FY 2013 Budget Recommendation:
Issues in Brief
Deval L. Patrick, Governor
Timothy P. Murray, Lt. Governor
The FY 2013 budget continues to support the Patrick-Murray Administration’s commitment to creating jobs and putting Massachusetts residents back to work. Using a blend of state capital investments, reorganizing economic development agencies and taking steps to improve the Commonwealth’s business climate, Massachusetts saw significant job growth in 2011. This year, Massachusetts gained 51,600 jobs, which is by far the strongest job growth performance for the state since 2000 – sectors experiencing the highest growth have been those key areas of focus by the Patrick-Murray Administration.
State employment continues to improve, dropping to 1.7% below the national unemployment rate of 8.5% for December 2011. Massachusetts ranks third in economic performance since January 2011, and ranks second in economic performance since January 2007. The Commonwealth was declared one of CNBC’s top five states for business in 2010, and was ranked sixth in 2011.
The Economic Development Planning Council, chaired by Secretary of Housing and Economic Development Greg Bialecki, has outlined five steps that build on the Patrick-Murray Administration's job creation and economic development strategy that has led Massachusetts out of the global economic recession faster than the rest of the nation. Five initiatives are outlined in the Council’s report mandated by the Economic Development Act of 2010:
The council consisted of 34 public and private sector representatives who have worked for eight months to develop the plan. The plan developed the Patrick-Murray Administration will help Massachusetts continue to compete in the global economy by making strategic investments in education, innovation and infrastructure.
The plan builds off the five broad categories that the council identified as most important to help retain or improve Massachusetts’ competitive position the global economy. The steps the council points to in each category describe ways in which government, business and academia can work collaboratively to make Massachusetts more competitive and successful. The council’s strategy and plan also supports effective economic development and job creation initiatives for Massachusetts that will continue to give first priority to helping our businesses and entrepreneurs continue to create and retain jobs here.
A large portion of the state’s efforts to promote job creation and expand employment opportunities are funded through the capital budget, primarily from state bond issuance. The debt service on the bonds is funded in the operating budget, and the FY 2013 budget fully funds debt service obligations at a level sufficient to support the capital investment plan. The state’s annual capital budget provides funding for substantial job-creating projects across the state, including construction in the life sciences industry, higher education and transportation.
The capital budget will invest more than $3.4 B in capital investment projects, more than double the level of state capital investments when Governor Patrick took office five years ago. While many of these investments create construction jobs and otherwise support economic growth, $120 M is specifically targeted to economic development programs, which will prioritize projects that invest in state infrastructure that supports private development and job growth.
In addition, in the FY 2011 year end supplemental budget, the Infrastructure Development Fund was developed to create jobs and stimulate long-term economic development through public infrastructure-related investments made by the Executive Office of Housing and Economic Development (HED) in consultation with the Department of Transportation (DOT). Roughly 28 projects will be under contract in January 2012 and commence construction in the spring of 2012.
Governor Patrick continues to support the MassWorks Infrastructure Program, the one-stop shop for municipalities seeking public infrastructure funding that supports economic development and job creation. Local cities and towns will see up to $94.1 M in infrastructure-related public construction activity during the 2013 construction season through the MassWorks Infrastructure Program and the new Infrastructure Development Fund combined. Projects recently completed through MassWorks grants include:
In support of Massachusetts small businesses, the Administration is leading a comprehensive review of the Commonwealth’s regulatory processes. State agencies are currently reviewing a representative sample of their regulations, specifically those over 12 years of age, to seek opportunities to streamline or rescind state regulations and reduce burdensome regulatory impacts on small businesses. Recommendations should be announced in early 2012.
The FY 2013 budget builds on achievements from the recently-created Mass Marketing Partnership established in the Economic Development Reorganization Bill. The long-term goal of the new agency is to execute a more consolidated and coordinated marketing effort within the Commonwealth for both attracting and retaining tourists and businesses to the state.
The re-organization legislation also created Massachusetts Growth Capital Corporation (MGCC). In its first year, MGCC has provided $13.8 M in loans to 38 companies and two micro-lender intermediaries, leveraging over $36 M in private financing. Its entire portfolio, which includes projects financed through the Economic Stabilization Trust and Community Development Finance Corporation, consists of more than $25 M in loans, and has leveraged $162.6 M in private financing. Recently, the federal government awarded Massachusetts $22 M in State Small Business Credit Initiative funds to support state-level, small-business lending programs. MGCC and the Massachusetts Business Development Corporation (MBDC) will distribute that grant to recipients.
