Mass. House passes bill seeking to attract federal funds
Photo | Courtesy of Commonwealth of Massachusetts
Massachusetts State House
A bill designed to leverage interest from the state's rainy day fund to attract more federal dollars into Massachusetts cleared the House of Representatives swimmingly Wednesday, passing on a 152-0 vote.
The House quickly approved the bill (H 4446) Wednesday afternoon following a caucus of House Democrats, and both chambers and Gov. Maura Healey are now all behind the effort, with final details to be worked out.
"It gives us more flexibility and the ability to access programs that we've looked at and maybe didn't make the commitment of our own resources going in there," Speaker Mariano said about the bill after the caucus. "But we have this money accumulating interest, we might as well use it to access and leverage federal money. So I think it's a good idea."
The speaker added that it was an idea "whose time had come," as tax collections have fallen short of expectations this fiscal year and led to re-budgeting.
"As revenue starts to contract, it's going to be more and more important that we maximize our federal monies," Mariano said.
Healey first proposed the idea in October, and was praised for the "creative" solution to attract more dollars from D.C.
The House bill resembles the proposal Healey filed last fall, under which she estimated that $250 million in interest could be generated annually from the state rainy day fund and used as matching funds to attract more federal infrastructure aid.
The Stabilization Fund, also called the rainy day fund, hit an all-time high $8.2 billion last month -- and it's growing fast. As of June. 30, 2023, the rainy day fund had a balance of $7.2 billion, according to the state comptroller's office.
The new fund created by the bill, called the Commonwealth Federal Matching and Debt Reduction Fund, would also use rainy day fund interest to give the administration more flexibility to pay down state debt.
Healey has said Massachusetts could secure more than $17.5 billion in aid through the federal Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act. Matching funds improve the state's chances of securing more of those federal funds.
Rep. Jack Lewis, who chairs the House Committee on Federal Stimulus and Census Oversight, said the House bill would allow the state to leverage a total $750 million in interest before December 2026, when aid through the three federal bills is set to become unavailable.
"The sooner we act on this bill, the sooner funding can be secured for our commonwealth and local communities," Lewis said.
Massachusetts was recently denied twice for federal funding to repair the Bourne and Sagamore Bridges that connect Cape Cod to the rest of the state. Rep. David Vieira of Falmouth said on the House floor Wednesday that their bids were turned down because the state was unable to provide necessary matching funds.
The third attempt to get federal infrastructure funds to repair the Sagamore Bridge was successful, which the Cape Cod representative attributed to narrowing the request to one bridge and using existing state appropriations to match the application.
"So my hat's off to the governor and her staff, as well as the House and Senate leadership, for being able to find a way structurally through this bill that we can leverage interest from our Stabilization Fund to be able to go after, not only infrastructure funds so that we can build those bridges over the Cape Cod Canal, but so that we can invest in other critical pieces of infrastructure throughout the state," Vieira said.
The House bill would also set aside up to $50 million in interest specifically to help municipalities compete for federal funding, and $12 million for technical assistance to help those communities complete their applications.
"Ashland, another town I represent much smaller than Framingham, in which the town has no option but to spread the research and application process for grants from the federal government across various departments and positions," Lewis said. "In the last several months of talking to colleagues, many of you represent municipalities in very similar positions, not having the personnel bandwidth to truly compete for all available federal funds."
In the version of the bill they passed last month, senators placed an emphasis on using the rainy day fund interest to pay down debt -- partially by only allowing the use of interest for federal grant matches until 2026. This was a departure from Healey's proposal, which didn't put an end date on when the funds could be used to compete for federal dollars.
The House seemed to follow the Senate's blueprint, and limited the administration from using the fund to compete for federal funds after December 1, 2026 in its legislation.
The House bill does, however, differ from the Senate's in maintaining the current formula for deposits into the Stabilization Fund.
Senators changed the deposit formula for excess capital gain tax revenues in their bill, reducing the amount funneled into the fund in years of high capital gains revenue and instead directing those dollars towards paying down pension liabilities and other post-employment benefits.
This section of the bill was controversial during the Senate debate, attracting criticism from Republicans who argued the current funding formula -- under which 90 percent of excess capital gains go into the state's Stabilization Fund -- is what has built up the state's reserves so significantly.
Under the Senate's bill, in years where excess capital gains are between 10 and 15 percent of budgeted state revenues, only 50 percent would go into the rainy day fund, the rest divided evenly between pension liabilities and OPEB. If excess capital gains are between 15 and 22.5 percent, 10 percent would go into the reserves and the rest into paying down pension and OPEB debt. And if excess capital gains exceeded 22.5 percent of budgeted state revenues, no amount would be contributed to the reserve fund.
With the state in a revenue slide, Senate Republicans argued last month, it's not the time to pass a law that would divert dollars away from the Stabilization Fund.
The House, in its bill, returned to the original Stabilization Fund formula but representatives didn't discuss the deposit formula on the floor during the limited debate Wednesday.
One thing the House and Senate did seem to agree on is inserting an accountability measure for the governor's administration.
The Senate last month adopted a Sen. Bruce Tarr amendment to require the administration to provide 30 days' notice before transferring any expenditures from the account or between funds -- an idea that House Ways and Means seemed to agree with.
The House bill would require Healey's team to let the Ways and Means committees know a month in advance of any spending down of the new fund.
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