Black Box Budget: Late, Loaded, and Lacking Transparency

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This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. More than a month after the fiscal year deadline, the Massachusetts Legislature finally sent its $56 billion 2024 budget to Governor Healey’s desk. Despite the budget’s process beginning in late 2022, little is known about how the Legislature arrived at the final product, which plans to spend an additional $3.5 billion more than last year, and even less is known about the role each of our elected officials played in choosing and voting on its priorities. The challenge for concerned citizens facing this black box legislative process is that they may only comment on the features of the budget after it has been completed, offering little opportunity for comment and meager accountability for their representatives’ votes. Worse still, a pliant and unconcerned regional press and supermajorities in each house will mean that the governor will be asked to pass or veto the budget’s provisions, with few political incentives to serve the interests of those without access to Beacon Hill’s inner workings. How should the governor and taxpayers view the priorities revealed in the 6.6% budget increase? How does its provisions meet leadership’s stated goals? And what features, if any, address the governor’s well-founded concerns that Massachusetts remains competitive for future talent and investment? My guest today is Pioneer Institute’s Senior Fellow of Economic Opportunity, Eileen McAnneny, an expert in the Massachusetts budget process. Ms. McAnneny has followed the evolution of the 2024 budget from proposals to final product and will share with us the important features of the current budget and offer her views on whether the stated goals of the legislators match the budget’s provisions. We will also discuss what opportunities may have been missed and what included features may have substantial negative effects on our Commonwealth, citizens, and its institutions. When I return, I’ll be joined by Pioneer Institute’s Senior Economic Opportunity Fellow, Eileen McAnneny.

Joe: Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi. I’m now pleased to be joined by Pioneer Institute’s Senior Fellow of Economic Opportunity, Eileen McAnneny. Welcome back to Hubwonk, Eileen.

Eileen McAnneny: Thanks, Joe. Glad to be here.

Joe: Well, I’m delighted to have you. In this week now, we’re talking about the budget. We’ve just had our Legislature pass their budget proposal to the governor, our new governor, Healey, her first budget for approval. Our listeners have probably heard two things. One, that it’s very late. It’s a month late. We’re into fiscal year 2024, a full month now. And also, this budget is a scale-tipping $56 billion, more than $56 billion, which is a 6.6% increase over last year’s record budget. So, our listeners will no doubt want to know why it’s taking long to produce a budget and also why it’s as big as it is. So, let’s start at the 10,000-feet view and work our way down with some details. For the basics, for people who don’t follow this all the time, where and when does the budget process begin? When did we start trying to figure out how much we were going to spend in 2024?

Eileen: That began really in earnest back in December of 2023 [2022], where they start to have a consensus revenue hearing and they hear from experts as to how much money they think the state will have. And then a number is set in January and then they’re off to the races. The governor files her budget, then the House takes up its version, it goes to the Senate. Finally, it is ironed out in conference. All of that is supposed to happen before the beginning of the fiscal year, which is July 1. Okay, so we’re well beyond a month after that. So, I’ve heard a bit in the press, not much, but a little bit about why these delays happen. But from your perspective, is the delay, again, this is a disagreement, perhaps how the House of Representatives envisions the budget and our Senate envisions the budget. Is this delay a function of deep policy disagreements or is it something else? Is it sort of a power struggle or something structural of that nature?

Eileen: I think it’s a little of both. I think that there are differences, there always are differences between the House and the Senate version, which is why there is typically a conference committee and sometimes it’s just they provide different amounts to various line items. Sometimes there are big policy issues, but I also feel like the deadline almost seems optional, right? That they are no hurry to comply with that July 1 deadline.

Joe: And indeed, there’s no penalty per se, just things get left unresolved. I remember reading something about school lunches, they can’t pick out what they want for their menu because they don’t know how much money they’re going to have to spend. But let’s set that aside for a second and say, okay, analyzing the House’s version versus the Senate before there was any reconciliation, does either reflect a substantial difference in priorities? Let’s say, what does the House prioritize versus what does the Senate prioritize?

Eileen: So, there are a few material differences for sure, but I think both branches are prioritizing education, transportation, housing, workforce development. And then they’re looking at protecting people who are being evicted, they’re looking at early education, delving into a little more detail, they’re looking at universal school meals, they’re looking at free calls for inmates and their families. I mean, there is something for everyone in the budget.

