The Rundown – March 2023

I would apologize for not writing a February edition of “The Rundown”, but honestly there wasn’t enough to write about at the state and mainly the federal level to justify a rundown.

Federal Recap

At the federal level, over the last month and a half, Members of Congress have basically spent their time creating sounds bites for news stations and click bate twitter posts. For an example, On Presidents Day, Georgia Rep. Marjory Taylor Greene, wrote a tweet saying “We need a national divorce. We need to separate by red states and blue states and shrink the federal government. Everyone I talk to says this. From the sick and disgusting woke culture issues shoved down our throats to the Democrat’s traitorous America Last policies, we are done.” And she doubled down after on Fox news saying that a national divorce would be better than a civil war. Now as a child of divorced parents I can say from experience that while it’s great in the beginning for the child (U.S. citizens) beginning when both parents fight to show that they love their kids more by showering them with presents (tax cuts, tax relief etc.), that part ends quickly and the child is just left with a broken home (divided country) and a new bike. Have we not learned from history that, that never works. Yugoslavia in the 90s, Korea and Ireland in the early 1900s, and let us not forget……. The U.S. and the civil war. How would it even work? Where would purple states like Georgia, Arizona and Nevada, go?? What about interstate commerce. Anyway, I feel like that sums up what Members of Congress have been up to the last month and a half.

Look Ahead

Having to think about what lies ahead at the federal level honestly scares me The Republican will continue to use their majority in the House to hold hearing after hearing on topics that would make the Biden administration and Democrats look bad in the run up to the next presidential election. Democrats will continue to get nothing passed in the Senate where they hold a slim majority, and we will probably continue to hear rumors about more people entering the field for the Republican presidential race. Which all means more hearings and sounds bites from members such the human equivalent of a rat with hair gel, Rep. Matt Gaetz, and the growing example for why we need mandatory cognitive test for senior members, Sen. Dianne Feinstein.

I would recommend that people stay away from the news for a couple of months and just enjoy that both the Celtics and the Bruins are the best teams in their sports. As for me, as a born and raised New Yorker I can’t enjoy Mass sports teams so I will keep track of the non-sense and will keep you all updated if anything is noteworthy. I will be using the federal section over the next couple of months to vent my frustrating that we actually pay these people 100,000s of dollars to do nothing but be on fox news and MSNBC. So keep that in mind and maybe just skip to the State section of these rundowns

State Recap

Finally, to the state level where for the first time this year things are actually happening. For a brief recap before we get to the Governor’s budget and tax relief packages, the legislature finalized leadership and committee position in the Senate and the House. It took the legislature almost a full 2 months to finalize the positions, which means that the legislature could finally get down to business and start voting on bills that could have a real impact and not just legislation that names a bridge.

The House passed its first significant bill of the session, voting 153-0 to pass a House Ways and Means redraft of Governor Healey’s FY2023 supplemental budget, includes elements of her $1 billion “immediate needs” bond bill. The $353 million billon, which also includes $585 million worth of bond authorizations, temporarily extends pandemic-era programs such as enhanced food assistance and free school meals. It also gives $44 million to the emergency shelter system to help offset medical costs for migrant families. The Bond authorizations include $400 million for the MassWorks grant program and $104 million for the Clean Water Trust, among other initiatives. 27 amendments were filed but quietly disregarded behind closed doors, which included $50 million in bond authorization for the Massachusetts Technology Park Corporation.

Governor Healey Tax Relief Package

Governor Healey jumped into the game as well in the end of February when she released an aggressive $859 million tax relief proposal, restarting a heated debate on Beacon Hill on tax relief. The plans main focus is to help keep people in the state by relieving the growing cost of living in Massachusetts and boost the state’s economic competitiveness. Healey included in her package a couple of proposals that were previously recommended by former Republican Governor Charlie Baker, including lowering the short-term capital gains tax from 12% to 5% and creating a new estate tax credit of up to $182,000, which would effectively eliminate the estate tax for all estates valued up to $3 million, higher than the current level of $1 million.