Lastly, the re-organization allowed for the merger of MassDevelopment Financing Agency (MDFA) and Health and Educational Facilities Authority (HEFA), two quasi-public agencies performing nearly-identical functions, eliminating duplicative functions in order to generate savings. MDFA reports that the merger has saved $2.7 M or 77% of operating expenses in the first year. That savings will allow the MDFA to provide more low-cost loans to a larger number of smaller, community-based non-profits in need.
The Governor’s FY 2013 budget provides up to $15 M in funding to the Massachusetts Life Sciences Center (MLSC) and assumes that $25 M in tax incentives will be funded to companies expanding their life sciences activities and creating jobs within the Commonwealth. The FY 2013 budget continues to make essential investments targeted towards job growth, business expansion, and new revenues for the Commonwealth by making additional funding available to MLSC in FY 2013 to provide research grants and accelerator loans to researchers and early-state companies, continuing efforts to promote Massachusetts as a global leader in all stages of business development in life sciences industries, from discovery to commercialization.
Similar to previous years, the first $15 M of any FY 2012 surplus will be made available to the Massachusetts Life Sciences Investment Fund held by MLSC. This funding mechanism has provided continuing state support to the Center for grants and loans, as well as supporting the operations of the agency.
To date, MLSC has invested and committed a combined $219 M across all programs throughout the Commonwealth, leveraged approximately $754 M through matching investments and created 1,965 jobs to date with an additional 5,437 jobs projected through current investments and commitments. Across all programs, the Patrick-Murray Administration’s investments through the Life Sciences Initiative will provide a total of 7,402 jobs created by the end of 2013.
The FY 2013 budget provides up to $10 M in FY 2012 surplus funds to recapitalize the Workforce Competitiveness Trust Fund (WCTF), which will help support both grants for innovative approaches for training and re-employing the unemployed and efforts to create regional “Centers of Excellence” at community colleges or vocational schools.
Calendar Year 2010 saw a return to pre-recession levels of the economic impact of tourism in the Commonwealth:
To build on that momentum, the Patrick-Murray Administration plans to focus on increasing our competitiveness in the international marketplace by increasing our investment to the Massachusetts Office of Travel and Tourism by $5 M. By doing so, we will continue to build on our natural strengths and our location as a gateway to New England.
In July 2008, Governor Patrick signed into law corporate tax reform, which provided a reduction in the corporate tax rate over four calendar years. On January 1, 2012, the final phase of the reduction lowered the rate of 8.25% down to 8.0%, resulting in an additional benefit of $15 M for businesses this year. This reduction reflects the continued efforts of the Patrick-Murray Administration to improve the business climate by making Massachusetts’ tax structure more competitive with other states and create a benefit for every corporate entity in the state, in spite of unprecedented budget challenges over the past several years.
Under Governor Patrick’s leadership, the Massachusetts Health Connector Authority has proposed to expand eligibility for the Small Business Wellness Subsidy offered through the Health Connector’s Business Express program in FY 2013. Business Express helps small businesses (50 employees or less) struggling to survive the economy by simplifying the shopping experience to find affordable ways to offer health insurance to their employees. The law today allows small businesses that buy health insurance through Business Express to get a 15% tax credit rebate that reduces the company’s share of its employee coverage cost of health insurance premiums for their employees. In order for a small business in Massachusetts to be eligible, it needs to meet the criteria identified in the National Health Reform legislation. The Governor’s FY 2013 budget would allow these small businesses to expand their tax credit rebate to cover family members who are also employees.
In addition to the capital program, other non-operating budget funding for job creation comes from the state’s quasi-public partners, such as the Life Sciences Center, the Massachusetts Port Authority, the Clean Energy Center, the Massachusetts Convention Center Authority, MassDevelopment and the Mass Tech Collaborative. These entities are continuing to advance the Patrick-Murray Administration’s objectives to create high-technology jobs that will be needed in the future, particularly in the life sciences and clean energy sectors.
Prepared by the Executive Office for Administration and Finance ·
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