Three weeks after formal legislative sessions ended for the year, state lawmakers remain at odds over a more than $4 billion economic development bill. House and Senate leaders say their teams are still negotiating on the wide-ranging bill, which was meant to change the state’s tax code, spur job creation and provide relief for people and sectors still reeling from the pandemic.
Gov. Charlie Baker said he’s still optimistic that some version of the bill will get to his desk. It’s unclear what the House and Senate will ultimately agree on, though, as they grapple with an unexpected $3 billion potentially being paid out by the state under an obscure law from the 1980s. It’s a steeper climb to advance a bill in the informal sessions that are held between August and January — any one lawmaker’s objection can derail a bill during those meetings.
Here are three things to know about the money and policies stuck in limbo.
There’s as much as $4.6 billion on the line.
The House and Senate each passed different versions of the bill, with the House approving one with a $4.2 billion price tag and the Senate’s clocking in at $4.6 billion. Each bill funded its investments with a mix of surplus state revenues, federal COVID-19 relief money and borrowing. They both authorized more than $1 billion in borrowing, and that money is not likely to be part of a final package because lawmakers can’t take the votes necessary for bond authorizations in informal sessions.
The money hung up in negotiations includes up to $400 million for cash-strapped hospitals, $400 million toward housing production, $300 million to rescue the COVID-battered Unemployment Insurance Trust Fund, $150 million in stabilization grants for child care providers and $75 million for hotels that took financial hits during the pandemic. There’s also money to support reproductive health, gun violence prevention and the state’s new climate law. Mayors are waiting on funds for local projects, and Baker has flagged the bill’s money for water and sewer work on Cape Cod as “a really big deal.”
Among the policy provisions tied up in the bill are steps to fight food insecurity on college campuses, measures to seal certain eviction records, authorization for online sales of lottery products and language that could bring happy hour drink specials back to some cities and towns.
Tax relief is the big sticking point.
Some version of the economic development bill seemed destined for passage until late July, when an obscure 1980s law resurfaced. Passed under a binding question at the ballot box in 1986, the law caps how much state revenue can grow each year. It ties the figure to annual growth in wages and salaries, calls for excess revenue to be returned to taxpayers via a credit, and has been triggered only once before, in 1987. Baker and his budget office expect the law — Chapter 62F, in Beacon Hill jargon — to kick in again this year. It’s not yet clear exactly how much money would be going back, but the Baker administration estimates about $3 billion.
In their economic development bills, the House and Senate had committed to a separate package of tax relief, worth about $1 billion. That included one-time rebates of $250 for individual taxpayers earning between $38,000 and $100,000, which were due to go out in September. It also featured a permanent increase to the Earned Income Tax Credit, estate tax reforms, and breaks for seniors, renters and people caring for children or other dependents.
Baker and Senate President Karen Spilka both maintain the state can afford both the credits called for under Chapter 62F and the broader tax relief plan. But House Speaker Ron Mariano wants to wait to know the full impact of the revenue-cap law before proceeding with other tax changes, to see what the state can afford. While Spilka wants quick action on tax policy, it’s Mariano who holds the cards. Under the state Constitution, all money bills must originate in the House, so the Senate doesn't have the option of putting forward its own separate tax reform bill to try to force action.
Don’t expect answers until the fall.
Under Chapter 62F, state agencies have to submit revenue information to Auditor Suzanne Bump by Sept. 1. Bump has until Sept. 20 to analyze that data and file her own report indicating if the state collected more than the allowable revenue amount, and how much the excess is.
Mariano has said it would be premature to act on taxes before knowing exactly how much the state will already be returning to taxpayers, so tax policy probably won’t move in the Legislature before that report lands. Taxpayer groups, warning of “significant political pressure to delay the certification,” have organized in preparation to take the state to court if officials try to evade the law’s requirements.
Assuming Bump does identify excess revenue as expected, rebates or credits could be issued within a few months. Baker said earlier this month that the Department of Revenue had already started working to get money back to taxpayers quickly, suggesting the end of November into early December as a possible range for rebates.
Some of the non-tax pieces of the economic development bill could emerge sooner. The conference committee that’s negotiating the bill has the option of advancing just the parts of the bill where there is agreement, and Spilka and Mariano have both tapped the hospital funding as one priority item. Spilka said last week she wouldn’t be surprised if Baker files a new spending bill this year that targets some of the same areas, which could be another route to get that money out the door.
