2019-2020 Legislative Session Begins
Members of the Massachusetts House of Representatives and the Massachusetts Senate as well as the Governor and other constitutional officers were sworn in on January 2 and 3. The session, which began with the respective legislative branches electing their leaders for the next two years, saw Representative Robert DeLeo elected Speaker of the House and Senator Karen Spilka elected as Senate President. While the respective legislative leaders have yet to appoint their leadership teams, it is expected that they will do so shortly.
Instead of leadership appointments, which traditionally come in late January to early February, Senate President Spilka, Speaker DeLeo and the Governor laid out some of their priorities for the new session. Of note, the following topic areas were identified by each of the leaders respectively:
Governor Charlie Baker focused on: (a) education funding – correcting the disparity between urban and suburban schools; (b) public transportation – spending $8 billion on infrastructure and the core system of the MBTA; (c) reducing greenhouse gas emissions – focusing on public transportation; (d) affordable housing – letting the municipalities lead but creating incentives; (e) criminal justice reform – implementing and building on the reforms from previous years; and (f) health care – helping small businesses and community hospitals, but also expanding telemedicine, scope of practice and mental health guidelines.
Senate President Karen Spilka focused on: (a) tax reform – as a potential means to fund education and transportation; (b) health care reform – to create transparency and reduce costs; (c) economic development and tax framework – how to assist small businesses in growing, but also assist in funding the future of the Commonwealth and (d) transportation – improving the current failing system.
Speaker Robert DeLeo focused on: (a) addressing sexual harassment expanding and improving the guidelines; (b) healthcare – helping community hospitals and lowering prescription costs; and (c) early education – not only improving early education, but finding more educators in the field. Speaker DeLeo’s comments were more limited than the other two leaders as the Speaker generally delivers a “State of the House” speech later in January that more directly outlines key focus areas. To that end, Speaker DeLeo, this past Fall, also indicated his interest in looking at health care reform with an eye towards assisting community hospitals, but taking a holistic look at areas such as pediatric medicine.
As new legislators begin to get settled into their roles, two upcoming dates are on the agenda. The deadline for filing legislation is January 18, a time by which all “on-time” legislation must be submitted to the House and Senate Clerks, respectively. The other date people will be watching is around January 23, the date by which the Governor must submit his fiscal year 2020 budget proposal. The Governor’s budget proposal is usually a harbinger of key policy areas and initiatives that the Administration will focus on in the upcoming year.
Closing out 2017-2018 Legislative Session: Short Term Rental Legislation Signed into Law; Includes Key Provisions to Assist Cape Cod and the Islands Address Water Infrastructure Needs
After wrangling over amendments proposed by the Governor at the end of formal session in July, the Massachusetts House of Representatives and the Massachusetts Senate passed a compromise amendment to House Bill No. 4841, “An Act Regulating and Insuring Short-Term Rentals” in late December. The legislation, which expands the scope of the state’s room occupancy excise tax and local option excise tax to include short-term transient accommodations, will also work to address the Cape Cod and Islands water infrastructure funding needs.
According to the fiscal report issued by the Senate Committee on Ways and Means, the new law will generate an estimated $34.5 million and $25.5 million in state and local revenues, respectively. The expanded tax base will automatically apply to all 175-plus cities and towns in Massachusetts that have already adopted the local room occupancy excise to date.Legislative leaders did agree to a change proposed by Governor Charlie Baker to exempt homeowners who rent out their units for 14 or fewer days a year from having to collect the tax. The Massachusetts legislature also agreed to postpone an extra Boston Convention and Exhibition Center (BCEC) financing fee on short-term units rented in Boston, Cambridge, Worcester, Springfield, West Springfield and Chicopee for about 10 years, or until the bonds on the BCEC are paid.
