Baker, Legislature at odds on spending $5.3b in federal COVID funds

Senate President Karen Spilka, House Speaker Ronald Mariano, and other lawmakers would have a say in how federal COVID-19 funds are spent under proposed legislation.

Massachusetts lawmakers are seeking control over how the state spends nearly $5.3 billion in federal American Rescue Plan funds, setting up a potential clash with Governor Charlie Baker over where — and how quickly — the stimulus cash is distributed.

After a year of watching Baker make dozens of unilateral decisions to navigate the pandemic, the Legislature’s move would give it a greater say over those billions so that Baker couldn’t spend the money without its direction.

Lawmakers plan to pass legislation as soon as next week that would push the funds into a coronavirus relief trust fund, where they would be “subject to appropriation.” While largely a mechanical change, it would mark a reversal from the depths of the COVID-19 pandemic, when Baker had wide leeway to quickly divvy up $2.7 billion in coronavirus relief funds at the same time he wielded sweeping emergency powers.

The Legislature’s move also opened concerns about how quickly some of the money would get out the door. Members of the state’s all-Democratic federal delegation on Wednesday prodded state officials to immediately release $100 million Baker had previously promised to several municipalities ravaged by COVID-19, sparking a daylong tit-for-tat between the governor and legislative leaders.

“A public legislative process will allow all communities, especially those impacted the most by COVID-19, to help determine where investments are most needed,” House Speaker Ronald Mariano and Senate President Karen E. Spilka, both Democrats, said in a joint statement. The House passed the bill Tuesday, and the Senate is expected to pass it next week.

“These investments may potentially be spread out over a number of years to ensure our continued economic vitality.”

The move immediately created tension with Baker, whose aides argue that the funding is discretionary and lacked any federal requirement for legislative appropriation.

Massachusetts received its $5.3 billion in federal stimulus money May 19. It has since sat in an account under Baker’s budget office, according to the comptroller’s office.

“The administration is ready to work with municipal, nonprofit, private sector, and legislative partners to invest these funds quickly,” said Sarah Finlaw, a Baker spokeswoman, adding that the governor “believes these funds are designed to be put to work without delay.”

Baker has already pledged to supplement direct funding for four hard-hit municipalities that were slated to receive far less than their peers, in part because of antiquated funding formulas the federal government used in the American Rescue Plan. Chelsea, Everett, Methuen, and Randolph would get a combined $100 million more under Baker’s commitment in March, presumably from the state’s own allotment.

But that funding decision wouldn’t rest with Baker alone should the Legislature’s bill become law.

US Senators Elizabeth Warren and Edward Markey and Representative Ayanna Pressley urged state officials to immediately distribute the money to the four towns and cities ahead of long-term deliberations about how to spend the rest of the federal funds. They had previously pushed Baker to carve out funding for the municipalities.

“The flexible federal relief funding in the American Rescue Plan we helped secure is currently in the state’s coffers,” they said in a joint statement. “We must keep this promise now.”

Appearing in Chelsea on Wednesday, Baker said he won’t go ahead with his plan to unilaterally release the money because the “Legislature put out a press release,” an apparent reference to Mariano and Spilka’s statement about the Legislature’s intent to gain control over how the funds are spent.

“We’ll raise this issue with them,” Baker said.

Mariano and Spilka responded later, saying hard-hit municipalities will get “additional financial support,” without saying when they could receive it or exactly how much. They also sought to cast the Republican governor as the obstacle, arguing his administration had access to the federal funds for two weeks before they moved to assume control of them.

“Like our [congressional] delegation, we have a sense of urgency regarding providing coronavirus relief to our hardest hit communities,” they said in a separate statement.

The legislative leaders said the state is “poised to invest” the entire new tranche of money. But in reality, the full $5.3 billion isn’t likely to be spent immediately.

The federal Treasury Department last month offered broad guidelines for how states could spend the money, including giving them until 2024 to decide. Legislative leaders said they intend to appropriate the money separately from the annual state budget, which lawmakers will soon begin negotiating ahead of the start of the fiscal year on July 1.

Baker and legislative leaders have yet to outline specific proposals for using the money, or when. More than a dozen other states have released some type of plan, according to the National Association of State Budget Officers, which tracks state-level spending.

“This will be a very deliberate process with the Baker administration and the Senate,” Daniel J. Hunt, chairman of the House’s Committee on Federal Stimulus and Census Oversight, said of deciding how to spend the $5.3 billion. “We need to make sure we’re all working together to make sure these funds are allocated in a way that moves the economy forward for everyone.”

There’s no shortage of interest in where the money should go. Business groups, for example, are lobbying to use a chunk of it to offset a looming unemployment fee increase. Some budget-watchers have floated the idea of offering hazard pay to health workers. Hunt, a Dorchester Democrat, said members of the legislative committee have had 50-plus meetings over the last month with interested parties.

That the Legislature wants a similar hand in directing the federal funds is a good thing, budget-watchers said Tuesday. By requiring the funds to be “subject to appropriation,” it would put the money through a procedure similar to the state budget, in which proposals must move through both chambers, Baker has veto power over line items, but the Legislature could overrule him.

Publicly subjecting spending decisions to that type of process — particularly for an unprecedented lump sum of federal funds — helps offer “much-needed clarity,” said Eileen P. McAnneny, president of the Massachusetts Taxpayers Foundation.

Other states have already begun sketching out their plans for the money.

Governor Ned Lamont released his 42-page proposal in late April for how Connecticut’s estimated $2.6 billion share should be spent, including dedicating hundreds of millions for COVID testing, capital projects, and expanding broadband. (The governor and Legislature there intend to negotiate a final plan for the money.)

Vermont Governor Phil Scott released his proposal the same month, and North Carolina’s Roy Cooper unveiled his recommendations in May.

With Massachusetts enjoying better-than-expected tax revenues, Baker and lawmakers opted to build the upcoming budget without an infusion of the federal funds.