While the House and Senate have each passed versions of a $47.7 billion state budget, some advocates believe that lawmakers’ most significant spending decisions have yet to be made.
Massachusetts is expecting to receive nearly $5.3 billion through the federal American Rescue Plan, and neither branch of the Legislature included those funds in the state budget. Democratic leaders have said they want to allocate those funds in a future spending bill.
The most transformative investments will likely be made when the Legislature takes up the federal funds, said Phineas Baxandall, senior analyst and advocacy director at the Massachusetts Budget and Policy Center, a left-leaning nonprofit research group.
“I think the Legislature used the budget to help us get back to ‘normal’ or where we were before the pandemic, and they plan to use the federal process to pursue more ambitious things,” Baxandall said. “Or that’s how I read what’s happened.”
MassBudget, in its reports on the budget process, has argued that lawmakers’ proposals do not reflect the level of need that Massachusetts residents are experiencing.
Housing, in particular, has been an area of concern. Both branches proposed to reduce the allocation for a key rental assistance program, Rental Assistance for Families in Transition, partly out of anticipation that federal housing relief would aid residents. MassBudget argued that despite the federal help, which is one-time money, it remains “important to build a strong foundation for programs like RAFT to address long-term housing challenges, rather than underfunding them and relying on temporary federal funds to fill the gaps.”
Baxandall said that allocating the federal aid could help the state make significant investments in child care, public transportation and education, among other needs that might be considered social infrastructure. But he said that the state will need to generate new revenue to sustain those investments in the long term, and he called for the state to incorporate public input in the process.
Identifying a “very well established business lobby” concerned with helping employers pay off unemployment insurance debts, Baxandall said he hopes the most powerful interests do not “get to the front of the line” for the federal funds. “Clearly businesses need some relief, but things like child care shouldn’t have to fight for leftovers,” he said.
Baxandall sees strong public engagement as part of the solution.
“With community input, we can really pursue a vision of the commonwealth that we need to be,” Baxandall said. “The pandemic has exposed disparities and vulnerabilities in ways that I don’t think people appreciated before. We now have an incredible situation where the needs are exposed, and we have resources that can really ramp up a vision that would meet those needs.”
A key part of that vision, for Baxandall, is to generate revenue from top earners without burdening those hit hardest by the pandemic. Progressive revenue proposals include a push to tax offshore holdings of multinational corporations, but the big ticket item is the Fair Share Amendment, a ballot initiative that would levy an additional tax of 4 percentage points on portions of personal income above $1 million for people who exceed that threshold. Supporters say the constitutional amendment could raise up to $2 billion a year for the state, in turn enabling greater public investments.
“The wrong way to interpret the current situation is to look at the big bucket of federal money and think that there’s less need for long-term revenue,” Baxandall said. “We have a time period where we can ramp up real new improvements for the commonwealth and look to longer-term funding sources. That’s a beautiful combination.”
State Sen. Adam Hinds, D-Pittsfield, chairs the Senate revenue working group, which is tasked with developing revenue recommendations. Hinds told The Eagle that while its report may be made public this summer, there is no set date for release.
In November, near the end of the fiscal year 2021 budget process, Hinds said that the group was planning to release recommendations ahead of the fiscal year 2022 budget process. Upon receiving unexpected federal support, however, the Legislature largely nixed proposals for new revenue in this year’s budget as well. The House and Senate now will seek to reconcile differences between their versions of the budget in a six-member conference committee, containing three members of each chamber.
One disagreement with possible revenue implications is over the state’s film tax credit. The House voted unanimously to lift the January 2023 sunset date for the credit. The Senate, meanwhile, opted to extend the sunset by four years while requiring companies to spend at least 75 percent of their filming budget or conduct at least 75 percent of principal photography days in Massachusetts, limit salaries eligible at $1 million and ban credit transfers.
A legislative commission reported in March that the film tax credit costs the state between $56 and $80 million each year, requiring around $100,000 of state spending per job created. The commission concluded that the credit was “not the best use of the state’s money.”
MassBudget called the House proposal “a boon” for Hollywood producers, recommending that the state either eliminate the credit or opt for a proposal like the Senate’s.
The House and Senate may also consider updating their revenue projections for the budget. While both branches relied on estimates of around $30 billion in taxes, the state has consistently collected revenue at levels exceeding expectations over several months.
Clarification: This piece has been updated to clarify the additional tax that the Fair Share Amendment would levy. The amendment would tax an additional 4 percentage points on only the portion of personal income above $1 million, rather than the entire income including the $1 million.