Of note to UCANE members, the legislation included a funding mechanism, the Cape Cod and Islands Water Protection Fund, championed by Senator Julian Cyr and Representative Sarah Peake. As noted by a press release from Senator Cyr’s office, Cape Cod towns are legally mandated to develop and build wastewater management systems to clean up nitrogen pollution. With an estimated price tag of $4 billion to clean up and maintain good water quality on Cape Cod, the Cape Cod Water Protection Fund was developed for Barnstable, Dukes, and Nantucket counties to provide funding assistance for critical municipal or regional water pollution abatement projects. The new fund will be funded by an additional 2.75% occupancy excise tax applied equally to both short-term rental and traditional lodging accommodations in the region.
UCANE, which supported this initiative since its inception, has long advocated for adopting creative measures to address the Commonwealth’s $21 billion water infrastructure funding gap. In the 2017-2018 legislative session, UCANE had proposed legislation regulating short term rentals that drove a percentage of a new excise tax to funding municipalities’ and regional water authorities’ funding needs. In previous sessions, UCANE has advocated for funding derived from real estate surcharges on the sale of real estate. The short term rental legislation, which was ushered through both branches by Representative Aaron Michlewitz, Senator Jamie Eldridge, and Senator Michael Rodrigues, was not universally supported by the largest third party short term rental entity, AirBNB.
For more information on the new law, the Cape Cod and Islands Association of Realtors has developed an informative FAQ that can be viewed at: https://www.cciaor.com/shorttermrentals/
2020 Consensus Revenue Forecast Reached by Key Leaders
According to a press release issued by the Secretary of the Executive Office of Administration and Finance Michael J. Heffernan, Senate Ways and Means Vice Chair Joan B. Lovely (D-Salem), and then House Ways and Means Chair Jeffrey Sánchez (D-Jamaica Plain), the Administration, Senate and House announced a consensus revenue forecast for Fiscal Year 2020 (FY20) of $29.299 billion, representing 2.7% growth in state tax revenue over adjusted Fiscal Year 2019 (FY19) projected revenue of $28.529 billion.
The adjusted FY19 revenue collections estimate incorporates a $200 million upgrade of projected state tax revenues, which is based upon current year-to-date revenues and economic data. Approximately $100 million is estimated to be from capital gains above the annual threshold and would be transferred to the Stabilization Fund, which now stands at more than $2 billion, and other off-budget funds. Both the adjusted FY19 estimate and the FY20 estimate are exclusive of marijuana sales and excise taxes, which are under review.
The consensus revenue forecast is the basis on which the Baker-Polito Administration, the House, and the Senate will build their respective FY20 budget recommendations.
Pursuant to Section 5B of Chapter 29 of the Massachusetts General Laws, the three officials must convene every year to establish a joint revenue forecast by January 15. In addition to conferring with each other, the Secretary and Chairs, who held a public hearing in December 2018, received testimony from the Massachusetts Department of Revenue, the Office of the Massachusetts Treasurer, the Massachusetts Public Employment Retirement Administration Commission, and independent, local economists from area foundations and universities on tax revenue.
Among other key considerations the three entities looked at:
The consensus revenue estimate for FY20 assumes that another income tax trigger will go into effect January 1, 2020, lowering the state’s personal income tax from 5.05% to 5.00%.
Of the forecasted $29.299 billion in FY20 state tax revenues, an estimated $1.481 billion is projected to be capital gains tax revenue, of which $221 million will be transferred to the Stabilization Fund ($199 million net of transfers to other long term liability funds).
The consensus revenue estimate for FY20 and the adjusted FY19 revenue projection do not include revenue from marijuana sales or excise taxes. With the industry at its beginning stages, the three branches decided to set aside the marijuana forecast so that the Administration, House, and Senate can make independent decisions on marijuana revenue for FY20 based on available information as each develops their budget proposals.
The agreement also includes the following statutorily required off-budget transfers that are mandated by current law:
- $2.841 billion transferred to the pension fund, a $233 million increase over the FY19 contribution, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
- $1.077 billion for the Massachusetts Bay Transportation Authority (MBTA)
- $917 million for the Massachusetts School Building Authority (SBA)
- $25 million for the Workforce Training Fund
After $5.080 billion in off-budget transfers, the Secretary and Committee Chairs agree that $24.219 billion will be the maximum amount of tax revenue available for the budget in FY20, absent statutory changes.
