Why can’t Massachusetts pass a budget on time?

The Massachusetts State Legislature keeps passing budgets late. Very late. In 2018 & 2019, Massachusetts was the last state in the country to finalize a budget to keep the state functioning. Nine budgets in a row have been late.

And now, the legislature failed to pass a year-end closeout supplemental budget before legislators broke for holiday vacation. Headlines like “Lawmakers botch budget bill negotiations” certainly aren’t encouraging.

And what’s worse, by failing to act this year by November 20th, the legislature has handed an immense amount of power to the Governor, who can veto individual line items in the budget without the legislature having time to override his veto.

And every day that the legislature fails to close out Fiscal Year 19, the state is losing an estimated $30,000 in interest it would have accrued had the books been completed. The State Comptroller estimates this is going to cost the state $1.2M by Dec 11th.

How did we get into this mess?

The main sticking point is a corporate tax break that the House chose to include in their version of the supplemental budget, but the Senate rejected.

What’s a Supplemental Budget?

Every year, by June 30th, the Legislature is supposed to pass a budget that covers the fiscal year running from July 1st to June 30th of the next year. This past July, the governor signed the “Fiscal Year 2020” budget, dealing with the state spending from July 1, 2019 until June 30th, 2020.

But the legislature passes smaller “supplemental” budgets from time to time to allocate more funds to programs or to deal with the fact that sometimes tax revenues come in higher or lower than originally estimated.

And every year, on October 31st, the State Comptroller is supposed to file a report “closing out” the previous fiscal year. The legislature has to pass one final supplemental budget, dealing with the previous fiscal year’s finances. Some accounts have deficits and others surpluses as a result of uneven spending.

And this year, the state actually ended up with a sizeable surplus of more than $750M due to higher-than-expected tax receipts. And there are always numerous programs in need of extra funding, from healthcare to education to transportation.

Wait, it’s all about a Corporate Tax Break?

Yes, mostly.

The House passed a supplemental budget on Oct 17th with $723M in new spending, and the Senate passed a version on Oct 24th with $780M in new spending. There are some details to work out in specific allocations of funding levels for different line items, but that’s par for the course in budget negotiations

The main sticking point is a corporate tax break that the House included in their version of the bill. Originally proposed by Governor Baker, the provision would give large corporations (those earning more than $25M per year) a tax break (in the form of a business interest deduction). Interestingly enough, this was a deduction which even President Trump through was too much, he identified this as a “loophole” that he closed in 2017.

We covered the attempt by progressive lawmakers to remove that corporate tax break from the bill, and the shocking lengths that House leadership went to in order to silence several first-year women legislators here.

Although those House progressives failed, the Senate made clear it would not be passing a corporate tax cut that has been estimated to cost the state at least $37M a year.

Sen. Michael Rodrigues, the Senate chair of Ways & Means, did not include it in the Senate Ways & means version. He spoke out against the corporate tax break, saying “We feel very strongly that major tax policy should go through the Revenue Committee and have a full and open hearing. The Senate feels strongly that major tax policy should be thoroughly vetted and debated.”

But as midnight approached on November 20th, it became clear that the House leadership (Speaker Robert DeLeo and House Ways & Means Chair Aaron Michlewitz) were refusing to budge. They wanted this corporate tax break to go through.

Informal Session Woes

The rules of the Massachusetts legislature prohibit them from meeting in formal session after the 3rd Wednesday in November. This year that was Nov 20th.

A formal session is where all 160 Reps or 40 Senators meet to debate and vote on bills. It’s only in such formal sessions that the legislature can take up most important legislation.

Because the legislature failed to vote on the final supplemental budget on November 20th, that means the bill can only proceed if it passes in informal session.

Informal sessions are sparsely attended, typically just 2-5 Reps in the chamber at a time. And any single Rep can attend and prevent business from being conducted that day by objecting. This happened last on May 23rd, and it’s the right of any Rep present to stop the movement of legislation.

The legislature now faces three problems, all of their own making:.

It’s hard to pass anything: Any Rep present in informal session can prevent the bill from advancing, which makes it hard to see how the bill could progress. Any progressive Rep could stop a bill from moving if the corporate tax break remains in the bill. Any conservative Rep could stop the bill from moving unless their own demands are met in the final text.
The governor has more power: The governor has the ability to veto individual line items in the budget, and now that the House can no longer meet in formal sessions, there is no way of holding a roll call vote to override the veto. The governor does routinely use this power and might be expected to do so now that he has an opportunity to veto without override.
The bill dies automatically at the end of the year: All appropriations bills must be passed in the year they are created, so there’s no easy way to pass many of the funding measures included in this supplemental in January. Those items would need a new bill and to go through the committee process from scratch.

DeLeo’s Threat:

Adding to the woes, Speaker DeLeo is threatening to blow up any compromise if he doesn’t get his way. He’s suggested that instead of removing the tax cut, he’d rather remove all discretionary spending from the bill in order to pass it now. That means cutting funding for critical census work, $50M spending on MBTA improvements, and funding for early voting in next year’s primary.

The Baker Administration seems likely to support DeLeo in this: Comptroller Andrew Mayor has said he is planning to take the “extraordinary act” of closing the year out without the legislature on December 11th. That means the same cuts to discretionary spending as DeLeo is promising.

This is outrageous, but you can do something about it.

Six legislators are on the conference committee that can still produce a compromise version without the corporate tax break. If your Rep or Senator is on this list, call them and ask them to remove the corporate tax break and produce a compromise supplemental budget that preserves all the important funding for the census, education, and other matters.

If your Rep isn’t on the list, then still call them and ask them to make their voice heard to Rep. Aaron Michlewitz. Rep. Michlewitz is the chair of the House Ways & Means committee and he could ensure a compromise that doesn’t threaten critical funding for our state and doesn’t give the biggest corporations in Massachusetts a tax break.

The House & Senate will meet in informal session today at 11AM. The House may try to advance their version of the bill.

Conference Committee Members:

Rep. Aaron Michlewitz (D-Boston): 617.722.2990
Rep. Denise Garlick (D-Needham): 617.722.2380
Rep. Todd Smola (R-Warren): 617.722.2100
Sen. Michael Rodrigues (D-Westport): 617.722.1114
Sen. Cindy Friedman (D-Arlington): 617.722.1432
~~Sen. Vinnie DeMacedo (R-Plymouth): 617.722.1330~~ After publication, Sen. DeMacedo was replaced with Sen. Humason
Sen. Donald Humason (R-Westfield): 617.722.1415