Governor Charlie 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 a separate $1 billion tax relief proposal that lawmakers spent months developing and were aiming to finalize before the end of the weekend.
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.
The Baker administration said last week that the state is poised to trigger it for the first time since 1987, and estimated taxpayers could be due back more than $2.9 billion. 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 potentially benefit millions of taxpayers.
The might-be windfall for taxpayers roiled the Legislature’s own plans for millions of one-time rebates and a slew of permanent tax changes.
Lawmakers’ constituents face rapidly rising inflation, and economic worries have topped residents’ list of concerns. Aiming to help, the House and Senate each tucked a similar tax relief package 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 also borrow or spend more than $4 billion to help prop up housing production, financially strained hospitals, and the state’s unemployment trust fund, among a slew of other things.
But that package remained locked in negotiations Monday morning, along with any potential legislation addressing the tax cap law — two pieces that insiders said cast a shadow over everything else in the session’s final hours.
“We are kind of perplexed,” Senator Cindy F. Friedman told reporters shortly before midnight. “We’ve got this tax piece, which is really serious and was laid in front of us in a pretty short amount of time.”
Friedman said lawmakers were considering passing an economic development bill that does not include any tax relief, and then “continuing discussions with the taxes.” That would mark an extraordinary flip, after legislators had recently heralded the meaningful relief their plan was poised to offer.
A late-session crunch is typical on Beacon Hill. Lawmakers’ self-imposed deadlines often provide the last antidote to legislative logjams, forcing compromise, horse-trading, or in some cases, the death of major bills. But not at least a generation has the Legislature entertained such major tax relief plans, let alone in the session’s waning hours.
On Sunday afternoon, the Legislature actually added to its list of bills in closed-door negotiations. Members created a sixth conference committee shortly before 3 pm to reconcile differences on a bill that would tighten the state’s firearms laws in the wake of a Supreme Court decision expanding gun rights across the country. But that, too, had not emerged as the night dragged into the early Monday morning 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 pm Sunday and was in “regular communication” with legislative leadership on major bills still being negotiated, including the economic development bill, spokeswoman Sarah Finlaw said.
As they awaited word on pending bills, lawmakers did take action on some items.
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, sending 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 standing 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 different ownership.
Ace of Monday morning, lawmakers were still working to iron out differences in other major pieces of legislation where the House and Senate differed.
After years of failed efforts, lawmakers were attempting to nail down a final version of a bill to legalize sports betting.
At the center of the disagreement was a proposal to allow people to place wagers on collegiate games. The House wants it, and the Senate—whose top leaders have historically opposed legalized gambling—does not.
If signed into law by Baker, who has expressed his support in the past, Massachusetts will join 30 states and Washington, DC, 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.
A conference committee, a compromise-seeking group of representatives and senators, had been deliberating on sports betting since early June.
The prospects of the betting bill, a House priority, were unclear as August dawned. So, too, was the potential of a separate measure on mental health access that Spilka has personally touted as a top priority.
The Senate version of the bill would mandate insurance coverage for an annual mental health wellness exam, and mental health bills passed by both chambers attempt to ensure compliance with the state’s mental health parity laws.
Amid the fray of the last day, lawmakers were also negotiating a relatively obscure piece of conservation legislation intended to protect public lands from development pressure.
The House last year passed a bill that environmentalists have championed for more than 20 years, and would require anyone looking to sell or develop protected public greenspace to replace it with another comparable property.
The Senate, however, embraced a different version, which has the support of the Baker administration and would create an alternative where developers or communities could set aside money to purchase property later when replacement land cannot be found in the community.
Dan Adams of the Globe staff and Globe correspondent Simon Levien contributed to this report.