Public Meeting Notice  Stabilization Fund & Long-Term Liability Financing Task Force - 10/16/25 Meeting Agenda

Meeting ID: 928 4769 2208 
Passcode: 697540 

Kickoff Meeting Minutes

Date: October 16, 2025
Location: Virtual (Recorded; open meeting)
Convened by: Administration & Finance (ANF)

Attendees

• Chris Marino (ANF) – Assistant Secretary for Budget
• Laura Taronas (ANF) – Finance Director
• June Matte
• Thomas Smith-Vaughan (Office of the Comptroller)
• Tim Rooney (Department of Revenue)
• Sue Perez (Office of the Treasurer)
• Henry Dormitzer
• Pew Charitable Trusts 
  • Greg Mennis
  • Mark Robin
  • Sheanna Gomes

1. Roll Call

Roll call was conducted. Members were present and the meeting proceeded as scheduled.

2. September 25 Meeting Recap

Staff reviewed key takeaways from the prior meeting, including:

• The Task Force was created to examine financing strategies for the Commonwealth’s long-term liabilities, including capital gains policies and Stabilization Fund funding and sizing.
• In FY2011, Massachusetts implemented a cap on excess capital gains due to volatility; the initial cap was set at $1 billion and adjusted in future years based on economic growth.
• Capital gains collections above the cap are distributed as follows:
  • 90% to the Stabilization Fund
  • 5% to the Pension Liability Fund
  • 5% to the State Retiree Benefit Fund
• While the policy has been effective, analysis suggests it has not kept pace with economic growth. An upward adjustment of approximately $300–$600 million may be warranted.
• Anchoring the threshold to a rolling revenue average was discussed as a potential way to better align with actual economic activity.

3. Task Force Charter: Stabilization Fund Focus

Staff outlined charter requirements specific to the Stabilization Fund, including:

• Reviewing the appropriate long-term level of funding.
• Evaluating best practices for stabilization fund funding and sizing across states.
• These discussions build on the broader review of Section 5G and general best practices for funding long-term liabilities discussed previously.

4. Deposit Policies

Overview of State Practices

• Most states direct year-end surpluses to stabilization funds; some require flat contributions from total revenue or dedicate special revenue sources.
• Examples highlighted:
  • California dedicates a portion of capital gains taxes.
  • Oil-producing states dedicate a share of extraction revenues.
  • Some states tie deposits to economic growth formulas or include discretionary appropriations.

Massachusetts Deposit Policies

• Originally funded solely through year-end surpluses, Massachusetts has since added several dedicated revenue streams.
• Policies align with best practices by using one-time and volatile revenues to build reserves.
• Major deposit sources include:
  • Excess capital gains (primary driver of fund growth since FY2011)
  • Casino gaming revenue
  • Abandoned property revenue growth
  • Certain tax judgments, settlements, and lottery withholding
• Interest earnings are generally retained, though temporarily redirected for federal matching and capital purposes.

5. Fund Sizing

• Capital gains collections have driven significant Stabilization Fund growth, with balances increasing by more than 130% since the pandemic.
• State comparisons show average stabilization fund balances of $3.5 billion, or 16.5% of general fund expenditures, in FY2024.
• Best-practice benchmarks discussed:
  • 5% of expenditures (NCSL)
  • 15% of expenditures (CBPP)
  • ~60 days of operating expenses (~16.7%) (GFOA)
• Members discussed the value of budget stress tests as a more dynamic sizing tool, particularly given revenue volatility differences across states.
• Massachusetts currently performs well against traditional sizing metrics.

6. Withdrawal Policies

• Massachusetts requires a legislative vote and a Joint Committee on Ways and Means hearing prior to withdrawals.
• Eligible uses include:
  • Revenue shortfalls
  • Replacement of lost federal funds
  • Events threatening public health, safety, welfare, or fiscal stability
• Statutory language allows flexibility while ensuring consensus between the Executive Branch and Legislature.
• Comparisons to other states highlighted alternative withdrawal triggers tied to economic indicators.

7. Pew Analysis and Best-Practice Considerations

• Pew research emphasized the importance of saving during periods of high revenue to manage economic downturns.
• Key considerations discussed:
  • Whether the capital gains deposit rule effectively captures temporary revenue spikes.
  • Strengthening withdrawal rules to ensure reserves are primarily used for downturns.
  • Using stress tests to inform savings targets.
• Members noted that the FY2026 enacted budget stress test provides an opportunity to establish clearer savings targets.
• Analysis indicated that while current policies prepare the state for moderate recessions, addressing severe recession scenarios may require broader policy changes.
• Members agreed that stress testing is a critical next step to better understand fund adequacy and use.

8. Upcoming Schedule

• Week of November 3: Pension Liability Fund (unfunded liability, market performance, stress testing)
• Week of November 17: OPEB and other long-term liabilities
• Week of December 1: Key considerations and recommendations
• Week of December 15: Final report

9. Key Takeaways

• Massachusetts’ deposit policies, particularly excess capital gains rules, compare favorably with other states.
• Regular stress testing would strengthen policymaking around fund sizing.
• Withdrawal parameters could be clarified or strengthened to establish clearer best-practice guidance.

1. Roll Call
2. 09/25 Meeting Recap
3. Stabilization Fund Review 

• Deposit Policies
• Fund Sizing and Stress Testing
• Withdrawal Policies 

4. Upcoming Schedule/Topics