Joe: So, there’s not so much substance, but we’re talking about particulars, the values that they assign to each of those priorities. There’s no profound difference between House and Senate as to what matters, it’s just how much each matters relative to the other.

Eileen: Yeah, I mean, I think at the macro level, that’s absolutely true. Like their focus is on those major things like education, transportation, healthcare, and the like, how they divide the money among those and for what particular, I think is where the rubber meets the road.

Joe: All right, now we’re primarily going to be talking about spending, not revenue, but there are a few variables that, of course, if you’re creating a  budget, you’re saying this is how much we have to spend, they can’t run deficits like our federal  government, they can only spend what they have, but there’s a lot of variables into what can happen with revenue. Haven’t there been, well, let’s say on the upside, there’s been some upside revenue from the newly passed millionaire’s tax, we can talk a little bit more about that. There were some discrepancies, I think there was an unemployment insurance charge back, but I don’t want to answer the question for you. What were some of the primary variables that legislators had to deal with regarding how much money they would likely be able to spend in the next year?

Eileen: So, I mean, I think it really is a guessing game, right? It’s an educated guess every year as to how much money the state will collect. And that is what this consensus revenue hearing I mentioned is all about. They bring in economists and experts who help them in that regard, right? And there are credit rating agencies like Moody’s and so forth that put out forecasts that help inform, you know, that thought process. But at the beginning of the budget cycle, both, well, the governor and the Legislature and the, I’m sorry, the House and the Senate all agree on the amount of money they have to spend. And then where they differ is how they’re going to spend it. So, this year, the consensus revenue figure for the tax revenues was $40.4 billion. And that reflects a slowing in tax revenue growth from fiscal year 2023 to ‘24 than what we’ve seen in the previous years, right? So, we saw enormous growth in tax revenues in several recent years. But from last year to this year, it’s definitely slowed down.

Joe: Okay, so it’s not a — revenue hasn’t gone down, rather it’s increased at a slower rate, right?

Eileen: Correct.

Joe: Correct. So, I want to just take an opportunity then to talk about a topic we’ve talked about on this podcast many times, the millionaire’s tax, the 4% surcharge on income over a million dollars. There’s a lot of debate ultimately got passed narrowly, but here it is, we’ve got it. The original estimate was again, using, if nobody changed behavior and we applied that tax to the past, we would have expected $2.1 billion in revenue from that tax. What has ultimately the house planned on spending from that? What do they now, now that it’s passed, now that they’re looking at the reality of what people do when they see a tax like this, what do they think will — how much money will be generated by this millionaire’s tax?

Eileen: They’re counting on a billion dollars. But I do think it’s important to point out for your listeners. So, when this conversation about the income surtax began, it was about 10 years ago. And so, the revenue estimates that they’re relying on are very dated and a lot has changed. And so, I think they’re absolutely prudent to not expect over $2 billion for the reasons that we’ve talked about before. I think that people will change behavior and it won’t be forthcoming. But also, they just have to be really careful, particularly in these first few years, because a lot of the rules haven’t been clearly articulated. So, there’s going to be a lot of give and take between taxpayers and the department. And I just think they need to tread slowly.

Joe: So, it’s not that the money’s not there. They just want to say, okay, let’s allow for the fact that we don’t know how this is going to come down. We’re going to see how the cards fall. We’re not going to spend it before we actually see it come in. Is that fair?

Eileen: Well, and I think they are accounting for some people changing their behavior. I think they’re not counting on the $2 billion, because I think they do realize that that may not be forthcoming because of people’s reaction to the surtax.

Joe: Indeed, if they knew there would be secondary effects of imposing a tax like this, meaning people would make decisions about their revenue, it would have been nice to have that be part of the debate before the amendment was passed. But that’s water under the bridge. I’m not going to spill milk here. How are in those particular, there was the promise with this particular tax that it would be somewhat segregated from the rest of the budget. And we’d know where that particular money, all money’s fungible, but that particular money was going to be earmarked for education, transportation, those sort of things. How is that, where is that money going?

Eileen: So, I have to say, as a skeptic about the whole income surtax, I think that the Legislature has actually really tried to segregate those funds. They’ve set up separate funds where the money will be deposited. And right now, they’re dividing it. It’s about 52 for education, 48% for transportation, but they are being very transparent or at least trying to. So, I think that they heard the criticism loud and clear — that money’s fungible and it might not go to education and transportation.

