In an extraordinary turnabout, Massachusetts lawmakers on Monday failed to strike a deal on a hulking economic development package that included plans for $1 billion in tax relief, saying they had deep concerns over what the state can afford amid a chaotic end to their legislative session.
Democratic leaders passed a host of other major legislation, including bills that would legalize sports betting in Massachusetts, expand access to mental health care, and reshape the state’s firearms laws — all hours after blowing past a midnight deadline to complete their work following 19 months of lawmaking.
But as their final marathon session stretched to 10:13 a.m. Monday — 23 hours after it began in the Senate — Democratic leaders stalled perhaps their most high-profile proposal, and one they had celebrated only weeks earlier, arguing they were thrown a late-session curveball in the form of a 1980s-era law that could ultimately send an additional $3 billion back to taxpayers in the coming months.
That likelihood, they said, muddied the state’s economic picture even as Governor Charlie Baker argued Massachusetts has more than enough of a fiscal cushion to absorb both sets of tax relief.
The lawmakers’ decision scuttles, for now, a plan to ease the burden on residents pinched by rising inflation with a mix of one-time $250 rebates and permanent tax changes as part of more than $4 billion in spending.
“The fiscally responsible thing to do is to hit pause right now on all of this spending,” state Senator Michael J. Rodrigues, the Senate’s budget chairman, told reporters early Monday. “We’re disappointed, but we want to make sure we get it right. We are committed to getting some real, long-term permanent tax relief done.”
Rodrigues said lawmakers could seek to move the tax package in one of the informal sessions that will dot the legislative calendar between now and January, as well as other spending initiatives that were supposed to help prop up housing production, financially strained hospitals, and the state’s unemployment trust fund, among a slew of other things in the bill they failed to move to Baker Monday.
But the decision to not move on the economic development bill nevertheless marked a stark — and, for longtime State House observers, stunning — reversal for legislation that overwhelmingly passed both chambers in recent weeks and was touted by legislative leaders as a once-in-a-generation bid to help taxpayers.
Baker’s announcement last week that the state’s record-setting revenues are poised to trigger a nearly 40-year-old tax cap law upended negotiations over the $1 billion tax relief proposal that lawmakers spent months developing.
The 1986 voter-passed law at issue seeks to limit state tax revenue growth to the growth of total wages and salaries in the state. Should revenue exceed that “allowable” amount, taxpayers are then due a credit equal to the excess amount.
With revenues from last fiscal year far surpassing expectations, the Baker administration last week estimated taxpayers could be due back more than $2.9 billion under the law, which hasn’t been triggered since 1987. In response, House Speaker Ronald Mariano had left open the possibility of seeking to undo, change, or suspend the law just as it’s about to benefit potentially millions of taxpayers. Lawmakers ultimately opted for none of the above, for now.
“We thought it would be the wisest choice to make sure we do this properly,” Mariano told reporters Monday. “Getting $3 billion dropped on you the week before you are finalizing your year-end finances doesn’t lead to good decision-making. We want to be fiscally prudent, and know what we are getting into.”
Aides to Baker did not immediately respond to a request for comment Monday morning.
Lawmakers’ constituents face rapidly rising inflation, and economic worries have topped residents’ list of concerns.
Aiming to help, the House and Senate tucked similar tax relief packages into hulking economic development legislation, including proposals to increase a tax deduction for renters, hike the Earned Income Tax Credit, and lift the state’s child and dependent tax credits. The economic development bill itself would spend more than $4 billion, including pulling money from an expected budget surplus and unspent federal stimulus funds.
But that package remained locked in negotiations into early Monday before legislators announced they could not reach an agreement before formal lawmaking ended.
“We are kind of perplexed,” Senator Cindy F. Friedman told reporters shortly before midnight Sunday. “We’ve got this tax piece, which is really serious and was laid in front of us in a pretty short amount of time.”
Supporters of the tax cap law, however, said lawmakers’ effort to cast its emergence as a reason not to pursue the wider package is a “convenient excuse,” said Chris Anderson, president of the Massachusetts High Technology Council, which pushed the original 1986 voter-passed law.
“It still doesn’t undercut their ability to pursue the economic development bill, at least major sections of it,” Anderson said. “If they were caught by surprise, it’s probably because they were distracted by the billions of dollars they had a free hand to spend.”
Lawmakers didn’t leave everything on the table.
Among the bills that they reached agreements on in the early hours of Monday morning and later shipped to Baker was a long-awaited package to legalize sports betting and bolster mental health care in the state.
The gaming legislation allows betting on professional and collegiate sports, but excludes betting on colleges in Massachusetts, a significant compromise between the House and the Senate’s differing philosophical views. The bill does, however, allow for betting on in-state colleges if they are competing in national tournaments, Rodrigues said.
It also includes some of the Senate’s proposed guardrails, like banning the use of credit cards to place bets.
If signed into law by Baker, who has expressed his support for sports betting in the past, Massachusetts will join 30 states and Washington, D.C., in allowing for the increasingly popular type of gambling, according to the American Gaming Association.
