Billions and Billions...

Sitting on roughly $5 billion in unbudgeted tax revenue from last year, the House on Wednesday passed a $303 million budget to cover old expenses, but delayed choices on how to spend the bulk of the surplus until later this fall as the Legislature also considers how to use billions of dollars in American Rescue Plan Act funds.

The approach means the Legislature pushed off deciding whether to embrace Gov. Charlie Baker's plan to use $1 billion from the fiscal 2021 surplus to replenish the state's unemployment insurance system, which employer groups have been lobbying for aggressively in recent months.

House Ways and Means Chairman Aaron Michlewitz and Senate Ways and Means Chairman Michael Rodrigues announced a deal between branch leaders on Wednesday morning that would allow Comptroller William McNamara to close the books on fiscal year 2021, which ended on June 30.

"This budget addresses time-sensitive deficiencies that require the Legislature's attention to close the books on FY21 and sets aside unobligated FY21 surplus funds to be considered later in the fall," Michlewitz and Rodrigues said in a statement.

The two Democrats referred to the bill that passed the House as a "bill-paying" budget for fiscal year 2021 that would also give the Legislature additional time to consider how to spend the remainder of the surplus.

McNamara faces an end-of-October deadline to balance the state's finances and file a report for the state's creditors, though that timeline has been disregarded in the past.

"In addition to meeting our fiduciary responsibilities, closing the books on FY21 as expeditiously as possible will allow us to continue our collective work to craft a comprehensive American Rescue Plan Act spending bill," the two chairs said.

The Democrats said a bill to spend ARPA money would be forthcoming "in the weeks ahead." The Legislature recently wrapped up a series of public hearings focused on the ARPA relief money, and House Speaker Ron Mariano has identified mid-November, when the Legislature breaks for its holiday recess, as the target for finalizing a bill to spend at least some of the state's funding.

After fiscal year 2021 tax revenues surpassed expectations by roughly $5 billion, Gov. Charlie Baker filed a $1.6 billion closeout budget in August that would have directed $1 billion of the surplus into the state's unemployment insurance trust fund, which was depleted during the pandemic.

Baker's plan also accounts for $2.2 billion in surplus funds being used to bolster the state's "rainy day" fund, and the governor proposed additional spending for union contracts, human service worker pay increases, 800 temporary shelter beds and other priorities.

Both the governor's bill and the Legislature's plan include about $17 million for shelters, but legislative Democrats did not include $39 million in rate increases for frontline health providers or the $40 million proposed by Baker for one-time bonuses of up to $2,000 for state employees required to work during the pandemic.

The Legislature's proposal also includes $221 million, or $185 million less than requested by Baker, for collective bargaining agreements and public employee wages.

The Massachusetts Taxpayers Foundation estimated that the House-Senate agreement would leave about $1.5 billion in surplus tax revenue that could be spent alongside the $4.8 billion in remaining ARPA funds.

The governor's office did not respond to a request for comment on the Legislature's approach, but last week reacted to strong September tax receipts by pushing for lawmakers to adopt his plan.

"Thanks to a strong recovery and smart budgeting, MA has a surplus - it's time for lawmakers to return those surplus tax dollars and pass our plan to deliver small business relief," Baker tweeted.

The Legislature has authorized up to $7 billion in borrowing over the next 20 years to stabilize the fund used to pay unemployment benefits and spread out the cost to employers, but business groups have been urging Beacon Hill to use surplus and ARPA funds to reduce the burden on employers.

"The sooner the state uses some of the federal money or excess tax revenue or whatever they can use to offset the deficit to employers the better position employers will be in," said Chris Carlozzi, state director for the National Federation of Independent Business.

Carlozzi said more than 30 states have used ARPA or CARES Act funding from the federal government to pay off some of the debt accrued during periods of high employment caused by the pandemic.

"We feel it's a point of equity," Carlozzi said. "I'm optimistic they will do the right thing in the end. We were happy to see Gov. Baker put it in the supplemental budget, but the point is we need to see this happen soon."

Carlozzi said more than 30 states have used ARPA or CARES Act funding from the federal government to pay off some of the debt accrued during periods of high unemployment caused by the pandemic. By acting sooner, Carlozzi said, the state can potentially avoid interest costs once Treasury borrows the money needed for the UI trust fund and businesses can plan for future hiring and growth.

The House passed the budget bill (H 4200) on a voice vote Wednesday afternoon, sending it to the Senate. The Senate meets next on Thursday, when the House will also be in session and could finalize and send the bill to Baker's desk.

In addition to not transferring any money to the unemployment trust fund, the House and Senate compromise bill does not address Baker's revived attempt to implement a tax deduction on charitable giving.

That charitable tax break was approved by voters in 2000, but was only available for one year before it was suspended by lawmakers. As part of the fiscal year 2022 budget, the Legislature delayed the implementation of the tax break for another year, over the objection of Baker.

The bill does propose to spend $20 million on grants for state-approved special education schools to address the impacts of COVID-19, and more than $5.37 million on staffing and upgrades or expansions to facilities that treat men with alcohol and substance abuse.

The state's 14 sheriffs would receive more than $25.5 million in additional funding to cover expenses from last year, and $5 million would go toward supportive housing to mitigate overcrowding in homeless shelters.

Similar to Baker's bill, House and Senate leaders have also proposed to spend $2.8 million to reimburse Worcester State University and Quinsigamond Community College for educating former students of Becker College's nursing program.

 State House News Service