Joe: Good. They’re all listening to this podcast. That’s great.

Eileen: Let’s hope so.

Joe: All right. So, let’s talk about, you mentioned at the top of the show that one of the priorities of both House and Senate was to improve education and training in the Commonwealth. I think that’s everything from kids to adults. So, let’s unpack that. If that’s indeed a priority. Let’s talk about early education. What’s the reasoning behind this move? What is it? And how does this, how is this a public good? How should taxpayers feel about our money being spent for more early education?

Eileen: So, there’s a lot to say about early education. And I think a lot of the conversation was really driven by the impacts of the pandemic and the fact that schools were closed. And many people could not work because they didn’t have childcare, right? And they had to care for their children. So, I think that really put a spotlight on early education. Another thing that was happening is that a lot of people were leaving the field of early education. In this economy where there’s a labor shortage, they can get jobs that pay more. And so, it was kind of this one-two punch, you know, there was a demand and then there was a shortage of providers. And so, it really caused people to take a look. I do think some of that has ironed itself out, right? Since, you know, as we’re returning to normal, so-called. And so, I think that we need to get more current data with respect to that. But the notion is in general that if there’s more affordable daycare then more people who are not working will join the workforce and help alleviate some of the workforce shortage that Massachusetts and really the nation is experiencing.

Joe: That seems like a common theme among many of these budget items. We say we can all agree, regardless of our political perspective, that we don’t have enough workers. I don’t go into a single store or restaurant or anyplace that they don’t say we’re desperately short of workers. So, the logic being, if one has a reliable daycare, early education, one can get that job that one wants and relieve some of this pressure with our labor shortage.

Eileen: But having said that, I mean, I do think because there’s not enough money to provide everyone who wants it with subsidized daycare, right? And I think everyone would want it because the cost of daycare is astronomical in Massachusetts. But I do think there should be a priority of who gets these slots, and it should be people who have a job, like for whom this is, you know, their ability to work is contingent upon affordable daycare.

Joe: That seems reasonable, meaning you’re not merely, it’s not merely for educating kids. One has to assume if a mom is staying home, she can well do that. But it’s so that she can actually work rather than, you know, not neither have to work nor have to watch the kids, right?

Eileen: Yeah. Yeah.

Joe: Okay, fair enough. Another sort of along the same line is a lot of talk about the shortage of nurses. A lot of people, not unlike perhaps early education, a lot of nurses or healthcare workers have left the field. We’ve all heard of the horror stories of working through COVID. But that aside, there’s just not enough nurses. So, there’s some big programs to subsidize or encourage students to enroll in low or no-cost nursing programs. Say more about shifting our gear from kids to adults. What’s going on there?

Eileen: So generally, I think, you know, it’s still more of the same thing that we were talking about, where we need to make sure anyone on the sidelines can work, right? Because our workforce is shrinking. And if we want to maintain our current economy or grow the economy in the future, we need more workers, plain and simple. So, this really is about making sure everyone is as productive as they can be. And some of that involves training. I think with respect to nurses, I mean, I would say that’s a subset of this general problem. And I think we have to be careful not to put our thumb on the scale too much for particular industries, right? Because all industries are facing a workforce shortage. And so, I think it’s critical across the board. You know, and I will say, I think in healthcare, we’re going to have to figure out a way to, you know, just to have a very robust pipeline. And I think some of that is for hospitals to have these programs. What we’re also seeing is a lot of employers didn’t invest in workforce training. And now they’re scurrying, and they want the state to be able to address it. But it’s a long-term thing. And I think we just really have to make sure that we have a continuous pipeline because this problem isn’t going away anytime soon.

Joe: I like what you’re saying. Again, you don’t want to pick winners and losers or winning industries or losing industries. You want to, in a sense, ensure that everybody can get the education they may need. Again, along the same lines, I think there’s also something in there for ensuring that adults can go to community college at low or no cost. I have some concern about universal community college, largely based on the fact that there seems to be very little accountability, whether students actually matriculate and whether the skills are getting are actually useful in the workforce. Is there anything in these budgets when we’re subsidizing education for adults? Is there anything that holds either the education institution or the students themselves accountable for all the money they might spend getting these educations?

