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During a marathon weekend that pushed the end of formal legislative sessions into Monday morning, the House and Senate worked to finalize deals related to infrastructure, cannabis, sports betting, and mental health, but held a sweeping economic development bill for further review in a conference committee.
The decision not to move forward was primarily due to a midweek development related to a provision in state law that could set aside nearly $3 billion of the state’s fiscal 2022 surplus for one-time tax relief. With only days remaining in the session, lawmakers decided to wait and assess the full fiscal landscape.
The state law that caps growth in tax collections, Chapter 62F, limits tax revenue growth to the three-year average growth in state wages and salaries. If the cap is exceeded, the excess revenue is provided as a proportional income tax credit to Massachusetts residents. The law was passed by voters in 1986, and tax revenues have exceeded the cap only once before this year, in 1987.
Record tax collections in fiscal 2022 are estimated to result in a tax credit worth between $2.5 billion and $3 billion. The final figure will be clear once the state auditor finalizes the calculation in September.
The development complicated discussions on an economic development bill because the roughly $4 billion bottom line would use a blend of fiscal 2022 surplus revenues, bond authorizations, and state American Rescue Plan Act funds. The bills under discussion also included $500 million in one-time tax rebates, and $500 million in permanent tax cuts.
With no more formal legislative sessions until January, the conference committee is likely to wait until the fall to determine the financial impact of the Chapter 62F tax credits.
It’s possible that lawmakers could advance a pared-down economic development bill later this year, but doing so would require unanimous consent among legislators, since just one objection can stop legislation during informal sessions. This calls into question the size and timing of the legislation, if it moves forward at all.
The MMA has been advocating for much of the funding that House and Senate members had approved in their respective versions of the bill, including significant investments in MassWorks, environmental infrastructure, the Clean Water Trust, and affordable housing.
The conference committee could present a new version of the bill after adjusting for the Chapter 62F tax credits, but the final bill would look significantly different from earlier versions. For example, bond authorizations cannot be included because bonding bills require a roll call vote, which cannot occur in an informal legislative session.
This also means there is roughly $2.3 billion remaining in the state’s ARPA funding for future allocation. The MMA had strongly urged the Legislature to allocate state ARPA funds in the economic development legislation, since federal ARPA rules require funds to be obligated by the end of 2024 and expended by the end of 2026.