BOSTON — Senators stamped their approval on a $575.4 million economic development borrowing package just after midnight Friday, hitching to it a controversial change to a voter-approved tax rebate law and artificial intelligence regulations as the sprawling package moves toward negotiations with the House.
Senate President Karen Spilka’s office described the authorizations as “investments to boost every aspect of the Massachusetts economy,” including $100 million for growth and job creation in the defense sector; $75 million for the development and application of AI; $25 million for downtown and Main Street vitality; $25 million for research and development of robotics technology; $20 million to support construction for early stage and high growth business ventures; $20 million for community development financial institutions and small businesses; and $25 million to support arts, culture, and the creative economy.
It also opens the door to duplexes being allowed on all residentially zoned lots subject to local limits, creates new safety standards for motorized scooters and e-bikes, bans the operation of cryptocurrency kiosks in Massachusetts, provides $100 million in bridge funding for public higher education institutions to help keep research going, imposes a 110% cap on prices charged by ticket resale platforms for music concert tickets, allows municipalities to elect to revive “happy hour” discounted alcohol sales policies, and automates and expedites the process of sealing criminal records.
“The bill we passed today will help small businesses cut through red tape, provide opportunities for new families to find a home they can afford, and set our state up to face the challenges and embrace the opportunities of the coming years,” Spilka said in an early-morning statement.
Senators appeared poised to use the economic development bill (S 3178) to repeal the voter-approved tax cap law that mandated nearly $3 billion in rebates for taxpayers in 2022 and disrupted Democrats’ own plans. Sen. Jason Lewis of Winchester’s amendment to repeal Chapter 62F had the support of at least half the Senate, but it was redrafted to instead revise the law before it came up for a vote Thursday evening.
Lewis said his original repeal amendment, “as I intended, led to some very good conversations with my colleagues and with some tax experts, and that led to the redraft that is before the body tonight.”
The updated version, Lewis explained, would require that Chapter 62F rebates only be triggered if state tax revenue in a given fiscal year is equal to 7.5% or more of the total statewide personal income reported for that year.
He said it was an attempt “to be consistent with the will of the voters when they first approved 62F, which was essentially to say if there are years where there is very robust revenue growth and the state takes in more revenues than would be expected … based on the underlying growth of the state economy, then that excess revenue should be refunded to taxpayers.”
Minority Leader Bruce Tarr pushed back on that idea, and the Lewis amendment ultimately passed 31-8 with Democrats Michael Moore of Millbury, Mark Montigny of New Bedford and John Velis of Westfield joining the Senate’s five Republicans in opposition.
“The intent of the voters was clear when they spoke. Their language was clear. It’s worked, despite the fact that a couple of times we’ve tried to adjust it. It doesn’t need any further adjustment,” Tarr said.
Tarr repeatedly cited the tax and business climate in Massachusetts during debate, including research from the Pioneer Institute that put the Bay State economy in the category of “in recession or at high risk.” He pointed to other metrics showing the state at second-highest debt per capita, ninth-highest tax collection per capita, 11th in tax competitiveness and with business-application growth over the last six years running near half the national average.
“We cannot spend our way out of the economic posture that we’re in. This bill makes many important investments … and investment is important, but it’s only part of the equation,” Tarr said, estimating roughly $500 million in debt service costs on the $321 million authorization to borrow.
He added, “As we consider this bill, we need to think about the context that we’re in. We need to think about the things that are driving us to be low in business formation, high in outmigration of adjusted gross income. And we need to think about how to address those, and we need to think about how to be more competitive. And that is not solely achieved by spending more borrowed money.”
Rodrigues, the Ways and Means Committee chairman, acknowledged that “Bay Staters are facing numerous challenges in their day-to-day lives” but stood by the borrowing package as a path to a less stressful economy.
“It just isn’t as easy as it used to be to simply get by. This economic development bill is our way of stepping up and putting our money where our mouth is as our response. As we have seen time and time again, when our state encourages robust investment in its economy and its people, the results follow,” the Westport Democrat said. “In a commonwealth that prioritizes strong economic development, there are good jobs for all of our residents. In a commonwealth that prioritizes strong economic development, housing is more affordable, and there is plenty of it. In a commonwealth that prioritizes strong economic development, booming industries pay back into our tax base, supporting critical education and transportation investments for our residents.”
During debate Thursday, Tarr pointed out that “the only method in this bill so far for causing economic development is the expenditure of more state money.”
“So let’s remember, the only way to create economic development is not just the expenditure of borrowed state money. Letting people keep and invest their own money is one of the surest ways to create economic growth,” the Republican leader said. “And, yes, it comes with a cost of foregone state revenue. But that foregone state revenue is at the very least not worse than spending taxpayer money to cause economic development.”
The bill authorizes far more borrowing than the state actually realizes. The state’s fiscal year 2027 capital plan includes $295.3 million for economic development policy, as well as $494.7 million for housing.
Tarr proposed an amendment, which failed 7-32 with Democrats Montigy and Velis joining the Republicans in support, that would have doubled the amount of personal income taxpayers can claim an exemption on over the span of four years. He said the personal exemption — $4,400 for an individual, $8,800 for married joint filers — has not been updated for inflation since 2008.
“During that time between 2008 and 2026, inflation has crept in like a thief in the night to steal as much as 50% of the value of the personal exemption,” Tarr said. “So in real value, the personal exemption is worth half what it was worth in 2008 dollars that could be being used to invest in the economy, grow businesses, and create economic opportunity.”
On a party-line vote, Senate Democrats rejected a Tarr amendment that would have eliminated the state’s estate tax. He said doing so would have provided about $500 million in annual tax relief to estate and heirs. Rodrigues called it an irresponsible and permanent revenue reduction.
As is their wont with an economic development borrowing bill, senators loaded it up Thursday with earmarks for projects in their districts.
The Senate adopted a Sen. Paul Feeney of Foxborough amendment to allocate $2 million in economic relief grants for businesses and nonprofits that lost revenues because of World Cup related security restrictions, traffic management, parking and transportation changes and a drop in foot traffic. Priority would be given to businesses and nonprofits along the Route 1 corridor and in communities by Gillette Stadium.
Another Feeney amendment grants $2 million for repairs and upgrades to the Pappas Rehabilitation Hospital for Children, which Gov. Maura Healey proposed shuttering last year as a cost-saving measure.
Senators also adopted a Sen. Michael Moore amendment allocating $5 million for capital improvements to Worcester’s DCU Center.
The amendment to carve out minor league baseball players under a collective bargaining agreement from certain state minimum wage and recordkeeping rules, in line with an exemption the House supported, was withdrawn. So too was the rider to crown “Roadrunner” by Jonathan Richman the official state rock song.