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June 2024 Legislative Update

Senate Passes FY25 Budget; Conference Committee Begins Work

The Massachusetts Senate passed its fiscal year 2025 (FY25) budget proposal towards the end of May. According to a report by the Massachusetts Taxpayers Foundation, the Senate’s budget proposal included $58 billion after adding $89.6 million in spending over the course of three days of debate. The FY25 Senate budget proposal is $9.2 million more than the House and $52.6 million less than the Governor’s proposal. The Senate, similar to Governor Maura Healey and the House of Representatives, relies on $1.19 billion in one-time resources and new ongoing revenue-generating initiatives (i.e. > $1 million income tax surcharge).

As reported by the MTF, “Approximately 60 percent ($53.7 million) in new spending is related to earmarks for specific communities, organizations, or programs; while 40 percent ($35.9 million) is for programmatic increases or new line-items. The Senate took action on 1,100 amendments through a combination of standalone votes and amendment ‘bundles,’ which categorically approve or reject many amendments at once. In total, 475 amendments were adopted, 400 were rejected, and 225 were withdrawn from consideration.”

For UCANE’s purposes, the Senate FY25 budget included level funding for the Clean Water Trust’s contract assistance line-item at $63.3 million. While the Commonwealth’s Sewer Rate Relief Fund was not funded, the underground storage program was funded at $8.49 million with an additional $1.8 million for the administration of the same. Finally, the Senate budget proposal funded the Massachusetts Department of Environmental Protection (MassDEP) at slightly over $54.3 million.

Among other areas of note, the Senate FY25 budget proposal includes:

      Surtax Spending Cap Clarification. Amends section 2BBBBBB of Chapter 29 of the Massachusetts General Laws (MGL), which defines the annual spending threshold for surtax revenue. This new language states that the annual spending threshold shall be equal to the prior year, less the dedicated transfer to the Commonwealth Transportation Fund of $250 million, and adjusted by the ten-year rolling growth rate of income subject to the surtax. This language is also included in the House budget.

      Home Equity Theft. Adds 20 new sections to the Senate budget that amend Chapter 60 of the MGL, which currently allows a city or town to foreclose on a person’s home to pay a tax debt and then retain the full value of the estate above the amount of the outstanding debt. The language outlines the process by which “excess equity” – defined as any remaining surplus amount above the taxes, interest, fees, and costs reasonably incurred after the final judgement of foreclosure – is returned to the homeowner.

      Chapter 70 Task Force. Creates a task force to make recommendations for updating the formula used to determine local contribution requirements for K-12 school funding. The task force, co-chaired by the Secretary of Education, will examine the current formula and assess ways to improve the fairness and accuracy of determining local school contributions. The task force report with recommendations is due by June 1, 2025.

      Special Commission on the Implementation of Vocational Education Annexes in Gateway Cities. Creates a special commission to study the implementation of vocational education annexes in gateway municipalities, including the cost of constructing the annexes at comprehensive high schools, methods to sustainably fund vocational programming at comprehensive high schools, and the estimated costs and current financing streams for potential annex projects. The commission is directed to file a report with recommendations by March 1, 2025.

The Massachusetts Senate and House of Representatives will now reconcile the competing versions of their fiscal year 2025 budget proposals. The Conference Committee will aim to reach an agreement on the budget and send it to the Governor before July, which is the start of the fiscal year 2025 budget year. For more information on the Senate FY25 budget proposal, please visit: https://malegislature.gov/Budget/FY2025/SenateBudget.

House Passes Housing Bond Bill with Large Water Infrastructure Commitment

With the final two months of formal session on its radar, the Massachusetts House of Representatives unveiled a significant five-year, $6.2 billion housing bond bill, calling for $2 billion to fix the state's aging public housing stock and $1 billion to expand the Massachusetts Water Resources Authority's (MWRA’s) service area into more suburbs with the goal of spurring housing production. The legislation, which builds off of Governor Maura Healey’s filing from last fall, exceeds her filing by $2 billion.

Of particular note to UCANE members, the $1 billion MWRA expansion item in the new House housing bill states that the authority "shall prioritize expansion opportunities with a focus on increasing housing capacity in the Commonwealth and improving drinking water quality for cities and towns with water supplies contaminated by per- and polyfluoroalkyl substances." The MWRA was created by the Legislature in 1984 and currently provides wholesale water and sewer services to 3.1 million people and more than 5,500 businesses in 61 communities in eastern and central Massachusetts. Its territory has expanded over the years, and some municipalities have spent years considering possible ways to join the MWRA.

