Baker, at odds with Legislature, looks to spend half of $5b stimulus windfall with a focus on housing

The governor’s announcement marks the latest twist in a tango between the second-term Republican and the Democratic-led Legislature over how to spend the state’s share of the federal cash.

“Our objective here is to try to put some of these dollars to work in a hurry,” Governor Charlie Baker said.Suzanne Kreiter/Globe Staff

Governor Charlie Baker on Thursday laid out his own plans for spending billions in new federal stimulus money, offering a rebuke of state lawmakers intent on gaining control over the funding bonanza from Washington.

Arguing the state needs to quickly jump-start a pandemic-scarred economy, Baker proposed setting aside $2.8 billion in proceeds from the American Rescue Plan Act for him to dole out, including $1 billion to help ease the state’s housing crunch. Under Baker’s plan, hundreds of millions would go toward job training, water-and-sewer infrastructure, downtown business districts, and other priorities.

It marks the latest twist in a tango between the second-term Republican and the Democratic-led Legislature over how to spend the state’s $5.3 billion share of the federal cash.

The Legislature earlier this month sent him a bill that would divert the federal money into an account state lawmakers control, where they could spread the money over several years.

Baker on Thursday rejected that and instead said he would ask lawmakers to amend it, by carving off $2.3 billion for them to divvy up, leaving the rest for him to put to work. State officials have already spent $194 million, with $109 million going to four hard-hit municipalities and $75 million to help subsidize the state’s new sick-leave law. Baker has also said he intends to bankroll the state’s newly announced vaccine lottery sweepstakes with $10 million of the federal funds.

“Our objective here is to try to put some of these dollars to work in a hurry,” Baker said in an interview. “Let’s get started on this stuff, and they can use a more deliberative process to decide what happens with the other half.”

Appearing in Haverhill, Baker argued that all the accounts and initiatives he’s funding already exist. “What we’ve really done is turbocharge a number of these programs,” he said.

The proposal immediately faced headwinds in the Legislature, where lawmakers could further tweak his proposal or simply return it to Baker in its original form, forcing him to either accept or veto it.

In a joint statement, House Speaker Ronald Mariano and Senate President Karen E. Spilka indicated they had no appetite to give Baker sole control of nearly $3 billion of the funds, though they would consider the “worthy causes he identified.”

“To that end, we will continue to pursue placing these one-time federal dollars, which were intended to be spent over multiple years, into the segregated fund so that we can hear from communities and stakeholders throughout the Commonwealth,” the Democratic leaders said.

Representative Linda Dean Campbell, who appeared at Baker’s event outside a new housing development in Haverhill, said individual lawmakers are in a better position to “micro-target” where the funds are spent.

“It will take a little more time, but that’s our job. Our job is to be deliberate,” the Methuen Democrat said of the Legislature. “This is a once-in-a-decade opportunity. Fast is not better.”

Baker put a focus on the state’s housing shortage, saying the need is more pressing than ever as Massachusetts emerges from the COVID-19 pandemic. Nearly one-third of his allocations would go to housing-related causes: $300 million for homeownership opportunities, $300 million to finance senior and veteran housing construction, $200 million to finance new housing for buyers with moderate incomes, and $200 million to help build more apartments.

Baker emphasized the importance of creating opportunities for lower-income and families of color — many of whom have been hit hard by the COVID-19 crisis — to buy and own homes.

“For decades, the federal government has run a variety of home-ownership programs and wealth-building programs in housing,” Baker said. “And, for the most part, people of color have either been directly or indirectly excluded from participating in these programs.

“That has a lot to do with the difference in wealth between whites and people of color in this country. We have an opportunity to do something about that and we should do it with this funding — and we should do it now.”

Affordable housing advocates considered Baker’s proposal a major, if not unprecedented, victory.

“This would be by far the biggest investment of new dollars in affordable homeownership in my memory,” Joe Kriesberg, president of the Massachusetts Association of Community Development Corporations.

Baker also wants to spend $900 million of the federal funds on various infrastructure projects, ranging from addressing issues such as sewage being discharged into the Merrimack River, to improving aging dams to fixing up state parks facilities.

His economic development portion would set aside up to $350 million to help with downtowns and other local business districts, and $100 million for cultural facilities and other tourism sites. He would pump $240 million into a suite of job training programs, with the hopes of addressing a labor shortage that is vexing employers.

And he would set aside $225 million for health care, mostly for addiction treatment and other behavioral services, with some money for financially distressed hospitals.

Baker technically has the power to begin spending all of the federal funding now. But he indicated he would not rush huge sums of money out the door while he and the Legislature are locked in debate, saying he intends to work in a “good faith manner.”

There has been no shortage of demands for the money. Baker, for example, did not address transit or child care, saying those needs already have dedicated funding from the federal stimulus package.

He also did not heed the business community’s request to set aside money to help pay for the huge deficit in the state’s unemployment insurance fund, caused by the sudden and steep job losses during the pandemic.

Baker pointed to a recently signed law that spreads the hike in the so-called solvency assessment over 20 years and covers $7 billion in unemployment payments tied to pandemic-related job losses. Businesses, even those without any layoffs in 2020, had been faced with an unexpected additional cost of as much as $1,300 per worker this year before that “fix” became law. Baker said there will be a “big sigh of relief” when employers get their new bills.

The failure to set aside any of the federal money to reduce this big unemployment insurance burden disappointed business lobbyists, particularly after nearly 30 other states have already committed to using federal money for that. Jim Rooney, president of the Greater Boston Chamber of Commerce, called it a sign “that government is taking the strong Massachusetts economy, the business community, and employers for granted.”

Public health advocates had also pressed state officials to dedicate money from the federal pot toward municipal health departments battered by the demands of the pandemic. Baker called local officials “terrific partners,” but he said he wants to discuss with state lawmakers what an “appropriate investment” would be.

“The fact that the governor has failed to make a single dime of investment in our state’s local public health system is both shortsighted and dangerous,” said Carlene Pavlos, executive director of the Massachusetts Public Health Association, which has pushed for the funding.

Correction: Due to an editing error, an earlier version of this story misstated whether an aspect of Baker’s proposal requires legislative approval. It would. The Globe regrets the error.