Mass. Gen. Laws Ch. 29; Section 7H ½ also requires the Secretary and the House and Senate Committees on Ways and Means to jointly develop a potential gross state product (PGSP) growth benchmark for the ensuing calendar year. The PGSP growth benchmark is used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark.
The three leaders reached an agreement that the PGSP figure for calendar year 2019 will remain 3.6%. PGSP is a measure of the “full employment” output of the Commonwealth’s economy and reflects long-term trends in the economy rather than fluctuations due to the business cycle and, as a result, is meant to be fairly stable from year to year.
Administration Designates 30 Cities and Towns as “Green Communities”
The final month of 2018 saw the Baker-Polito Administration announced that 68% of the Commonwealth’s municipalities are now “Green Communities” after the 12th Designation Round. The additional 30 Massachusetts cities and towns designated by the Massachusetts Department of Energy Resources (DOER) as Green Communities have committed to clean energy goals to reduce energy consumption and lower emissions. With news of the 12thround of designations, 240 of the Commonwealth’s municipalities have now earned a Green Communities designation. The 30 new Green Communities are now eligible for grants totaling $4,866,648. Since the program began in 2010, DOER has awarded over $100 million in grant funding to the Commonwealth’s cities and towns through designation and competitive grants.
According to a press release from the Office of the Governor, the 240 Green Communities range from the Berkshires to Cape Cod and are home to 78% of Massachusetts’ population in municipalities as large as Boston and as small as Rowe. All Green Communities commit to reducing municipal energy consumption by 20% each, and this new group of 30 cities and towns have committed to reduce their energy consumption amounting to savings of 293,936 MMBtus in five years, energy use equivalent to heating and powering nearly 2,281 homes, and reducing greenhouse gas (GHG) emissions of 21,380 tons, equivalent to taking 4,501 cars off the road. Proposed projects include LED interior lighting upgrades across schools and municipal buildings and HVAC upgrades to improve efficiency and enhance occupant comfort.
Under the Green Communities Act, DOER’s Green Communities Designation and Grant Program can provide up to $20 million annually to qualified cities and towns. The goal of the Designation Grant Program is to support communities’ investments in energy efficiency and renewable energy projects that further the clean energy goals determined by the designated communities. Initial designation grants are based on a $125,000 base for each designated Green Community, plus additional amounts tied to per capita income and population, and for municipalities that provide as-of-right siting for renewable energy generation.
Funding for these grants is available through proceeds from the Regional Greenhouse Gas Initiative (RGGI) and Alternative Compliance Payments (ACP) paid by retail electric suppliers that do not meet their Renewable Portfolio Standard compliance obligations through the purchase of Renewable Energy Certificates.
For more information about the Green Community designation and this round of awards, please visit: https://www.mass.gov/guides/becoming-a-designated-green-community
News in Brief
- Brodeur to Run for Mayor of Melrose? According to a report in the State House News Service, House Chairman of the Joint Committee on Labor and Workforce Development, Representative Paul Brodeur, is said to be considering a run for Mayor of the City of Melrose. Brodeur, a popular and effective legislator, was a key negotiator for the so-called “grand bargain” law that created the Commonwealth’s family and medical leave program, while also raising the Commonwealth’s minimum wage. A native Melrosian who was elected to a fifth term in the Massachusetts House of Representatives in November, Brodeur is known as a pragmatic leader who is adept at forming coalitions to support the wide variety of initiatives he champions. The current Mayor of Melrose, Gail Infurna, has indicated that she will not be seeking re-election in 2019.