Eileen: I would say there’s not nearly enough accountability. And that’s something Pioneer is looking into because the state in reaction to this workforce shortage has put a lot of resources into workforce training. And really for all the different types of workforce training that’s necessary, certainly for kids who may not go to college, they need to learn a skill, so to be career ready. There are people who are employed or maybe recently unemployed who need to get new skills. And then there are folks who may have been on the sidelines, right? And they need to come into the workforce too. So, I think it’s really important to understand it’s not a one size fits all. Having said that though, I think the number of programs that are scattered through this budget, it’s really tough to even count and into track. And so, I think we need to do a better job of coordinating workforce training programs and streamlining it so that people can access them. I mean, they don’t do any good if people don’t know about them or they’re put off because it’s just too complicated to figure out.

Joe: Sure. So, you imagine sort of a one-stop shopping where it’s streamlined such that a person who wants training goes to one place and sort of chooses his own path and understands very clearly what their subsidies or options are rather than this Byzantine system we have now where there’s a different program for every kind of job, every kind of training. And one needs to be educated in order to get an education.

Eileen: Exactly, right. And so, I will say though, there is an effort, it’s called Mass Talent. And it is a website where they’re trying to do that, again, just for discrete industries, they need to do it across the board, but they’re starting off, and I think they’ll learn from this pilot. But that is the notion I liken it to like a state-sponsored indeed, right, where you go in, I’m looking for a job, I can plug in what I’m looking for. You have a job and you want to hire someone and we connect, right. And I think we make it as simple as possible.

Joe: Right. Again, this is thing called technology. We might be able to harness it.

Eileen: We should use it sometime.

Joe: All right. I want to talk about a slightly, well, I don’t call it slightly, I think it’s somewhat controversial feature of the new budget. It’s to offer in-state tuition for state colleges. For those students who are coming of age, they’re potential freshmen and they are undocumented. They’re not here legally. This seems to me to be, this is subsidized with taxpayer money. And to me, I’m just looking at it from a 10,000-feet view. If these students want to get an education, I think that’s terrific. They should get an education, but a subsidized education, meaning something that Massachusetts residents and citizens enjoy, that let’s say citizens of New Hampshire, Connecticut, don’t enjoy. So if a New Hampshire student wants to come in and study in UMass, they pay out of state. But if an in-state, undocumented student wants in-state tuition, they are able to enjoy that. Again, these are very normative observations. I don’t want to lead the witness. But what is your view on, a, how much this would cost and whether this is something we want to spend our money on?

Eileen: So, I guess I would say, I think the difference, I mean, there are obviously clearly differences between a student from New Hampshire or an undocumented immigrant. But I think that’s less relevant than the fact that there are many kids in Massachusetts who are native born for whom education is out of reach because it’s unaffordable. And so, I just, I do think we need to think about that, understanding that there are finite resources, how we want to prioritize them. And, you know, one part of me says, that they’re willing to work for it, let’s encourage that, particularly because of the workforce shortages that we’re talking about. But I do think that we want to be rational about how we divvy up finite resources, for sure.

Joe: Indeed. Perhaps that’s a topic for another show. I want to drill down into something, we talked a lot about what sort of baseline the House and Senate. But I think I’ve been impressed by our new governor’s candor about her priorities of the budget. She envisioned more money to help people who are caring for young children or elderly dependents. I’ve read well to be a substantial credit for all dependents. How will this work? And do you have a sense for what this will cost? And has the governor’s priority found its way into what the House and Senate have proposed?

Eileen: Yeah, so I agree with you. I think that the governor has been quite candid that Massachusetts needs to focus on affordability and competitiveness. It’s a new day after the pandemic and we can’t rest on our laurels. And so, I think what you’re referring to is her tax package, which she put forth as a companion piece to her budget, and it was worth about a billion dollars. And there were several important provisions in there. One, in recognition that rents are super high, in addition to housing costs, she increased the rental deduction from $3,000 to $4,000. She also provided seniors with some relief on their income tax return for property taxes that they pay. And then she did a couple of things to help with the Massachusetts competitiveness, which was to reduce the short-term capital gains rate from 12 to 5 percent, and then to make some changes to the estate tax, where Massachusetts is clearly an outlier. And so, she tried to balance between affordability and competitiveness. I, in an earlier publication of Pioneer, said she hit the nail on the affordability, but I think we need to do more on competitiveness. But unfortunately, all of the provisions that were in her tax package haven’t made their way into law yet. So that’s still before the Legislature and the House and the Senate have some big differences.

