Mass. legislative leaders agree on $3.8b spending bill that omits tax relief measures

Senate President Karen Spilka and House Speaker Ronald Mariano at a bill-signing ceremony last year.

Massachusetts lawmakers on Wednesday reached an agreement on a long-stalled bill that would funnel nearly $3.8 billion toward hospitals, housing initiatives, and elsewhere but omits permanent tax relief measures that lawmakers previously had touted as a much-needed economic balm for residents.

The legislation, which lawmakers could vote on as early as Thursday, combines pieces of two initiatives: a spending bill that closes the books on the fiscal year that ended in June and a hulking economic development package that lawmakers failed to agree upon before their formal session ended Aug. 1.

Versions of the latter passed the House and the Senate in July, each with $1 billion in proposed tax breaks and relief measures. But legislative leaders said that with the state already sending nearly $3 billion in tax refunds to taxpayers under a separate law, they opted to include only “one-time investments” in the compromise that emerged Wednesday.

They also closed the door on pursuing any permanent tax changes before a new governor and Legislature are sworn into office in January, effectively pushing any debate to at least 2023.

House Speaker Ronald Mariano cited “economic uncertainty” in the decision to scrap tax relief plans for now.

“The relief will be coming. Obviously we’re committed to taking a look at permanent tax cuts next year when we have a better picture of what the economy looks like,” the Quincy Democrat said Wednesday. “We want to be sure that what we do is smart and well thought out.”

The 203-page bill touches a variety of areas. It would dedicate $350 million toward “fiscally strained” hospitals, $17.5 million for “reproductive and family planning services,” and $112 million to help the MBTA implement safety directives from the Federal Transportation Administration.

Another $100 million would go to “promote and accelerate” the use of electric vehicles, while a separate $100 million would flow to the state’s Unemployment Insurance Trust fund to offset estimated overpayments.

The bill — backed by a mix of federal stimulus funds and a multibillion-dollar budget surplus — also includes a slew of smaller earmarks for museums, road repairs, and various projects important to individual lawmakers, many of whom are running for reelection Tuesday.

Tax relief, and the absence of it, however, loomed large. The Baker administration began sending millions of taxpayers tax refunds this week after a windfall of collections triggered a 1986 tax-cap law for just the second time in nearly four decades.

Legislative leaders said their spending bill, combined with the nearly $3 billion in refunds, constitutes “an unprecedented combination of economic investment and relief” for families feeling the pinch of inflation.

Those refunds did not require any legislative action to begin flowing to taxpayers, and the law stipulates that they be applied on a “proportional basis,” meaning the more someone owed in income taxes, the higher the refund they’re due.

The tax relief packages lawmakers had considered included more targeted, permanent changes, such as hiking the state’s Earned Income Tax Credit, expanding state child and dependent tax credits, and raising the deduction renters can claim.

A spokesperson for Governor Charlie Baker, who first proposed a series of similar tax changes in January, called it “extremely disappointing” that none of the measures survived despite lawmakers “reaching consensus on a much needed tax cut plan just a few months ago.” (Lawmakers technically differed on a few aspects of their plans in July.)

Attorney General Maura Healey, the Democratic nominee for governor, said Wednesday that tax reform is “badly needed” and that she would pursue it, if elected.

“As governor, it will be a top priority of hers to get this done with the Legislature,” said Karissa Hand, a Healey spokesperson.

The campaign for Geoff Diehl, the Republican nominee, did not respond to an e-mail seeking comment.

Lawmakers could vote on the bill Thursday, when both chambers have scheduled informal sessions. Those lightly attended sessions come with inherent risk — a single vote in dissent could kill legislation. But Mariano said the earmark-heavy package helps ensure many lawmakers have a “self interest in making sure some of these projects get done.”

“The intention is to try to get it to the governor’s desk tomorrow,” he said Wednesday.

Lawmakers have already faced pressure to tie up the state’s finances from the fiscal year that ended June 30. Comptroller William McNamara had a Monday deadline to file the annual state financial report, marking another year in which the Legislature’s inability to pass a timely closeout spending bill delayed that report, too.

All 200 legislative seats, as well as the governor’s office and every statewide constitutional seat, are on the ballot Tuesday. In reality, many Democratic legislative leaders face little electoral pressure to wrap up major business ahead of the vote — one election-tracking website considers the state’s legislative races to be the least competitive in the country — but it could prove important for the few incumbents facing a challenge.

Previous versions of a $4 billion economic development and tax relief bill passed both the House of Representatives and the Senate. But a final package never materialized as the formal session closed on Aug. 1.

Those packages included sending millions of taxpayers one-time $250 rebates in addition to the proposed permanent changes to the tax code, among them: adjusting the Massachusetts estate tax and its $1 million threshold, which is tied for the lowest in the country.

When it became clear in July that the state was likely on the hook for the mandatory tax refunds, Senate and House leadership disagreed on how to move forward. At the time, Senate President Karen E. Spilka believed there was enough money to both honor the 1986 tax-cap law and pass at least part of a tax relief package, but said her chamber couldn’t strike a deal with the House.

Spilka said Wednesday that she was disappointed lawmakers couldn’t reach an agreement on broader tax relief proposals that had cleared both chambers in July.

“I have said from the very get-go that we could and should do the permanent progressive tax relief,” the Ashland Democrat said.