Gov. Maura Healey delivers her second annual speech to a joint session of the state legislature in the House of Representatives' chamber of the state house on Jan. 17, 2024. Photo by Sam Doran | State House News Service

Gov. Maura Healey launched into her second year as governor with big spending promises, but Democratic leaders in the state legislature say they aren’t planning to raise taxes to pay for them, even as the state’s fiscal picture looks grimmer than it did a year ago.

Healey’s State of the Commonwealth address included pushes for major spending increases for roads and public transit, moving towards universal free pre-K access for every 4-year-old in the state, and more.

She said the state will “need to be smart with how we spend our money,” after she just made the first mid-year budget cuts in seven years as tax revenues have come in below projections each of the last six months. The governor said the budget she will file next week will be “balanced, responsible – and forward-looking.”

Asked if he would consider proposals to raise taxes to pay for lofty spending promises with fiscal stormclouds gathering, House Speaker Ron Mariano said “life goes on” and pointed to a tax cut package lawmakers and Healey passed last year.

“No we’re not going to raise taxes, we just lowered taxes. We’re not schizophrenic,” the speaker said. “We’ve chosen the course of action and we think the competitiveness that the tax cut gets us is an important fact.”

Healey’s Big Pledges

Gov. Maura Healey built her State of the Commonwealth speech around big policy changes, several of which will effect real estate.

– Pass her landmark $4.12 billion housing policy and affordable housing finance bill.
– Double operating funding for the MBTA and set up a task force to find new ways to fund transit.
– Renew state investments in its multi-year biotech funding initiatives “for a new era of innovation.”
– Grow Massachusetts into a global hub for climate tech.
– Fund “no-cost” HVAC training at schools across the state for workers who will retrofit existing buildings.
– Increase funding for local flooding defenses.

Mariano praised last year’s tax reforms, which figured prominently into Healey’s speech as well, saying they will “go a long way” to make living in Massachusetts more affordable.

Senate President Karen Spilka also said her chamber is not considering raising taxes.

“That is not something that I believe we are looking at. I believe, you know, that we will take a look and closely monitor our revenue for the coming months, for the coming year, and we will take a look. We will take a look at the governor’s budget, and then the House will do its budget and we’ll do ours. But we will closely monitor our revenue,” Spilka said.

How to Pay for T Spending?

The state budget has ballooned in recent years, in line with a surge in tax collections since the beginning of the COVID-19 pandemic. The budget in fiscal year 2020 was slightly above $43 billion, compared to the $56 billion fiscal 2024 budget.

Just before the pandemic hit in 2020, the House approved a package of tax and fee increases to increase funding for the MBTA and transportation projects. The Senate didn’t take up the bill and then Beacon Hill’s priorities shifted to addressing the pandemic.

On Wednesday night, Healey proposed doubling support for MBTA operations and addressing deferred maintenance on the system that has become increasingly unreliable and unsafe in the time since.

However, without raising taxes and with less general tax revenue to spend in the next budget than was originally appropriated for fiscal 2024, when asked how the state would afford Democrats’ spending priorities both Mariano and Spilka said they look forward to seeing the details of Healey’s budget proposal.

“Well, that remains to be seen,” Mariano said when asked how the state could pay for all the spending Healey proposed in her speech Wednesday night.

He added, “The devils are in the details, and she’s going to release her budget in a week or so. And we’ll have to look at the details then, compare it to the line items that we’ve traditionally funded that affect a lot of the same people that she’s highlighted in these new programs.”

One potential way out: The governor also pledged to “increase funding for local roads and bridges to record levels, with special investments dedicated to rural communities,” and convene a task force to rethink long-term transportation financing questions “in the clean energy era,” a potential nod to expectations that gas tax revenue that in part pays for road maintenance will dry up as electric vehicle usage increases.

“I promise under our administration, we aren’t kicking the can down the road any longer on anything difficult,” Healey said during her nearly hour-long speech in the House Chamber.

Other Players’ Competing Priorities

Spilka agreed with some of the priorities that Healey laid out, including education spending.

“These are bold plans,” Spilka said. “When you talk about critical areas such as early education and care, COVID highlighted how broken and totally out of reach, because of how expensive it is for so many families. We need to do something in early education and care.”

Spilka last week indicated that the Senate will also propose making community college free for all residents in its own version of the budget.

Though some Republicans were wary of top-dollar spending priorities, Republican Rep. Donald Wong of Saugus said he agreed with the governor’s points on education.

“Yes,” he answered, when asked if he agreed with her list of priorities. “And you know, one of the things that’s very important is education for the kids. We’re not just competing against kids in the U.S., we’re competing against kids around the world. And we have to get our kids up there so they can have the good jobs, good companies, and be our future.”

