#2020-37 November 6, 2020

Democrats Expand Senate Majority, House Remains Dem Supermajority

Democrats in the state Senate expanded their majority this week, reducing the body’s Republican caucus to three members for the new session beginning in January.  Democrats were not as successful in capitalizing on former Vice President Joe Biden’s overwhelming win in the Commonwealth.  While they will retain their supermajority in the House, it does not appear that there was a substantial change in the makeup of the legislature.  

Lunenburg Democrat John Cronin beat incumbent Republican Senator Dean Tran in north central district.  Democrats held the seat from 1993 until Tran won it in a 2017 special election.  For the next legislative session, the Republican caucus in the 40-seat Senate will shrink to three members -- the fewest seats the party has won in a biennial general election since at least 1970.  

Republicans were able to flip a formerly Democratic-held House seat, with Kelly Pease, a retired Army Officer who worked as a legislative aide for former Republican Senator Donald Humason, topping the ballot in the Fourth Hampden District by about 9 percentage points.  The seat has been vacant since May, when Representative John Velis resigned after winning a special election to fill Humason’s Senate seat.  They also held the Cape-based seat of retiring Representative Randy Hunt, with Steve Xiarhos beating Jim Dever.

In another Cape Cod district, Democrat Kip Diggs reclaimed the seat held by Republican Representative William Crocker since 2017.  In other closely-watched contests, Senator Patrick O’Connor (R-Weymouth), appears to have held onto his seat after a tough contest with Meg Wheeler of Cohasset; Representative Tram Nguyen (D-North Andover) Democrat, also won reelection, fending off a challenge from Republican candidate Jeff Dufour two years after she unseated Representative Jim Lyons.  Democrats Dave Robertson of Tewksbury and Josh Cutler of Duxbury also won on Tuesday.

In addition, former Representative Sally Kerans won the five-way race to succeed Representative Theodore Speliotis, who succeeded Kerans 23 years ago.  Meg Kilcoyne (D-Northborough), who worked as outgoing Representative Harold Naughton’s legislative director for the past 10 years, won the race to succeed him, topping Lancaster Republican Susan Smiley.

Democrats have held super-majorities in both chambers for nearly three decades, margins large enough to ensure they could override any gubernatorial veto.  Republicans last held enough seats to block a veto override in the Senate in the 1991-1992 session.  

House Leaders Release $46B FY2021 Budget, Using Reserves to Avoid Tax Increases

On Thursday, House leaders released a $46 billion state budget for FY2021 that avoids any broad-based tax increases or significant cuts by relying on one-time funding from the federal government and state reserves.  The House budget is approximately $188 million more than the budget Governor Charlie Baker proposed, with a majority of the new funds earmarked for education, food security and substance addiction services. 

The House’s fiscal 2021 budget assumes a $2 billion reduction in tax revenues due to the pandemic and proposes a 5.3 percent spending increase over the $43.6 billion FY2020 budget.  House budget-writers adopted many of the same one-time revenue sources that Baker relied on in his revised budget submission last month, including $550 million in federal CARES Act funding and $834 million in enhanced Medicaid reimbursements for MassHealth.  The proposal would use $13.86 billion in federal money, up from $13.23 billion in fiscal 2020 along with a withdrawal of $1.5 billion from the state’s “rainy day” fund.  Governor Baker had proposed using $1.35 billion in reserves.

Progressive groups have been urging the Legislature to consider taxes on businesses and wealthy individuals to avoid cuts to safety net programs, but business leaders have warned that employers bracing for higher minimum wage and unemployment insurance costs next year could choose to leave the state.  The budget does delay a charitable giving tax deduction that was set to become available for tax year 2021 and House Ways and Means Chairman Aaron Michlewitz (D-Boston) did not rule out revisiting tax increases in fiscal year 2022.

The Association is monitoring several areas of proposed budget including a section restricting courts from finalizing evictions if a tenant has an active application for rental assistance pending with the administration.  This section is regarded as a possible middle ground between the plan put forth several weeks ago by Governor Baker and some House Democrats who want to revive the pandemic eviction moratorium.  House leaders also included $50 million into the Rental Assistance for Families in Transition program. 

We are also analyzing the House proposal to speed up collections of sales taxes from businesses – an idea the Association and a large consortium of business groups have opposed for many years.  Budget writers claim the plan, which mandates that businesses with at least $150,000 in monthly sales revenue remit the sales taxes they collect at the end of each month, instead of the month after they are collected; will net $267 million in one-time revenue.  Unlike the Governor’s proposal, the House provision does not mandate that businesses transition to daily sales tax remittance by 2024.

The House is expected to debate the budget next week, with amendments due by 8 p.m. today.  Speaker Robert DeLeo (D-Winthrop) indicated that he hopes to work with the Senate to deliver the final budget to the Governor by the end of the month.  

MBA Joins Business Groups in Urging Caution on Tax Increases

On Monday, the Association joined nearly 20 statewide business groups and seven regional Chambers of Commerce on a letter to legislative leaders outlining “guiding principals for revenue and the recovery” that cautions that it has never been easier for businesses and jobs to flee Massachusetts and the House and Senate should consider that possibility before imposing new or higher taxes on companies. 

The letter notes that the, “barriers to exit for Massachusetts employers and employees has never been lower” given the way the COVID-19 pandemic has fundamentally changed work for millions of people, and that the fragile economy “requires a go-slow approach to new taxes on business.” 

Raise Up Massachusetts and other advocates have called on the Legislature to address looming budget wounds by increasing taxes levied against corporations, those with annual household incomes over $1 million and investment profits.  A survey conducted by the group showed “large majorities” of Massachusetts voters in support.  

While the letter does not explicitly say the organizations oppose all tax increases or new taxes, it does state that raising taxes now is, “akin to shooting at a moving target with the potential for dramatic long term impacts for the Massachusetts economy.”  As we noted above, House Ways and Means Chairman Aaron Michlewitz said that the House budget does not include any “broad-based” or “targeted” tax increase to balance out spending.  However, he did not rule out revisiting tax increases in fiscal year 2022.

To read the letter, click here.