Business leaders voice concerns over state spending trends | Regional News

November 27, 2023

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BOSTON — State spending rose at “breakneck speed” over the last five years, according to business leaders who are calling on Beacon Hill Democrats to slam the brakes on the rate of new expenditures and use the tax code to make Massachusetts more competitive.

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“The drastic increase in government spending over the past five years is a growing concern for our future competitiveness and may detrimentally impact the long-term fiscal health of Massachusetts,” the heads of nine business groups said in a letter to Gov. Maura Healey and legislative leaders released Tuesday by the Greater Boston Chamber of Commerce.

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As state officials ramp up the fiscal year 2025 budget process, the business groups are asking them to limit spending growth to the inflation rate and to revisit tax reforms if they determine that projected revenues will outpace inflationary growth.

Total spending out of the state’s General Fund increased by 26.7 percent between fiscal 2018 and fiscal 2022, a time when the Boston area consumer price index grew at 14.7 percent over the same period, according to the letter.

A total of $39.9 billion in expenditures in fiscal year 2018 grew to $50.6 billion by fiscal 2022, according to data from the Greater Boston Chamber.

“The budget growth is particularly striking when looking at outcomes and the state’s recent performance in areas key to our continued growth and competitiveness,” the chamber of commerce leaders wrote. “Massachusetts consistently is among the top 10 of states in per capita state and local expenditures. Yet the greater Boston area has some of the worst traffic congestion in the world, a failing public transit system, and ranks 43rd in the nation for fiscal stability according to U.S. News. Meanwhile, Massachusetts now ranks 46 in the country for its tax climate and 50th in the country for its Unemployment Insurance System.”

State budget officials plan to convene Monday, Dec. 4 to hear from economists about revenue projections over the coming months.

Pulling from a new surtax on wealthier households and significant pots of federal aid delivered during the pandemic, state officials have pumped up annual budgets with investment-oriented outlays, raised the state’s reserves to record highs, and delivered on tax relief with about $3 billion in one-time rebates and this year’s law that spreads out $1 billion in targeted relief.

The business officials called the recent surge in available revenues, which powered both spending and tax relief, an “historical aberration” and said that the recent approach to state spending “is not sustainable and not responsible.”

In interviews with the News Service, James Rooney of the Greater Boston Chamber of Commerce, Tim Murray of the Worcester Regional Chamber of Commerce, and Rick Kidder of One SouthCoast Chamber all pointed to recent revenue numbers that could indicate that the state’s revenue surge of the last few years is slowing down.

Murray, a Democrat who served as lieutenant governor for Gov. Deval Patrick during the Great Recession, said he was wary of leaning on unsustainable revenue that can lead to making cuts when times get worse.

“It can be heart-wrenching, because these are good programs, and good work that’s being done. But you’ve got to have a balanced budget, so there are consequences to some of those cuts,” Murray said.

New investments and program expansions just in the last year include guaranteeing free school meals for all public school students; a slate of higher education tuition relief initiatives; a major boost in funding for the state energy and environment office; and record-high investments in unrestricted government aid and student transportation.

The letter was signed by Rooney; Murray; Kidder and Michael O’Sullivan of One SouthCoast Chamber; Rick Sullivan of the Western MA Economic Development Council; Karen Andreas of the North Shore Chamber of Commerce; Peter Forman of the South Shore Chamber of Commerce; Greg Reibman of the Charles River Regional Chamber; Jonathan Butler of 1Berkshire; and Paul Niedzwiecki of the Cape Cod Chamber of Commerce.

Together, the groups represent more than 10,000 employers in Massachusetts.

The chamber leaders also drew attention to what they called “continued and renewed attacks on ensuring accountability for major areas of state spending.”

In the recent battle that has developed over whether to keep standardized testing as a graduation requirement for high school students, the business community has largely come out in favor of keeping the accountability measure in place.

Massachusetts spends among the highest per student of any state, the chambers’ letter said, with only four states spending more. Given the high level of investment in students’ education, the business leaders wrote that “efforts to obscure transparency and reduce accountability for spending” were “troubling.”

The state’s teachers unions and progressive education advocates are supporting legislation and a ballot initiative to uncouple a student’s score on the Massachusetts Comprehensive Assessment System (MCAS) from whether they can earn a diploma.

“Legislation and a ballot initiative to eliminate the MCAS testing requirements that hold local school districts accountable for education outcomes will harm the effectiveness of the Student Opportunity Act and rob the Commonwealth of key data on the state’s strong education system,” the letter said. “We cannot allow continued increases in education spending to be coupled with reduced accountability and expect to compete in a 21st century economy.”

With a signature-gathering deadline for ballot questions coming up on Wednesday, the Massachusetts Teachers Association claims they’ve gotten more than enough signatures to move to the next step of getting the MCAS question before voters in 2024.

“The Legislature has been very generous with respect to education funding over the years, and trying to provide the resources necessary to lift up local school districts,” Rooney said. “I think anyone, whether you’re a consumer, taxpayer or business leader, I think everyone sort of feels the need to seek the value of that spending.”

Rooney said there’s value in “measuring output and the results of spending.”

The chambers also called on lawmakers and Healey to build a more structured system for measuring the use of newly-available dollars from the income surtax voters approved last year on wealthy households.

Lawmakers carved out a separate fund for this money earlier this year, so the surtax dollars aren’t dumped into the General Fund. Voters approved the surtax specifically to finance education and transportation investments.

“The remaining question is, how will we know that the promise of the tax was delivered on?” Rooney said. “What are we going to look back on, two, three, five years from now and say — well the proponents can say ‘I told you so,’ and for the opponents, they can say ‘I was wrong, it actually delivered results.’ How are we going to know that?”

Kidder, who represents South Coast businesses, said that a stronger accountability system for state spending was also at the top of his priority list.

“Partly, this is important because of the increasing amount of new policies coming about as the result of ballot initiatives. Ballot initiatives, in their own right, are extraordinarily valuable for getting a direct feel from the electorate,” Kidder said. “But when you start creating expensive solutions to perceived problems, those expensive solutions end up usually with the business community having to bear the brunt of it.”

He added, “The business community does not have a limitless capacity to fund state government.”

A Tax Foundation report released Tuesday showed that Massachusetts was in the top five states in per capita tax collections.

In fiscal year 2021, the District of Columbia surpassed all states with $13,278 collected per person. New York followed at $10,266, with Connecticut, California, New Jersey and Massachusetts not far behind.

The report said Massachusetts brought in $8,101 in state and local tax collections per person that year.

On the other end of the spectrum, Alaska was the lowest at $4,192.

“Businesses large, small or medium sized aren’t just competing with the person on the street or the next town over anymore,” Murray said. “In today’s environment, similar businesses compete from other states. So making sure that Massachusetts is competitive and cognizant of what’s happening in other states is important, and the state budget plays a role in that process.”

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