Public Meeting Notice  Stabilization Fund & Long-Term Liability Financing Task Force - 11/17/25 Meeting Agenda

Meeting ID: 968 4385 7576 
Passcode: 155797 

Date: November 17, 2025
Location: Virtual (Recorded; open meeting)

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)
• John Borak (PERAC)
• Henry Dormitzer
• Pew Charitable Trusts:
  • Greg Mennis
  • Sheanna Gomes
  • Mark Robyn
  • David Drain
  • Stephanie Connolly

Opening & Roll Call

Chris Marino opened the meeting, noting that it is a public meeting and will be recorded and posted. Roll call confirmed quorum.

Recap of October 16 Meeting

Chris provided a summary of key takeaways from the prior meeting:

• Massachusetts’ Stabilization Fund deposit policies are strong, particularly excess capital gains rules.
• The Commonwealth generally meets national benchmarks for a healthy rainy day fund.
• There is interest in strengthening withdrawal parameters or at least establishing clearer best practices.
• The Stabilization Fund should be viewed as one tool among many, not the sole solution during downturns.
• Stress testing was identified as a critical next step to better understand fund adequacy and use.

Stabilization Fund Stress Testing (Pew Presentation)

Purpose & Framework

Pew reviewed the role of budget stress testing to:

• Inform target size of the Stabilization Fund
• Understand how reserves perform under recession scenarios
• Support proactive, routine fiscal planning

Best practices highlighted:

• Routine stress testing (e.g., Minnesota, North Carolina)
• Use of stress tests to explicitly inform savings targets
• New Mexico cited as a non-statutory example of effective use

Time Horizon Discussion

• Pew updated analysis to focus on a 3-year revenue loss horizon, rather than 5 years.
• Rationale:
  • The first 2–3 years are most critical for reserve usage
  • Longer-term revenue losses often reflect permanent economic shifts
• North Carolina uses a 2-year horizon; a 3-year horizon may better reflect Massachusetts’ policy commitments and spending rigidity.

Key Findings

• Current Stabilization Fund balance (~$8 B) was compared to modeled 3-year revenue shortfalls.
• Analysis illustrated how much of projected gaps the fund could cover under various downside scenarios.
• Capital gains volatility analysis showed that under a hypothetical 5G-style policy in prior recessions, 13–16% of revenue could have been saved, helping approach recommended benchmarks.

Clarifications

• Pew clarified that “percentage of shortfall” reflects how much of the cumulative 3-year revenue gap could be filled using current reserves.

Discussion: Role of the Stabilization Fund vs. Broader Toolkit

Key Themes

• The Stabilization Fund is critical but insufficient on its own, even in moderate downturns.
• Spending pressures (Medicaid, human services, safety-net programs) often increase during recessions, worsening fiscal gaps.
• Case studies suggest the Stabilization Fund is most heavily used in the first year, serving as a bridge while longer-term solutions are developed.

Utah Toolkit Comparison

• Utah’s fiscal toolkit prioritizes other measures before drawing on reserves.
• Discussion raised questions about:
  • Whether this sequencing is realistic during sharp revenue shocks
  • How statutory and constitutional constraints shape toolkit order
• Pew noted Utah’s model reflects legal accessibility of tools, not just policy preference.

Fund Size Considerations

• Participants noted the Stabilization Fund is significantly larger today than in prior recessions.
• Context provided:
  • FY2008 tax revenue ≈ $20B; today ≈ $40B
  • Adjusted comparison suggests the fund is roughly twice as large, not four times
• Concern raised that a larger fund could make draws an “easier first answer,” underscoring the need for guardrails and planning discipline.

Goals During a Recession

The group reviewed high-level objectives to guide fiscal response:

• Maintain balanced budget and fiscal health
• Preserve strong credit ratings
• Balance short-term response with long-term sustainability
• Use reserves strategically over time, not all at once
• Support economic recovery and avoid actions that hinder growth
• Protect key investments in education, workforce, and businesses

Fiscal Toolkit Overview (Based on MA Case Studies)

Spending-Side Tools

• Hiring freezes, layoffs, furloughs, early retirement incentives
• Pausing discretionary spending
• Rate cuts and contract restructuring
• Agency consolidation and administrative efficiencies
• Pausing statutory funding formulas (e.g., Chapter 70, Chapter 257)
• Pension schedule adjustments
• Debt refinancing and management
• Temporary shifts in capital financing

Revenue & Resource Tools

• Broad tax packages (income tax, sales tax base changes)
• Targeted tax actions (amnesty programs, loophole closures)
• Fee and license revenue maximization
• Use of off-budget trusts and special revenue funds
• Accelerated federal reimbursements or settlements
• Cost-shifting with quasi-public entities
• Sale of surplus state assets

2001 Recession Case Study

Revenue Impact

• Immediate tax revenue decline of ~14.6%
• Faster recovery compared to later recessions

Tools Used

• Stabilization Fund transfers: ~$1.55 B (FY02–FY03)
• Tax package: ~$1.2 B (cigarette tax, elimination of charitable deduction, reduced exemptions)
• Transfers from other funds (~$600 M combined)
• Pension schedule extension (5 years), saving ~$134 M
• 9C cuts: $120 M (FY02) and $420M (FY03)
• Workforce reductions and early retirement programs
• Debt refinancing to capture lower interest rates

Takeaways

• Heavy reliance on the Stabilization Fund in the first year
• Broader mix of tools layered in over time as policy solutions developed
• Draws declined as other measures took effect

Key Takeaways & Looking Ahead

• Stress testing provides valuable context for reserve adequacy and usage strategy.
• Stabilization Fund should function as a bridge, not a substitute for structural solutions.
• Clear goals and sequencing matter, especially given today’s larger budget and fund balance.
• Case studies reinforce the importance of combining reserves with policy actions over time.

Next Steps:

• Continue recession case studies (Great Recession)
• Further discussion of pension liability financing
• Identify potential best practices for Stabilization Fund withdrawal guidance

1. Roll Call
2. 10/16 Meeting Recap
3. Stabilization Fund Planning
   1. Stress Testing Follow-up
   2. Recession Toolkit/Case Studies
4. Pension Review
   1. PERAC Overview
   2. Pew Analysis
5. Upcoming Schedule/Topics