As the latest legislative session wrapped up last week, Massachusetts lawmakers authorized millions of dollars for economic development, approved measures to control health care costs, and took other steps intended to improve the state’s business climate.
Perhaps just as important, business leaders said, lawmakers did not act on several proposals viewed as hurting the business climate, such as a bill mandating companies to provide paid sick leave. Legislators also didn’t raise taxes or increase unemployment insurance costs.
“Overall we viewed it as a very positive two-year session,” said Jon Hurst, president of the Retailers Association of Massachusetts.
Here’s a look at some of the key legislation affecting businesses:
The economic development bill, passed on Tuesday, includes several provisions intended to boost the state’s critical technology sector, including a $50 million fund to help local universities and nonprofit institutions compete for federal research and development money. The program will help provide the institutions with matching funds, which are often a prerequisite for receiving federal grant money.
“Down the road, it means more cutting-edge research work here in Massachusetts, that leads to new products, new companies, and new jobs,” said Jim Klocke, executive vice president of the Greater Boston Area Chamber of Commerce.
The bill also establishes a sales tax holiday for the weekend of Aug. 11 and 12, lifting the 6.25 percent sales tax on items priced under $2,500 for those days. The tax-free weekend, the eighth in nine years, has proven important for Massachusetts retailers because it allows business owners to recapture customers who would otherwise make the drive to New Hampshire, where there is no sales tax, Hurst said.
The move, Hurst said, is “a very strong economic incentive and welcomed stimulus for Main Street.”
Health care costs
Three elements of the massive health care cost containment bill approved last week are considered especially beneficial to Massachusetts employers, business leaders said.
The legislation, which Governor Deval Patrick is expected to sign Monday, calls for health care costs in Massachusetts to grow no faster than the state’s economy from 2013 to 2017. From 2018 to 2022, the goal is for health care costs to grow at a pace that is a half percentage point below the state’s economic growth rate.
“It’s putting pressure on the system to grow in a more sustainable way,” said John Regan, executive vice president for government affairs with Associated Industries of Massachusetts, the state’s largest employers group.
Health care has been one of the fastest-growing costs for businesses in recent years, and the new law promises to bring them under control, said Regan. Perhaps more important, by indexing health care increases to the economic growth rate — just over 2 percent last year — they become more predictable.
“When you build your budget around a 6 or 7 or 8 percent increase and you get 14 percent, suddenly your budget is out of whack and you really have to scramble,” he said.
The legislation also makes changes to the Fair Share system established by the health care overhaul law in 2006. Currently, companies in which fewer than 25 percent of employees enroll in employer-provided health insurance must pay an annual penalty of $295 per full-time employee equivalent. The goal of the system is to ensure employers are making a fair contribution to their employees’ health insurance costs.
However, small businesses, which often face higher premiums than larger companies, sometimes find themselves facing this assessment because their employees get insurance from another source, such as a spouse. And for many small companies, it can only take a few employees opting for other coverage to reach the 25 percent threshold.
“There have been too many employers, particularly small employers, that have been unfairly assessed,” Hurst said.
Under the new law, effective July 2013, employees who have insurance coverage through a spouse or other source will not count against a business in calculating whether the penalty is owed.
The bill also creates a tax credit of up to $10,000 for businesses that implement wellness programs aimed at improving employee health and reducing insurance premiums. It also calls for the creation of wellness guidelines, in consultation with companies that have already implemented such programs.
Many of Massachusetts’ largest corporations already operate wellness programs quite successfully, said JD Chesloff, executive director of the Massachusetts Business Roundtable, a public policy group focused on business issues. These businesses have found that every $1 invested in wellness programs returns $2.50 to $6 in health care savings, increased productivity, and other cost reductions.
“We have just seen tremendous impact,” he said. “There are lessons to be learned from the success of corporate wellness programs that we can apply to the public conversation around cost containment.”
On Friday, Patrick signed into law a bill that requires utilities to increase the amount of electricity they buy from renewable sources such as solar and wind power generators. But the new law also requires utilities to competitively bid renewable energy contracts, a provision that business groups say could help control costs.
Energy from renewable sources is generally more expensive than that from conventional power plants. Before now, business officials said, the state had not done enough to ensure that ratepayers get the best deal when mandating utilities to purchase renewable power. AIM’s Regan pointed to contracts between the state’s largest utilities and the proposed Cape Wind project, the offshore wind farm, as an example of noncompetitive negotiations.
The bill, he said, “puts in place a standard by which contracts are negotiated that requires them to be open, transparent, competitive, and cost-effective.”
Hurst, of the Retailers Association of Massachusetts, said he was pleased that lawmakers decided not to consider a bill that requires all businesses to provide workers with paid sick leave. Such a measure would increase employers’ costs and hurt productivity, opponents say.
Regan noted that the Legislature adjourned without increasing taxes, creating a more stable tax environment at a time when future federal tax rates are in question. Bush era tax cuts will expire at the end of the year unless Congress extends them.
Earlier in the session, state lawmakers froze contribution rates for unemployment insurance, preventing a scheduled increase that was expected to cost employers an additional $369 million, according to state labor officials. It was the third consecutive year that the Legislature has frozen contribution rates.