Jockeying starts over how to spend $5b in federal aid
Pressure mounts as everyone wants a slice of the pie
CHRIS CARLOZZI, state director of the National Federation of Independent Businesses, wants at least $1 billion. That’s what he thinks government should spend to help replenish the unemployment insurance trust fund, so businesses don’t have to spend 20 years paying off debts incurred due to government-forced shutdowns.
Carlene Pavlos, executive director of Massachusetts Public Health Association, would be happy with $251 million. That’s what it would take, she said, to fix the long-standing inequities and inadequacies in the public health system, which the pandemic brought to light. It would let local public health boards hire and train staff and build centralized data systems.
Another $1 billion would satisfy John Pourbaix, executive director of Construction Industries of Massachusetts. He said Massachusetts has long underfunded its roads and bridges, and rebuilding infrastructure will be essential to economic recovery.
The federal American Rescue Plan Act provided Massachusetts state government with an unprecedented $5.3 billion in direct aid to the state. State officials have until 2024 to allocate the money, and 2026 to spend it. The US government is giving states a wide amount of latitude to spend the money on COVID-19-related costs, economic stabilization, public health challenges, and to replace lost revenue.
Already, Republican Gov. Charlie Baker had a brief spat with the Democratic-led Legislature over who should control the money. The Democrats won, giving Baker $200 million to spend immediately but gaining control of the rest of the money to allocate through a typical legislative process. Baker has since re-filed his proposal for how to spend $2.9 billion, which is likely to be a starting point as the House crafts its own spending plan, which would then go to the Senate, and finally back to Baker. Baker has been pushing the Legislature to act quickly, even as lawmakers pledge to hold multiple hearings and have a transparent, public process.
Evan Horowitz, director of the Center for State Policy Analysis at Tufts University, said the biggest challenge is that there are probably a dozen proposals for how to spend $1 billion each – far more than is available. “It’s a lot of money, but it’s not infinite money. Not even close,” Horowitz said.
So far, the Baker administration has not said how it will spend the $200 million it has control over immediately, though officials are expected to make an announcement soon.
Baker’s plan for the $2.9 billion would spend $1 billion on housing, with money going toward homeownership assistance and housing production. Baker wants to increase funding to existing programs that help first-time homebuyers, such as by providing down payment assistance or mortgage insurance. He wants to subsidize the production of housing for buyers with moderate incomes; the production of workforce rental housing; and the building of supportive housing for seniors and veterans. Most of the money would go through existing programs that could be scaled up, with the idea that building would start quickly and be completed by 2026.
Another $1 billion would go toward infrastructure – water and sewer projects, culverts and dams, state parks, broadband internet, and marine port development.
Baker would spend $450 million on downtown development and shoring up tourism. He wants to spend $240 million on workforce training, $175 million on addiction treatment, and $50 million for financially stressed hospitals.
Baker has been pushing lawmakers to pass a plan quickly so the money can be spent. According to the Executive Office of Administration and Finance, there is a need to help individuals with job training before 400,000 residents lose enhanced unemployment benefits in September. Officials note that behavioral health problems and addiction worsened with the pandemic. The lack of housing, a problem pre-pandemic, has worsened as prices skyrocket. Tourist attractions need money during the peak summer tourism season.
The Legislature has shown less of a sense of urgency, instead stressing the need for a deliberative, public process. House Speaker Ron Mariano and Senate President Karen Spilka said in a June 22 statement that lawmakers will hold public hearings throughout the summer. The hearings will likely be similar to those held on the annual state budget, with experts, legislative committee chairs, and the public testifying on particular topics at each hearing.
“The Legislature stands firm in its commitment to employing an open, transparent, and thorough public process to best understand how we as a state can make smart investments with these one-time federal dollars to address pressing and long-term needs while promoting a just recovery for all areas of the state,” Mariano and Spilka said.
Rep. Dan Hunt, who chairs the House Committee on Federal Stimulus, said the committee has already begun meeting with advocates and is currently accepting testimony on how to spend the money. Hunt would not provide a time frame for when lawmakers will develop their proposal.
Lawmakers note that there is already a huge amount of fiscal stimulus in the economy. According to administration figures, Massachusetts has benefited from $113 billion in federal aid between six COVID-19 relief bills, with over $50 billion going directly to individuals and businesses, and additional money going to education and transit, as well as state and local governments.
Doug Howgate, executive vice president of the business-backed Massachusetts Taxpayers Foundation, said the magnitude of the federal response is unprecedented and requires the balancing of speed and strategy to create long-term benefits with one-time money. “There’s always going to be this balance of wanting to be expeditious in acting, but at the same time to do it in a way that’s effective, has a plan, and works not just for this year but the year after that,” Howgate said. In other states, Howgate said, the quickest use of ARPA money has been to backfill budget cuts, but Massachusetts budget writers have been able to avoid making major cuts.
Horowitz said one difficulty is that there is no short-term deadline for determining how to spend the money, other than the end of the formal legislative session in July 2022 (or later if lawmakers extend it). The Legislature has a history of deferring important bills until the last minute, and Horowitz said, “If you don’t have a deadline, it’s very tempting to kick the can down the road.”
Horowitz added that the economy is recovering quickly, leaving little economic need for immediate stimulus beyond targeted aid to struggling populations, which could be handled through the normal budget process.
While lawmakers have pledged a public process, government critics note that the Legislature – particularly the House – has a history of closed-door deliberations.
Paul Craney, a spokesman for the conservative Massachusetts Fiscal Alliance, said legislative leaders’ comments about wanting to institute a public process were “talking points” to obtain control over the money. “It’s just a bunch of money that these politicians all want to claim dibs on so they can spend it however they want,” Craney said.
The availability of the money is leading to jockeying inside and outside Beacon Hill.
Sen. Barry Finegold, an Andover Democrat, recently delivered a passionate speech during the Senate budget debate about the need to help safety net hospitals – like his constituent, Lawrence General Hospital – before withdrawing his amendment and saying he would instead advocate for funding through ARPA.
In an interview, Finegold said he does not think there is a bigger need than to help struggling hospitals that took a financial hit but saved lives during the pandemic. “If we’re not going to spend money on safety net hospitals, in my opinion we shouldn’t spend any money at all,” he said.
Steve Walsh, president and CEO of the Massachusetts Health and Hospital Association, said in a statement that ARPA “is a pivotal – and perhaps the last – opportunity to restabilize Massachusetts hospitals, which were there for their communities through the darkest hours of the pandemic.”
One overarching theme of the debate is likely to be equity and help for communities of color, amid a national reckoning on race and a pandemic that disproportionally affected the Black and Latinx communities. Both lawmakers and the Baker administration have stressed the importance of equity in spending.
Baker officials say the homeownership programs would benefit communities of color, since assistance would be targeted to help close Massachusetts’ large gap in homeownership between white families and families of color.Michael Curry, CEO of the Massachusetts League of Community Health Centers, chaired a Health Equity Task Force, which recently released a report recommending that ARPA money be spent with an eye toward equity. Curry said this could mean creating a cabinet-level secretary of equity, hiring new staff, collecting data, or implementing the myriad proposals related to health care, housing, and other topics included in the report.
Curry said the murder of George Floyd and the pandemic “really opened the door to a long overdue conversation on how we prioritize health equity in Massachusetts.” With the report as a roadmap, Curry said, “we now need to put resources behind the proposals that are there.”