As reported by the State House News Service, nearly 200 water systems across Massachusetts -- including towns, schools, and hospitals -- will likely need to take some action to comply with new federal limits on PFAS in drinking water. Linking into the MWRA’s vast and efficient system is one way for municipalities to address their PFAS issues more easily. For its part, the MWRA has studied expansion into the Ipswich River Basin towns of Beverly, Danvers, Hamilton, Ipswich, Middleton, Lynn, Lynnfield (center water district), Peabody, Salem, Topsfield, Wenham and Wilmington. As well, for the South Shore and Ipswich River Basin, the MWRA's studies concluded that capacity either is, or could be, available to meet the projected demand (48.9 million gallons per day for the Ipswich River Basin and 40.5 million gallons per day for the South Shore towns). An expansion into the Ipswich River Basin "could range from $130 million to well over $1 billion" while the South Shore expansion "could range from $540 million to well over $1 billion. Finally, the MWRA has also looked into expanding its Metro West area service territory to include Acton, Ayer, Bedford, Chelmsford, Concord, Groton, Holliston, Hopkinton, Hudson, Lincoln, Littleton, Maynard, Natick, Sherborn, Stow, Sudbury, Wayland, Wellesley, Westborough, Westford, and Weston.

The inclusion of significant funding for the expansion of the MWRA and funding for the HousingWorks program was supported by UCANE, the American Council for Engineering Companies-Massachusetts and the Massachusetts Water Works Association. In a white paper to legislators before the release of the housing bond bill, the groups wrote:

“As the Massachusetts legislature continues its efforts to facilitate the development of more affordable housing throughout the Commonwealth, water infrastructure remains intrinsic to any long-term solution. Without access to water infrastructure that provides drinking water or removes wastewater, there is little chance of building affordable housing, much less one affordable house. Thankfully, the Commonwealth has a variety of resources and programs that – if supported or reviewed – could ensure that the means of building more affordable housing remains realistic.”

The UCANE-ACECMA-MWWA white paper highlights the importance of specific water infrastructure programs while advocating for a review of the interbasin transfer act, higher funding for the HousingWorks program, the elimination of MWRA entrance fees, and the funding of the regional matching program created under Chapter 259 of the Acts of 2014.

Finally, one item that was not included within the housing bond bill was an additional excise tax on real estate transactions. Led by the City of Boston, certain municipalities have argued that such a tool would allow for them to grow their housing stocks and support the infrastructure to do so. Unfortunately for interested municipalities, the real estate industry has heavily opposed the initiative – highlighting the fact that wealthy communities, with significantly higher cost housing, may benefit, but less wealthy communities will not. The Local Option for the Housing Affordability Coalition, which includes dozens of groups who support the transfer tax proposal, will continue to press for the measure’s inclusion within the Senate’s eventual housing proposal.

To review the House’s proposed Housing Bond Bill, please visit: https://malegislature.gov/Bills/193/H4707/BillHistory.

News in Brief

Coastal Zone Management Names New Resilience Officer. The Executive Office of Energy and Environmental Affairs (EEA) announced Ms. Deanna Moran’s appointment as Chief Coastal Resilience Officer within the Office of Coastal Zone Management (CZM). In this position, Ms. Moran will lead the state’s new ResilientCoasts initiative, a holistic and proactive strategy to guide state and local coastal resiliency policy and action. Moran joins CZM from Conservation Law Foundation (CLF), where she currently serves as Vice President for Healthy and Resilient Communities, working to leverage law, planning, policy, research, and finance to address New England’s urgent climate challenges. Previously, she was CLF’s Director of Environmental Planning and was responsible for climate resilience advocacy across New England and the Boston Harbor Public Access Initiative. Before CLF, Moran worked for a community development financial institution assisting local governments in devising and implementing neighborhood revitalization strategies, including the reclamation of vacant and abandoned properties. She has consulted on a number of planning and policy-based projects for organizations including the Southern Coalition for Social Justice and the New Jersey Climate Adaptation Alliance. Moran earned a law degree from Suffolk University Law School, a Master’s  Degree of City and Regional Planning and a Master’s Degree of Public Policy from Rutgers University, and an undergraduate degree in Environmental Design from the University at Buffalo.