Joe: I want to double back to, I didn’t want to stumble into the lack of a connection to a tax relief package within this budget. So, let’s shelve that just for a moment, because I want to  keep covering some of the expense, the what’s in the budget itself. One of the things I know that didn’t make it into the budget was this controversy surrounding online lottery sales. You know, I know that’s revenue, right? The lottery makes a lot of money for the state, but we know that lotteries are generally used by people with lower incomes. And as such, I regard them, and I think most economists regard them as regressive taxes, which means opposite to progressive, their taxes on low-income people. Making a regressive tax easier to use, that is, to make it easier for low-income people to buy lottery tickets, to me seems unwise. It didn’t make it into this budget. Do you have any sense of whose big idea this is and why it failed?

Eileen: Sure. So, I think that you have a lottery in the first place because you’re right. It’s predominantly played by lower-income people, and it is regressive, but we opted to do that many moons ago.

Joe: That ship has sailed.

Eileen: So, then I think the question is, do you allow the lottery to compete with the online gambling that we’ve allowed, the sports betting that we have recently out, right? And so, I think that’s part of the question. And I think the host said, let’s go to i-Lottery. We’ll make it more convenient for people. Maybe we’ll increase the pool of people who play it with convenience. And so that was a priority of the House. The Senate did not go along with it, and it did not make it into the final budget.

Joe: Okay. All right. Now, there was some money given to the state from the federal government, the American Rescue Plan Act, the ARPA money. Some has been spent, some hasn’t. Is the federal money, the emergency relief money, is any of that being spent in this budget?

Eileen: There’s a couple of hundred million. So, in this budget, what’s different than the past couple of years is they do rely on some reserves. And so indirectly, they’re taking some ARPA money, because what they did is what the ARPA law required is that money had to be appropriated by a certain date and then it has to be spent. I’m pretty sure it’s by the end of 2025, or maybe it’s 2026, but there is a deadline for spending the money. So, Massachusetts put a lot of the money into a trust fund, and now they’re drawing on that trust fund, $205 million to balance the budget.

Joe: And well, I’ll move on to the next idea. We’ve been keeping an eye out for money dedicated to mental health. A lot has been made both after the pandemic. We’ve got a perhaps an uptick in issues related to mental health. Do we have money dedicated to that? And I’ve read somewhere whereby we have money earmarked for these programs, but it’s yet to be spent. Is that part of the budget?

Eileen: Well, I think that’s true of a lot of the ARPA money, right, where it has been earmarked or appropriated, but it hasn’t been spent yet. And I will say that behavioral health, mental health is a big priority of the Senate, particularly the Senate President, who’s been very candid about her own family’s struggles with mental health. So, I think we’ve seen a lot of money geared towards that. And I think appropriately, as you say, to me, the big, really, the kind of un-talked-about pandemic has been the mental health crisis in this country, post-COVID. And so, they’re trying to get the money out the door that they have some new programs, they’re trying to stand up and so forth. So yeah, that is a big priority.

Joe: All right, I want to drill down into a budget area that we talk about amongst the sort of Pioneer wonky people about that, I think deserves coverage on this topic, because we’re talking about the budget. And in this budget, and perhaps under the radar of many of the sort of news commentators who might look at this, I have grave concerns. I don’t know if you share mine about this, these new subsidies, these health insurance subsidies for the Mass Health Connector. At a 10,000-feet view level, I think we used to subsidize plans for low-income people, which is fine, I suppose. But during COVID, we raised the standard for the income level that one needed to have in order to be eligible. In other words, higher and higher incomes became eligible. I have read that we’re talking about potentially raising that so high that average citizens above average incomes may be eligible for this Mass Health Connector. I’ve had earlier podcast episodes on why that may have a detrimental effect to the private world, but I’d like to hear your view on what’s in this budget and why you may or may not have concerns about these changes.

