House and Senate leaders broke a weeks-long impasse over a large surplus spending bill, cutting a deal that dropped a controversial corporate tax change and trimming down Gov. Charlie Baker’s $50 million request to fund more MBTA repairs and safety inspections.
The vote on the compromise budget bill to close the books on the fiscal year that ended back in June capped a tumultuous day during which Comptroller Andrew Maylor backed off a threat to sweep the entire surplus into reserves by mid-afternoon if the Legislature couldn’t resolve its differences.
The total spending in the final version of the budget clocked in at $541 million, which was significantly less than previous iterations of the bill that ranged from $723 million to $853 million. Instead of spending more of the surplus, the budget bill proposed to deposit $587 million into the state’s “rainy day” fund, pushing the balance of the reserve account to $3.45 billion.
House Ways and Means Chairman Aaron Michlewitz said the compromise reflected a increased level of caution that leaders felt was appropriate after passing a major $1.5 billion, seven-year education funding overhaul and hearing last week from economists about the risk of an economic slowdown in 2020 and beyond.
“Those two factors weighed heavily,” Michlewitz said.
The corporate tax provision was widely viewed by those trying to read into the negotiations between the branches over the past several weeks as a major sticking point, and the decision by the House to drop it completely from the compromise came after some liberal Democrats were threatening to hold up any deal that included it.
The provision would have decoupled Massachusetts from the federal tax code, and allowed businesses to avoid paying about $37 million in new taxes as a result of the 2018 Republican tax reform law signed by President Donald Trump that capped the amount of interest a corporation could deduct on debt built up in order to invest in the company. While proponents saw it as a way to foster job growth and capital investment, critics slammed it as an unnecessary corporate tax giveaway.
“To get the budget done, we tried to find appropriate areas of compromise to make sure we got this done,” Michlewitz said, about the decision to drop it.
One area where conference committee negotiators cut was in funding for the MBTA, which was reduced from $50 million to $32 million to help pay for Gov. Baker accelerated repair program. The reduction came just days after an outside panel hired by the Baker administration to review the MBTA system identified significant gaps in safety.
“With the House focused on an upcoming transportation revenue debate, we provided $32 million to the MBTA for an immediate infusion of funds. The appropriation will help the T address its interim needs while we await clearer and more consistent information on the administration’s spending plans,” House Speaker Robert DeLeo said in a statement.
DeLeo said the administration had initially told him it needed the funding for a “flex force” to work on both the capital and operating side of the MBTA operation and enable the agency more quickly deliver infrastructure improvements.
He interpreted the governor’s comments this week that the money was needed for enhanced safety as a shift in that reasoning, though at the time Baker made the request in June he did also say the money would allow the MBTA to increase the frequency of its train inspections and preventive maintenance.
“While we seek more precise information on the needs of the T, the House recommits itself to a transportation revenue debate in the coming months,” DeLeo said.
Spilka did not elaborate on the decision to scale back the appropriation for the MBTA, or say whether she shares the speaker’s uncertainty with how Baker plans to spend the money.
“I believe that the T needs some funding and that’s something that we’re talking about. Again, through the give and take of negotiations, that’s where we ended up,” she said.
