Senate Votes to Leverage Rainy Day Fund Interest

The Senate Ways and Means Committee on Monday advanced their own version of Healey's bill (S 2482), and the Senate placed it on their agenda for action at a formal session scheduled for Thursday, January 11, 2024.

The Senate Ways and Means version of this bill:

• Creates the Commonwealth Federal Matching and Debt Reduction Fund to be credited with the interest earned on the investment of money in the Commonwealth Stabilization Fund
• Requires the Comptroller, quarterly, to transfer to the Commonwealth Federal Matching and Debt Reduction Fund, interest credited to the Commonwealth Stabilization Fund provided that: (i) the balance of the Commonwealth Stabilization Fund has not decreased in the previous year; or (ii) the balance of the Commonwealth Stabilization Fund exceeds 10 per cent of budgeted revenues for all budgeted funds for the preceding fiscal year.
• Allows the Secretary of Administration and Finance to expend money from the Commonwealth Federal Matching and Debt Reduction Fund, without further appropriation: (i) to reduce any portion of the commonwealth’s indebtedness; (ii) to reduce, repay or retire any portion of the commonwealth’s long-term liabilities; and (iii) to transfer any amounts in the fund to the Stabilization Fund.
• Requires the Secretary of Administration and Finance to provide quarterly reports to the Clerks of the Senate and House of Representatives and the Senate and House Committees on Ways and Means on the activities of the Commonwealth Federal Matching and Debt Reduction Fund. • Requires the Secretary of Administration and Finance to report quarterly to the Clerks of the Senate and House of Representatives and the Senate and House Committees on Ways and Means on the expenditures from the Commonwealth Federal Matching and Debt Reduction Fund, including but not limited to:(i) a detailed list of capital projects receiving money; and (ii) a detailed list of federal funding applications and the status of those applications.
• Allows the Secretary of Administration and Finance to expend from the Commonwealth Federal Matching and Debt Reduction Fund until December 31, 2026 for: (i) up to $750 million for matching funds for federal programs; (ii) up to $50 million in matching funds for local and regional government-led projects seeking federal funding; and (iii) up to $12 million for technical assistance to support cities, towns, tribes, regional organizations applying for federal funding opportunities.
• Modifies the amount, on a sliding scale, of above threshold capital gains revenue that is deposited into either the Commonwealth Stabilization Fund, the State Retiree Benefits Trust Fund or the Commonwealth's Pension Liability Fund based on the percentage by which above threshold capital gains revenue exceeds the total budgeted revenues for all budgeted funds for the preceding fiscal year. 

Under the bill, the state comptroller would make quarterly transfers into a new Commonwealth Federal Matching and Debt Reduction Fund of stabilization fund interest as long as the stabilization fund had not decreased in the previous year and as long as its balance exceeds 10 percent of budgeted state revenues. The state's stabilization fund, or "rainy day" fund, is currently at a high of $8.1 billion, Administration and Finance Secretary Matt Gorzkowicz said on January 8.

As the state pursues federal funds, the legislation could make $750 million in state funding available over the next three years, as well as $50 million in matching funds for local and regional government-led projects seeking federal funding.

Funds from Washington could go towards infrastructure projects related to repairing roads, bridges, public transit, investments related to the impacts of climate change, modernizing the power grid, expanding broadband, and other related investments.

Money in the new fund could also be used by Healey's administration and finance secretary, without further appropriation, to reduce state debt or reduce or retire long-term state liabilities, according to a summary of the bill.

Doug Howgate, president of the Massachusetts Taxpayers Foundation, said the portion of the bill that would allow the fund to pay down debt is also intended to help attract federal dollars.

"That part of it gets down to the need to make sure these resources are adaptable. The way we are going to pursue federal funds oftentimes is going to be demonstrating a state match, but it could also be that it would make sense for us to free up other areas of our capital budget by maybe paying off debt sooner than we would otherwise anticipate," Howgate said.

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," Gorzkowicz said at a press conference in October. "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 filed her bill with the Senate. Rather than refer the bill to a joint committee -- the path for most bills -- the Senate sent the bill to its Ways and Means Committee. It appears the bill is advancing without the benefit of a public hearing to afford feedback on it.

Asked about the bill advancing without a public hearing, a spokesperson for Senate Ways and Means Chair Michael Rodrigues said in an emailed statement: "As is often the case with legislation filed by the Governor, the bill was initially referred to the Committee on Ways and Means, where after diligent review with internal and external stakeholders, was able to craft a recommendation that will prudently invest interest accrued from the Commonwealth’s stabilization fund, currently at historic levels, to secure the state’s fair share of federal funds."

The Senate's maneuvering on Healey's bill did not produce any public response from the House.

Though the majority of Healey's and the Senate Ways and Means' bills overlap, there are a few differences related to the long-term plan for the fund.

"After three years, the Healey administration would have had the fund continue and be able to be used for what's called PAYGO capital, so ongoing infrastructure maintenance costs. I think the Senate sunset it after three years," Howgate said. "But I think the most important thing right now is the approach related to federal funds. Should stabilization interest remain a strong source of resources, I think it makes sense to give ourselves time to think about that longer term approach, as opposed to committing to something right now."

Howgate said lawmakers should focus on how to prioritize putting Massachusetts at the front of the pack to attract federal dollars, when the amount of help coming out of Washington right now is a "once in a long time opportunity."

"The legislation that the Committee reported out today provides us with a smart accounting measure that we can utilize to effectively stretch and maximize our taxpayer dollars to place the Commonwealth in the very best position to compete for these lucrative federal funds, while also ensuring we continue to protect our rainy day reserves and adhere to sound fiscal discipline,” Rodrigues said in a statement. "Government is all about partnership, and I thank the Administration and the Senate President for this cost saving initiative as we work to capitalize on these historic federal funding opportunities to support projects throughout all corners of our state."

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01/08/2024