Governor Signs $3.7B Economic Development, Closeout Bills, with Some Vetoes

Governor Baker Signs $3.76B Economic Development and Closeout Bill, Issues Some Vetoes

(Sources: State House News Service and other media)

Months of uncertainty about the fate of a multibillion-dollar spending package came to an end Thursday when Gov. Charlie Baker signed into law a $3.76 billion compromise bill that, to his disappointment, does not feature the tax relief Democrats once promised.

Baker used his veto pen to strike only $1.1M from the bill's bottom line and sent back two proposed changes dealing with certified nurses' aide exams and retirement buybacks. He also vetoed two dozen outside sections, most dealing with in-state tuition retention language Baker said would be more appropriate in an annual budget or "considered as part of a comprehensive public higher education finance reform effort, not made piecemeal."

More from Governor's Office, Including several attachments

Baker also struck down a section of the bill that would have created a special commission to examine "the potential negative environmental and economic impacts" of discharging radioactive spent fuel pool water, which lawmakers included as Holtec weighs dumping contaminated water into Cape Cod Bay in the process of decommissioning the former Pilgrim Nuclear Power Plant.

The governor said that proposed panel's work "would be duplicative of, and would interfere with, ongoing work on waste disposal and decommissioning issues by the responsible federal and state agencies."

The most significant change Baker made is more or less an accounting one. He vetoed language setting a $510 million cap on the amount of federal American Rescue Plan Act funds that could be spent toward the bill's goals, a move that the administration said would allow Massachusetts to prioritize committing its full pot of $2.3 billion in remaining ARPA money.

That veto does not change the legislation's bottom line, but it will effectively shift around spending sources so that Gov.-elect Maura Healey and the Legislature will need to decide the fate of carried-forward surplus fiscal 2022 state tax revenues rather than untapped federal aid.

In his signing letter, Baker said he was "deeply concerned" that the proposed cap would have left that much ARPA money unused ahead of an end-of-2024 deadline to commit the full pot and an end-of-2026 deadline to spend it.

"It is imperative that the Commonwealth does not put these funds at risk through further delay in allocating them. Therefore, I am vetoing section 264, which would restrict ARPA-FRF spending to only $510 million," Baker wrote. "This will allow the Commonwealth to allocate federal dollars first for uses as authorized in line items in this bill. Relative to the enacted bill, the same amount of money will remain unallocated, and that money will still be subject to appropriation, but it will be state money, and it will not expire."

The bill will steer funding to a range of industries and toward numerous public programs. It includes $850 million in relief for financially strained hospitals, human services providers, nursing facilities, rest homes and community health centers as well as $200 million for the state's ongoing COVID-19 response.

Other spending highlights include hundreds of millions of dollars for housing production and homeownership supports, $150 million for early education and care providers, $150 million for clean energy initiatives and $100 million for port infrastructure improvements.

The new law additionally provides the MBTA with another $112 million for critical work and safety improvements in the wake of a blistering Federal Transit Administration investigation, which found myriad problems and incurred mandatory corrective action plans. That money adds to $666 million lawmakers and Baker already approved for the T to address those issues.

"The significant investments in this bill will fortify health and human services, advance clean energy and resiliency efforts, expand affordable housing production, and support Massachusetts communities, businesses, and families," Baker wrote.

Legislative leaders spent months weighing spending ideas and tax relief measures behind closed doors before both branches in July unanimously approved versions of the bill. Those drafts each included $500 million in one-time rebates for middle-income Bay Staters and authorized about half a billion dollars annually in permanent estate tax reforms and tax breaks for renters, seniors, caregivers and others.

Top Democrats tossed their original plan back onto the shelf, however, when they learned in late July that Massachusetts owed taxpayers nearly $3 billion in relief under a 1986 voter-approved tax cap law. The compromise they revived after months of inaction featured none of the previously approved tax reforms as legislative leaders warned about an uncertain economic future.

"As I have also previously expressed, I was disappointed that permanent tax relief reforms were not included in this bill. The measures that I proposed in January and that were supported by the Legislature in earlier versions of this bill are affordable and sorely needed by Massachusetts taxpayers," Baker wrote in his signing letter. "Recognizing the importance of childcare investments, I am approving sections in this bill that redirect $315 million from the Commonwealth Taxpayer Relief Fund to the High-Quality Early Education & Care Affordability Fund. However, we can invest in childcare and make sensible tax changes at the same time. With the state in a historically strong fiscal position, the tax cuts that the Legislature has committed to prioritizing next session will be affordable without a special set-aside."

In addition to authorizing spending for economic development goals, the bill includes measures that will allow Comptroller William McNamara to close the state's financial books on the fiscal year that ended June 30.

McNamara under state law faces an Oct. 31 deadline to file an annual financial report, but delayed action on the closeout budget pushed his work past that date.

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11/10/2022

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This bill is now H.5374

Economic Development Bill Sent to Governor Baker

November 4, 2022: The Senate sent a nearly $3.8 billion spending bill (H 5374) to Gov. Charlie Baker's desk Thursday that both closes the books on fiscal 2022 and features a compromise on the stalled economic development package that hit a wall on July 31.

The agreement reached between the House and Senate conferees is a wide-ranging relief package to support the state's long term economic health, residents, and communities while preparing us to face future economic challenges. The bill closes the books on FY2022, "investing $3.76B on to help those strained by the pandemic including direct investments to support fiscally distressed hospitals, human service workers, and early education and care providers, while helping families facing rising energy costs, climate resiliency, infrastructure and housing, all of which are critical to our state's longterm economic health. As a result of extraordinary growth in tax revenues over this past year, in addition to those direct investments, this agreement includes nearly $3B dollars for one-time tax relief that is being returned to all taxpayers of the commonwealth. The $3B dollars in historic tax investment returns including the $3.76B in appropriations means we are investing $6.76B total in tax relief and direct investments. Notably some of the investments are $350M for hospitals that have become fiscally strained by the pandemic,$225M for rate increases for human service workers and providers, $200M for COVID-19 response efforts, $195M for our nursing homes and rest homes, $80M for community health centers, $20M to reduce gun violence, $17.5M for reproductive and family planning services, $250M to support and accelerate clean energy initiatives, $304M to support housing production and over $500M to support EEC, economic development, workforce development, and community support initiatives." (source: Senate report)

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The House and Senate conferees have reached an agreement on a combined economic development and supplemental budget bill that will include relief from high energy costs, money to boost housing production, "immediate assistance" for the MBTA and more. The legislature is expected to vote on this conference committee report during House and Senate informal sessions on November 3, 2022.

This is a $3.7 billion bill, which no longer includes the tax cuts and reforms that Gov. Charlie Baker had proposed and which were included in the economic development bills that the House and Senate each approved unanimously. This economic development package will also close the books on Fiscal Year 2022.

According to legislative leaders, the bill "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."

But pointing to economic uncertainty, the legislative leaders said they decided to limit spending in the new bill to one-time investments only, a move that appears to scrap roughly half a billion dollars per year in permanent tax relief both branches approved this summer.

"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."

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 $1.4B for the human services sector ($350M for financially-strained hospitals, $225M for provider and worker rate increases, $200M for ongoing COVID-19 response, and $195M for nursing facilities and rest homes), $540M 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 $409.5M to support affordable housing, according to a Senate summary.

The package would also funnel another $112M towards the MBTA. The Legislature has already authorized $666M for the MBTA to make safety fixes ordered by the Federal Transit Administration, and the supplemental budget that Governor Baker filed in August called for $200M for the MBTA.