Unemployment Rate Remains Steady. According to a press release from the Executive Office of Labor and Workforce Development, the state’s April total unemployment rate was 2.9 percent, unchanged from the revised March estimate of 2.9 percent, The Massachusetts unemployment rate was 1.0 percentage points lower than the national rate of 3.9 percent reported by the Bureau of Labor Statistics (BLS). Over-the-year, the state’s seasonally adjusted unemployment rate was down by 0.3 percentage points. The labor force increased by an estimated 12,200 from the revised estimate of 3,757,000 in March, with 10,100 residents more employed and 1,900 more residents unemployed over-the-month. The state’s labor force participation rate – the total number of residents 16 or older who worked or were unemployed and actively sought work in the last four weeks – increased 0.2 percentage points over-the-month, to 65.1 percent. Compared to April 2023, the labor force participation rate was unchanged. The BLS preliminary job estimates indicate Massachusetts lost 500 jobs in April. This follows yhe March revised loss of 4,100 jobs. The largest over-the-month private sector job gains were in Education and Health Services, Professional, Scientific, and Business Services, and Trade, Transportation, and Utilities. Employment now stands at 3,733,000. Massachusetts gained 669,500 jobs since the employment low in April 2020. From April 2023 to April 2024, BLS estimates Massachusetts gained 21,800 jobs. The largest over-the-year gains occurred in Education and Health Services, Leisure and Hospitality, and Government. Construction has gained 200 jobs over-the-month. Over-the-year, 4,000 jobs were added.

Revenue Rebounds; Surcharge Exceeding Expectations. The Massachusetts Department of Revenue (DOR) Commissioner Geoffrey Snyder announced in May that preliminary revenue collections for April totaled $6.324 billion, $1.540 billion or 32.2% more than actual collections in April 2023, and $1.034 billion or 19.5% above benchmark. The fiscal year 2024 year-to-date collections totaled approximately $33.857 billion, which is $1.537 billion or 4.8% more than collections in the same period of fiscal year 2023, and $889 million or 2.7% more than the year-to-date benchmark. April collections increased in non-withheld income tax, income tax withholding, and sales tax in comparison to April 2023. These increases were partially offset by decreases in corporate and business tax and ‘all other’ tax. The increase in non-withheld income tax was likely due, in large part, to the 4% income tax levied on annual taxable income in excess of $1,000,000 (4% income surtax). As reported by the DOR, the increases in income tax withholding and sales tax were due, in part, to typical timing factors in collections. The decrease in corporate and business tax was due to a decrease in return payments and an unfavorable increase in refunds, partially offset by an increase in estimated payments. The decrease in ‘all other’ tax is mostly attributable to a decrease in estate tax, a category that tends to fluctuate. Historically, April has been the single largest month for collections, ranking first of the 12 months in eight of the last 10 years. There are two main causes for April’s relative strength. First, the individual tax filing season reaches its peak; payments made with returns are concentrated in April, while refunds are spread across February, March, and April. Second, the first income estimated payment installment for the current tax year is due in April.

MassDOT Launches Grants Portal. The Massachusetts Department of Transportation (MassDOT) Highway Division announced the launch of a new community grants portal named Grant Central. The portal will be a hub of information and resources about MassDOT grants available to all 351 communities in Massachusetts. It will include information about how to apply for funding, how municipalities will be reimbursed, how applications are scored, and more. Grant Central is a streamlined portal that manages MassDOT Highway Division’s six municipal grant programs including the Chapter 90 Program, Complete Streets Funding Program, Shared Streets and Spaces Program, Municipal Pavement Program, Municipal Small Bridge Program, and the Local Bottleneck Reduction Program. Municipal officials who visit the grants portal can read specific details about what each grant program requires for the application to be considered, along with grant contract amounts, deadlines for applications, and MassDOT contact information should officials have questions. Grant Central makes printing, signing, and emailing documents more streamlined and digitized.  The portal also introduces a public-facing grant award tracker, showcasing all grant awards on a map for greater transparency than ever before. Grant Central revolutionizes grant management for MassDOT and municipalities statewide. For more info on Grant Central and all MassDOT municipal grants, please visit: https://madothway.my.site.com/GrantCentral/s/  

Pittsfield to Revamp Water and Sewer Rate Structure with Responsible Recognition of Rising Costs. The City of Pittsfield announced recently that its water and sewer rates are going up by 8% in the next fiscal year. In doing so however, Pittsfield is looking to formalize its approach to water and sewer rates by building in an annual adjustment every February tied to two factors: the Consumer Price Index, (CPI) and an Operational Sustainability Factor (OSF). According to an article published by WAMC, Pittsfield Mayor Peter Marchetti has been looking for a way of developing a formula to provide predictable increases on a more consistent, but also more realistic level, in an attempt to avoid higher, sometimes 25% to a 50%, increases when rates were sporadically addressed. In recognition of the cost of providing water and sewer service, the new formula encapsulates the CPI index for water and sewer as well as an OSF that further recognizes that all of the employees that work under the water and sewer enterprise funds are entitled to pay raises by union contract on a yearly basis, and any projects that are water and sewer related, the debt service is funded from that budget as well. Under the new system, City will work to keep any increases under ten (10%) percent. On average, the new water bills will reflect a $20 to $30 increase per household. The City has attributed rising costs, whether in terms of chemicals, labor or construction materials, across the board as necessitating the current rate increases.

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