Democrats for Education Reform applauded Healey’s announcement of significant investment in early literacy. The governor announced a program she’s calling “Literacy Launch” with funding to go towards educator training programs and better curriculum materials.

“We applaud Governor Healey’s historic announcement of Massachusetts’ significant investment in early literacy. The importance of teaching our children to read with research and evidence-based curricula cannot be overstated. Funding for teacher professional development to support educators is also an essential component of the Governor’s vision for student success,” Mary Tamer of Democrats for Education Reform said in a statement.

Former House Ways and Means Chairman Jeffrey Sanchez of Boston said, “There’s an optimism that’s here right now relative to early education and pre-K than I think that I’ve felt in a while, so I think it’s exciting.”

Biz Leader Praises Transportation Vision

MBTA General Manager Phil Eng said Healey’s vision for the T – which includes significantly higher state investment for the beleaguered system – was “very inspiring.”

“Transportation she talked about, quality of life, families, future generations — it’s everything that I look for in public service. And I’m just really proud to be part of it,” the GM said on his way out of the House Chamber.

Greater Boston Business Chamber President and CEO Jim Rooney said he was encouraged by the governor’s “enthusiasm and optimism for our future,” and making “sure that our workforce and businesses stay and grow here,” through new approaches to housing affordability, transportation fixes and immigration reform.

“For the transportation crisis, I was pleased to hear the Governor’s recommitment to advancing meaningful solutions. The Chamber has long advocated for a focus on developing a long-term strategic transportation funding plan for the Commonwealth; we were pleased to hear the Governor embrace this recommendation and look forward to hearing more details on the make-up and charge of the task force she announced tonight,” he said in a statement.

Rooney and the Greater Boston Chamber have long championed the idea of “mobility pricing” – adding tolls to more of the state’s highways, with the option of raising and lowering them based on congestion – to raise more money for public transit.

GOP Raises Fiscal Questions

But not everyone was completely sold on all of the governor’s proposals.

“I think we heard one half of the equation tonight, which has some very ambitious goals for some very important subjects like climate change, education, housing, transportation. What we are still yet to hear is the other half of the equation, which is how are we going to keep the budget balanced in the face of taxpayers fleeing Massachusetts?” said Senate Minority Leader Bruce Tarr.

There has been a general trend of domestic outmigration out of Massachusetts over the past two decades, though the state did see its population bounce back and grow in 2023 after a dip in 2022.

“Governor Maura Healey has an opportunity to tackle head on the issue of our declining economic competitiveness and address the ever-growing flight of wealth and people from our state. Over the last year, Massachusetts has seen thousands more people leave, taking with them millions of dollars that are not being replaced. The emergency budget cuts Healey was forced to enact just days ago are only one symptom of this growing problem,” Massachusetts Fiscal Alliance spokesman Paul Craney said.

Tarr said Republicans are “not going to be bystanders in the budget process.”

“How are we going to make sure that as we reach for the stars, that our feet are on a solid financial footing?” he said. “And that may not be as glamorous or exciting as some of the things that were discussed tonight, but it’s equally as important if we’re going to pursue all of these things, many of which are important and many of which philosophically we have no disagreement with, then we also need to deal with the reality of the fiscal climate that we’re in.”

Retailers Call for More Tax Reform

Business groups stressed that they think the governors’ focus needs to remain on making the state more competitive through changes in tax policy and spending.

“Our existing tax policy must be heavily scrutinized as revenues continue to decline and the realization sets in that Massachusetts cannot tax itself into prosperity. It is essential that Governor Healey and Beacon Hill lawmakers work to make the Commonwealth more conducive to economic growth by instead easing tax burdens and avoiding costly new labor mandates for small businesses seeking relief in an increasingly unaffordable state,” said Christopher Carlozzi, Massachusetts state director for the National Federation of Independent Business.

Jon Hurst, president of the Retailers Association of Massachusetts, said the speech was “very positive” but that there is still more to do to stay competitive with other states. He called for investments in small businesses to be the “primary focus of the economic development plan.”

“But much more is needed to move us forward in keeping the Commonwealth competitive vs the other 49 states, including reforming our worst in the nation Unemployment Insurance system. And equally important to us being able to compete with other states, are our efforts to achieve competitiveness and fairness within the actual borders of the Commonwealth. We must eliminate state discriminatory laws which create higher costs for our in state small employers vs their big employers competitors,” Hurst said in a statement.

Most lawmakers, former lawmakers, advocates and other state officials’ praised the speech on their way out of the chamber on Wednesday night – a nearly hour-long speech during which there were at least 48 rounds of applause.

As to whether Healey’s “big vision” is attainable, former Senate President Stanley Rosenberg put it: “Nothing happens overnight. But if everybody puts their shoulder to the wheel, good things will happen.”

State House News Service staff writer Sam Doran contributed reporting.

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