The largest share of the proposed relief, about $458 million, would come in the form of a new child and family tax credit, which would create a $600 refundable credit for each qualifying dependent, including children younger than 13 years old, adults who are disabled, and seniors. To help with rising rent and housing cost in Massachusetts, Healey is reviving a proposal to boost the maximum rental deduction from $3,000 to $4,000, which would affect 880,000 renters, and to double the maximum allowable credit for the senior circuit breaker credit, assisting 100,000 households. The package also includes a number of smaller proposals including increasing the apprenticeship tax credit to $5 million, including an exemption for employer assistance with student loan repayment, expanding the dairy tax credit from $6 to $8 million, expanded commuter transit benefits, and more.

Healey’s office said the tax package would carry a total cost in fiscal year 2024 of $859 million. It said the measure has a net cost of $742 million because the $117 million in affected short-term capital gains tax revenue by law would need to be placed into reserves and could not be spent as part of the annual budget. Healey also said that the relief package will be factored into her recently released budget proposal for FY24. It is now up to the legislature to decide if they want to increase or decrease the Governor’s tax proposal. The legislator previously shut down their own tax relief bill last year after they realized that Massachusetts owed nearly $3 billion in excess tax revenues back to taxpayers under a voter-approved law known as Chapter 62F. Since then, the legislature has shown little interest to re-address a tax relief package.

Governor Healey FY24 Budget Proposal

To kick off the month of March with some flare, Governor Healey released her first state budget proposal. Healey’s administration described the proposal as a “downpayment” on its goals of making Massachusetts a more affordable place to live, tackling climate change, and preparing students for careers in an evolving economy. The $55.5 billion budget proposal would increase spending by 4.1% over the current year (FY23) budget, which would account for the expected the growth rate in state revenues in FY2024 when accounting for $1 billion from the state’s new millionaire income surtax. Healey plans to use the $1 billion from the new surtax to increase funding for education ($510 million), including $100 million in childcare grants to providers, and transportation ($490 million), which includes $181 million in MBTA capital investments. The budget would also pump new money towards energy and environment initiatives, human service provider rates, housing programs and much more.

The proposal also includes a $3 billion increase for funding for EOHHS, compared to what former Governor Charlie Baker proposed in his budget proposal last year. Though MassHealth, would be funded in Healey’s budget at $19.8 billion, which would have a net cost to the state of $7.9 billion. That’s a decrease of $1.9 billion on a gross basis or $254 million after reimbursements compared to fiscal year 2023 spending projections. The decrease is driven, the administration said, by “caseload decline and intentional distribution of funds across fiscal years to mitigate a revenue cliff due to the end of the federal COVID Public Health Emergency.” As expected, Healey’s proposal did not include funding for the Enough Pay to Stay rate add-on. The Enough Pay to Stay rate add-on has never been included in a Governor’s proposal, if it were to be included, it would be added in later by the legislature.

Look Ahead

The release of Governor Healey’s budget recommendations marks the beginning of a long budget cycle that will see a lot of Healey’s proposed budget items be either changed or taken out. The House generally puts out, debates, and passes its own budget proposal in April, followed by the Senate in May. Those two budgets then typically spend much of June in a conference committee before lawmakers agree to a compromise version. Fiscal year 2024 begins July 1, but Massachusetts lawmakers seldom have the budget done in time for it to be in place for the start of the fiscal year, which could result in supplemental budgets being passed till they pass a full budget for FY24.

It is also now up to the legislature to decide if they want to increase or decrease the Governor’s tax proposal. The legislator previously shut down their own tax relief bill last year after they realized that Massachusetts owed nearly $3 billion in excess tax revenues back to taxpayers under a voter-approved law known as Chapter 62F. Since then, the legislature has shown little interest to re-address a tax relief package. We will have to wait and see what happens next.

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