansion" of what existing state resources can manage.

Gorzkowicz said the legislation contains safeguards to stop drawing money from the proposed fund -- which would be made permanent and function as a pay-as-you-go capital fund once there are no more federal funding opportunities -- should there be an economic downturn.

Quentin Palfrey, the administration's director of federal funds and infrastructure, said the use of interest earned from the rainy day fund is a "very fiscally responsible mechanism." As Massachusetts applies for competitive federal grants, Palfrey said the fund would bolster the commonwealth's promise to commit state matching dollars -- but only deploy those dollars when the grant is secured.

"Today's legislation will give us the tools that we need to compete and win," Palfrey said. "The legislation gives us the resources to offer robust matching funds to make our applications competitive."

The Massachusetts Budget and Policy Center praised Healey's "smart" proposal, saying it could be a game-changer for the state to invest in projects like high-speed rail and electric charging infrastructure. The approach also ensures that savings will remain in the rainy day fund in case of future recessions or disasters, said Phineas Baxandall, MassBudget's interim president.

"Unleashing these funds, for instance, could repair transportation and water infrastructure, reduce carbon emissions, improve climate resilience, update information technology, improve public housing, and meet other needs that help the Commonwealth serve its residents," Baxandall said in a statement. "The Governor’s proposal would make use of the interest from our rainy day fund without drawing down previously deposited savings from the state and without interrupting additional deposits to the fund from the Commonwealth’s annual budget."

Healey also signed an executive order Thursday to formally establish the Federal Funds and Infrastructure Office led by Palfrey. The office, housed within the Executive Office of Administration and Finance, is tasked with navigating federal funding opportunities and working across Cabinet offices to jockey for grants.

State officials on Thursday applied for $250 million in clean energy investments, which could benefit about 80,000 homes, through the U.S. Environmental Protection Agency's Greenhouse Gas Reduction Fund, Healey told reporters as she underscored her administration's competitive approach.

Healey framed her capital fund pitch as a "jobs engine," saying investments would pave the way for career development opportunities, including for entrepreneurs.

The fund would designate $50 million for municipal matching grants and local infrastructure banks, plus $12 million to provide technical assistance to local governing bodies as they apply for federal programs, Healey said.

"Today we're doubling down on our commitment to federal funds," Healey said. "We want Massachusetts to win and win big. ... Today we're filing legislation to make sure we leave nothing on the field."

Once the state has pursued coveted federal programs, remaining money in the fund could be deployed to address a "significant backlog of deferred maintenance on our state assets," Gorzkowicz said.

"This will enable the administration to advance critical projects and priorities that have been authorized and supported by the Legislature but have not been funded due to constraints in our traditional debt finance capital program," Gorzkowicz said.

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10/19/2023