PROVINCETOWN — When Gov. Charlie Baker signed a $3.8-billion economic development bill two weeks ago, he threw in a curveball, vetoing a provision that said only $510 million would come from the state’s remaining share of federal American Rescue Plan Act money. The legislature had held back $1.7 billion in ARPA funds to allocate in a separate bill next year, but Baker said his veto would allow the state to spend that money on the current bill, leaving $1.7 billion of this year’s state tax receipts to spend next year instead.
Even for experts, it can be hard to tell if these differences are semantic or meaningful. Newspapers and nonprofits that have sought to track the use of federal Covid relief money frequently run aground on the byzantine rules of state budgeting.
The Mass. Budget and Policy Center put out a report last year titled “Where’s the Relief?” to help advocates keep track of the billions of dollars that have arrived in the state, especially from the $2.2-trillion CARES Act, passed in March 2020 as the pandemic shutdowns began, and the $1.9-trillion American Rescue Plan Act, which was signed by newly elected President Biden in March 2021.
The author of that report, Nancy Wagman, said that Gov. Baker’s administration has been juggling massive pots of money, each with federal rules that can change multiple times in a single year.
“There were frequently changing rules about which fund could cover which sorts of needs,” said Wagman. “Sometimes the administration would fund something out of one source and then switch it as the rules changed.”
The rules are dry and technical, but decisions about where hundreds of millions of dollars ultimately will go are of vast importance.
Baker’s team has largely received the benefit of the doubt, state Sen. Julian Cyr told the Independent, especially because Baker himself served as secretary of administration and finance for governors Bill Weld and Paul Cellucci. “Baker knows more about state finance than pretty much any governor ever,” Cyr said.
Nevertheless, the $2.9 billion in tax rebates recently triggered by Chapter 62F, a revenue cap written into law by a ballot measure in 1986, has enraged many legislators. Those rebates were issued in direct proportion to the personal income taxes people paid last year — so a person who made $1 million last year received a check for about $28,000, according to a Mass. Budget and Policy Center analysis by Jason Wright. A median-income taxpayer might receive a $208 rebate, according to Wright’s report, and about half of lower-income households will receive nothing at all.
State legislators including Cyr feel they were deprived of the chance to restructure the 62F rebate formulas this year, for instance by capping the rebates to any one taxpayer at between $3,000 and $6,000. That would have left more money for rebates to lower- and middle-income households.
According to Commonwealth magazine, the State House News Service, and the Boston Globe, House Speaker Ron Mariano was especially angry at Baker for not alerting legislators to the likelihood of a 62F rebate in April — when his office of administration and finance began updating the rules for the rebates. Instead, most lawmakers and the public found out about the 62F rebates on July 27, when it was too late for the legislature to override vetoes.
Baker’s actions ultimately ensured that the richest people in the state received $30,000 checks, Cyr said.
ARPA and CARES
Baker’s veto of the economic development provision could have the effect of spending down the state’s remaining ARPA money, leaving ordinary tax revenues in their place. The rules for ARPA money are relatively loose, according to Wagman, but acceptable uses include premium pay for essential workers; investments in water, sewer, and broadband; responding to the public health and economic effects of the pandemic; and replacing lost public sector revenue.
The legislature wanted to go into next year with $1.7 billion still tied to those priorities. Baker’s preference for “spending down” the restricted ARPA funds could mean that the legislature will have $1.7 billion in unrestricted cash instead.
Will that matter? The state’s use of CARES Act money may hold a clue.
The CARES Act sent Massachusetts nearly $2 billion over which the state had considerable discretion, according to Wagman’s “Where’s the Relief?” report. That money went into a Coronavirus Relief Fund, created in July 2020 and controlled by the office of administration and finance.
That office directed $253 million from the fund to the state’s prisons and jails, overseen by the Dept. of Corrections and the 14 county sheriffs. The money was used for “payroll and other payments to individuals” — not for Covid testing and personal protective equipment.
Payroll at the prisons and jails did not meaningfully change from 2019 to 2020 to 2021, according to detailed payroll information on the state comptroller’s website. Nearly a third of the Dept. of Corrections payroll came from the Coronavirus Relief Fund, even though those costs were about the same as they had been in 2019.
“Decisions about how to use the Coronavirus Relief Fund became, in many ways, a series of technical decisions for the administration,” Wagman said. Money that was earmarked for Covid relief could technically be used for prison guards. Wagman’s report says that the Baker administration was preparing to allocate another $550 million this way right up until the end of 2020.
Instead, a new series of guidelines came from the federal government, and Baker’s team directed that $550 million into a small business grant program run by the Massachusetts Growth Capital Corp. A total of $4.4 million came to 86 small businesses on the Outer Cape through that program, in amounts ranging from $10,000 to $75,000.
A last-minute adjustment on Beacon Hill, in other words, meant several million for businesses out here. As discussions about $1.7 billion in ARPA money continue next year, those last-minute decisions could become just as important.
