Warning of potential pain ahead, Massachusetts House leaders said Thursday they want to avoid broad-based tax hikes for now and use up to $1.5 billion from savings accounts to navigate the state through the rest of the fiscal year.
The $46 billion budget proposal, which the House plans to debate next week, largely follows the framework Governor Charlie Baker laid out last month, avoiding what House leaders called “drastic cuts” in the face of a $3.6 billion revenue shortfall spurred by the resurging coronavirus pandemic.
The House, however, is proposing to spend more than Baker’s $45.5 billion plan, and pull more money from the state’s $3.5 billion reserve account if need be.
The announcement ended what had been a state of relative hibernation on Beacon Hill, where most work had retreated behind closed doors since July. But with Election Day now behind them, the state budget is expected to be just one of several major initiatives legislators tackle in the coming weeks.
State Representative Aaron Michlewitz, who is the House budget chairman, said the legislative leaders “obviously considered” tax hikes in their proposal — something business groups have pressured lawmakers to rethink on a significant scale. But Michlewitz said they ultimately chose to lean on more than $3.6 billion in one-time infusions to fill the state’s revenue hole.
That includes relying on more than $1.38 billion in federal funds and hundreds of millions of dollars generated by Baker’s oft-failed proposal to accelerate how the state receives sales taxes, this time requiring any business that collects more than $150,000 to more quickly remit money to the state.
The House, like Baker, also is proposing to delay by one year a charitable giving tax deduction residents could have begun using on their state returns starting in January, a move that will save the state more than $60 million.
But lawmakers said they didn’t include in their plan Baker’s proposal to hike costs on Uber and Lyft trips, which would have raised the per-ride fee to $1 from 20 cents. House leaders additionally left out Baker’s proposed 15 percent tax on opioid manufacturers, which he previously said could generate up to $14 million in revenue.
House Speaker Robert A. DeLeo also suggested the House could tamp down on the local earmarks that often lard the budget debate, citing the state’s still-uncertain fiscal picture.
“We tried to create a budget that addressed the immediate needs . . . but also didn’t burden further our constituents in this difficult time," Michlewitz, a North End Democrat, said, though he didn’t rule out pursuing tax increases in the fiscal year that starts in July. “We’re not out of the woods just by getting through” this fiscal year.
The state’s tax base has so far not taken another nose dive four months into the current fiscal year, and tax collections are actually running more than 1 percent ahead of the pace from last year, state officials said this week.
More than two dozen business groups are at the same time pressing lawmakers to take a “go-slow approach” on new taxes on businesses, warning in a letter to legislative leaders this week they’re already facing other costs amid the state’s uncertain economic landscape.
On the other hand, progressive groups have repeatedly pushed the Legislature to consider hiking taxes on the wealthy and corporations to avoid trickle-down cuts.
State Representative Carlos González, the chairman of the Black and Latino Legislative Caucus, said lawmakers are cognizant of the “need to be stewards, that we don’t hurt the economy more in the long run." But he said lawmakers shouldn’t rule out adding funding through amendments.
“I think we need to have all options available,” the Springfield Democrat said. “We’re going to continue to try to highlight where the major needs are, particularly in communities hardest hit by COVID.”
It also remains to be seen what path the state’s more-liberal Senate pursues in its own proposal. State Senator Michael J. Rodrigues, the chamber’s budget chairman, said he has not taken tax hikes off the table, acknowledging there “certainly have been some members advocating for more revenue — i.e. more taxes.”
“We have to strike a balance. The pandemic has caused an increased need for additional investment in certain areas," said the Westport Democrat.
The House in March passed a tax package that leaders said then could raise as much as $600 million annually for transportation, including by hiking the state’s gas tax 5 cents and raising ride-sharing fees.
DeLeo said the House chose not to tuck any of those measures into the budget, but he pointed to the potential of the Senate considering the package “as a separate piece.” (Senate leaders have previously cast doubt on the prospect of a gas tax emerging if the state was still battling high unemployment rates.)
Under the chamber’s plan, state officials would also withdraw up to 43 percent of the available funding in the state’s so-called Rainy Day Fund, leaving the savings account with a little less than $2 billion for what DeLeo called the “expected . . . storm next year.”
The House budget office initially said its budget plan included taking up to $1.55 billion from the fund, but officials later on Thursday revised it to $1.505, calling the first number a mistake.
After the state’s eviction moratorium ended last month, Baker unveiled a $171 million package of programs aimed to keep struggling renters in their homes. But questions quickly surfaced about whether it would be enough, and while Baker pumped an extra $64 million into a long-running rental relief program, the system has become overwhelmed.
The House budget proposal commits $50 million in state money to the rental program, which DeLeo and Michlewitz said was a $33 million increase over Baker’s proposal, while also including language that requires courts to stay an eviction decision if a tenant has an active rental relief application that has not yet been processed by the state.