Massachusetts Unemployment Rate Lowest Since 2003. According to a press release from the Massachusetts Executive Office of Labor and Workforce Development, the unemployment rate in Massachusetts ticked down one-tenth of a percentage point in November to 3.4 percent as the state added an estimated 4,600 jobs. At 3.4 percent, the state’s unemployment rate is at its lowest point since May 2003, the state said, and it is three-tenths of a point lower than the national unemployment rate of 3.7 percent. Massachusetts added 60,500 jobs between November 2017 and November 2018, according to the United States Bureau of Labor Statistics. The sectors that gained jobs last month included trade, transportation, and utilities; professional, scientific, and business services; education and health services; and information. Financial activities, construction, other services, and manufacturing lost jobs during November.
A survey of wage and fringe benefit rates paid to flaggers in 10 Massachusetts communities on state and locally funded projects revealed rates very similar to those paid on federal projects. In most cases, flagger rates agreed to by municipalities and police unions are higher than those earned for normal police work. In addition, officers generally receive time and a half for working nights, weekends, and holidays. They are paid for four hours if they work four hours or less, and for eight hours if they work between four and eight hours.
Under the federal Davis-Bacon Act, contractors on federally funded projects must pay wages and fringe benefits, but workers already receiving fringes from their employers are only entitled to the wage rate. In Massachusetts, police working flagger details are paid a single flat rate despite the fact that they already receive fringe benefits from their employer.
As a result, the Pioneer Institute report states that savings from the 2008 law have not been significant. After three years, the Massachusetts Department of Transportation said it had saved $23 million. The reason any money was saved is because civilian flaggers are only paid for hours worked, as opposed to the four- and eight-hour minimums police flaggers enjoy.
To view a copy of the Pioneer Institute report, please visit: https://pioneerinstitute.org/better_government/catch-22-of-state-prevailing-wage-law-prevents-flagger-reform-from-achieving-significant-savings/.
News in Brief
Former State Senator Berry Passes Away. Former State Senator Fred Berry, a Peabody Democrat who spent 30 years on Beacon Hill and served as Senate Majority Leader at the time of his retirement in 2012, passed away at the age of 68. Born in Salem in 1949, Berry graduated
from Boston College, earned his master’s in education from Antioch College and served as a Peabody City Councilor from 1979 until joining the Senate in 1983. He was first tapped for Senate leadership in 1991 and became Majority Leader in 2003.
Jobless Rate Below 4% Again. The unemployment rate in Massachusetts dropped slightly to 3.5 percent last month as the state added 4,440 jobs. October marked the 30th consecutive month the unemployment rate had held below 4 percent. The educational and health services, construction, information, manufacturing, trade, transportation and utilities, other services and professional, scientific and business services sectors all added jobs in October. Leisure and hospitality, financial activities, and government recorded job losses. The October estimates showed roughly 3.7 million Massachusetts residents employed and 134,1000 unemployed.
Commission on the Future of Transportation to Release Report in Mid-December. As has been seen in the various media outlets, the Governor’s Commission on the Future of Transportation (www.mass.gov/orgs/commission-on-the-future-of-transportation) will be issuing its report in mid-December. The Commission, which was comprised of urban planners, autonomous vehicle groups, and small business groups, has been a wide ranging discussion as to the next steps in developing the state’s transportation infrastructure. Certain outside groups have taken to using the creation of this commission as an opportunity to talk about transportation financing at every turn – something that can be a double-edged sword. In particular, the group T4MA keeps up its steady “hew and cry” for new transportation funding in the form of congestion pricing, vehicles miles tolled and other “direct” apportionment mechanisms. This is an issue (i.e., transportation financing) that we will likely hear about a lot during the 2019-2020 legislative session. To view the T4MA report, please visit: https://d3n8a8pro7vhmx.cloudfront.net/t4ma/pages/314/attachments/original/1537900718/white_paper_final_9-21.pdf?1537900718.
Hughes to Cede Top Party Position. After leading the Massachusetts Republican Party for six years, Quincy City Councilor Kirsten Hughes is stepping down as Chairwoman. Hughes, head of the Republican Party for six years, has overseen the return of a Republican to the Governor’s Office. Potential candidates for the position, which is elected in January, include Representative Geoff Diehl, Representative Peter Durant, and the party’s current Treasurer, Brent Anderson.