Ever since the Supreme Court in 2018 struck down a federal law that banned sports betting, the concept has been a priority of Mariano, the House speaker, who said a year ago that a sports betting bill without the ability to bet on college games “probably would be” a deal-breaker for him.
Last week, Senate President Karen E. Spilka told WBUR’s “Radio Boston” that Mariano should soften his “all or nothing” stance.
“We thought by taking [Massachusetts college sports] out, it would speed things along,” Mariano told reporters of the compromise bill early Monday morning.
The sweeping mental health bill also is headed to Baker’s desk. The legislation, among other things, would mandate insurance coverage for an annual mental health wellness exam and ensure compliance with the state’s mental health parity laws.
A late-session crunch is typical on Beacon Hill. Lawmakers’ self-imposed deadlines often prove the last antidote to legislative logjams, forcing compromise, horse-trading, or in some cases, the death of major bills. But not in at least a generation has the Legislature entertained such major tax relief plans, let alone in the session’s waning hours.
While joint legislative rules require formal lawmaking to conclude by midnight, on Beacon Hill lawmakers can — and often do — suspend their own rules.
Besides barreling toward making major changes to state law in the dead of night, lawmakers’ tardiness also gave the upper hand to Baker, a lame-duck Republican governor who isn’t seeking reelection this fall. Baker is allowed 10 days to act on any legislation that reaches his desk, meaning he can veto a bill and the Legislature will have little ability to act beyond calling a special session, a rarity on Beacon Hill.
Baker was in the State House at around 9 p.m. Sunday and was in “regular communication” with legislative leadership on major bills still being negotiated, including the economic development bill, spokeswoman Sarah Finlaw said.
Shortly before 5 a.m., lawmakers said they reached a deal on language that would retool the state’s firearms laws in the wake of a Supreme Court decision expanding gun rights across the country.
The agreement would broaden who is prohibited from getting a license to carry to anyone who has a temporary or permanent harassment prevention order against them, as well as require police to conduct a “personal interview” of anyone seeking a license to carry, according to legislative officials.
The language would also bar police from imposing restrictions on licenses, something Massachusetts officials said the high court case, known as New York State Rifle & Pistol Association v. Bruen, demanded. The decision overturned a New York law — similar to one in Massachusetts — that required applicants to prove a special need to get a license to carry a firearm in public.
Lawmakers, however, discarded a more far-reaching House proposal that would have required gun owners to renew their licenses twice as often.
“This is consistent with what the chambers aimed to do, which was a narrow response to Bruen, to start and a promise of a lot more to come on gun control,” state Representative Michael S. Day, the House judiciary chairman, told reporters early Monday.
Hours earlier, the chambers sent to Baker an $11.3 billion infrastructure and transportation borrowing bill that also includes a slew of policy, including regulations on so-called e-bikes and $275 million in funding to extend passenger rail service from Boston to the western part of the state.
Cut from the final version, however, was a Senate-passed provision that would have required the MBTA to produce a plan for a low-income fare program. A coalition of transit advocates called the decision “deeply disappointing.”
Lawmakers also delivered a response to a series of amendments Baker sought on a sweeping climate and energy bill, shipping it back to him Sunday night.
They agreed to several of Baker’s proposed changes, notably one to eliminate the “price cap” on offshore wind projects — a mechanism that requires each new project to offer power at a lower price than the one brought online before it. Some have worried that the cap has discouraged bids, and while lawmakers had initially left it intact, they ultimately capitulated to Baker’s push to kill it.
“Removing the price cap has been a top priority for the governor, and we share his view that it will allow our future procurements to give us more value per dollar,” Representative Jeffrey N. Roy, the House’s lead negotiator, said from the chamber floor.
Legislative leaders, however, rejected other changes, including Baker’s bid to inject $750 million of federal American Rescue Plan Act funding into the legislation.
Legislators in the overwhelmingly Democratic House and Senate also accepted changes Baker made to a bill that would reshape oversight of the state’s two soldiers’ homes, including elevating the Department of Veterans Services to a Cabinet-level executive office that reports directly to the governor.
In a letter to lawmakers, Baker said he supports the changes, but asked that deadlines for setting up new offices be pushed back four months until March — when Baker’s successor, not him, will be in office.
And early Monday, lawmakers sent Baker a compromise package of reforms to the state’s marijuana industry that cracked down on steep local fees charged to marijuana operators and steered a significant chunk of the state excise tax on recreational pot sales into a fund for disenfranchised cannabis entrepreneurs.
Advocates, cannabis businesses, and progressive lawmakers had spent years lobbying for the reforms, arguing they are straightforward fixes to well-documented problems with the original legalization law, passed by voters in 2016 and rewritten by the Legislature in 2017.
Among those issues: an onerous municipal approval process that has been implicated in two federal corruption investigations, and a lack of institutional financing that has allowed larger corporations backed by wealthy private investors to dominate the space at the expense of smaller, locally owned businesses with more diverse ownership.
Dan Adams of the Globe staff and Globe correspondent Simon Levien contributed to this report.