Eileen: So, this is definitely a topic that we could spend a whole program on, but I’ll try to do it very quickly. So, I think healthcare is a complicated system for sure, but the government is becoming a bigger and bigger payer in this system. And they do that through a few ways, right? They do it through Mass Health or Medicaid, where they help poor folks to afford health insurance, and they do it through Medicare, where the elderly get health insurance. And that’s about half of the market right now. And unfortunately, like Mass Health anyway, and some will argue maybe Medicare, but they often are cross-subsidized by commercial insurance. And so, to the extent that the commercial market is shrinking, it means the people purchasing in there, which is typically small employers and some large ones, they are shouldering more of the subsidy that’s going to cross-subsidy between the public and the private payers in health insurance, so the government and employers. And I think the latest proposal increases eligibility to 500% of the federal poverty level, which is about $73,000 for an individual. I mean, that’s a lot of money. That’s a, you know, certainly if purchase of health insurance is a priority, you would think one would be able to afford it on a salary of $73,000. But my concern is it’s a pilot program, so it’s supposed to last for two years. But as we know, it’s very difficult to take away a benefit that the government gives. And so, I’m concerned it won’t be a pilot. And what it will mean is health insurance for those purchasing in the commercial insurance market will become less affordable.

Joe: Indeed, again, as you say, it deserves its own show, maybe we will do something down the line. But as you say, when you talk about cross-subsidies for our listeners who aren’t economists, what they’re saying is when you or I or people who are on private insurance pay our premium, some of that money goes to pay for people who don’t pay anything. In other words, we subsidize those people without insurance. And the government doesn’t have its own money. Hospitals don’t have its own money. So, we’re paying the cost of people who pay and people who don’t pay. And the more people who cross that line from paying to not paying, the larger the burden gets in sort of this death spiral. And what we’re doing, what you’re suggesting is by creating subsidies for those people who really reasonably should be able to afford it. If anyone, you’re at $73,000, if we unburden them and put them on the public health connector and subsidize them, hey, that’s money not going for other worthwhile causes that government might otherwise spend. But it’s also that’s many fewer people who are ultimately now paying in and cross-subsidizing the poor and the elderly. Is that fair?

Eileen: You said it much more eloquently than I did.

Joe: All right. All right. Now, okay, I told you we’d table it. So, I’m going to come back to this whole tax relief. You and I talked about this in an earlier episode talking about the governor recognizing the need to, though we are a very successful state now, Massachusetts must remain competitive with all the other 49 states for talent and treasure. We want the best and brightest.

We want investors to invest in Massachusetts. But if we don’t have a competitive tax regime, we’re going to lose perhaps the highest-income people possible, the most footloose of all our citizens. So, let’s talk about this notion of tax relief. It didn’t get into this budget. The governor is not going to decide her priorities here. We’ve promised that for a later day. Describe to our listeners, how does the budget sort of acknowledge the fact that there’s someday in the future, hopefully not too just in future, there’s going to be a tax relief package that will be passed.

Eileen: So, there’s a placeholder in the budget, if you will, for of $580 million. And so, they’re estimating that will be the cost of the tax relief package when eventually it is passed. And so, that’s certainly less than the governor had put forth, which was a billion dollars. It’s less than what the House put forward, which was like $1.1 billion. And so, I think the Senate has had some reservations about certain of the provisions that were in the governor’s package. But I think what they plan to do, or I’m hoping is at least maybe phase in some of them so that there’ll be all of the components in the governor’s budget will be included, but they may just be phased in over a few years. That’s my hope.

Joe: So, we will get to, in theory, in theory, we have no legislative power here on this podcast, but over time, perhaps, the governor may get everything she wants, but it’ll be one component at a time. You talked about that in the past. We were talking about short-term capital gains. We’re talking about amending the estate tax, some of the other provisions. Aren’t there also, to me, when I look at the debate of why folks are leaving Massachusetts, it seems it’s sort of guided by one’s political outlook. If you’re, let’s say, lean leftward, you insist that people leave because they can’t afford a house and are at a cost of living. If you’re on the right side of the spectrum, you might say people don’t like paying a 9% marginal rate on their income tax above and beyond federal tax. What does the governor propose to things like the short-term capital gain, the estate tax? Weren’t there some things in there to help people with their rent or with, I forget —

Eileen: Senior property tax? Yeah. There was a whole host of things. We touched on some of them, certainly. In the governor’s package, there was an increase in the rental deduction. There was an increase in the senior property tax, the circuit breaker, it’s called. There was an increase in dependent care deduction. So, these are all geared towards families, working-class people who may need some help on their income tax with some of these costs of living. What I would say is, to the point you made about, for a lot of people, this is a philosophical or ideological issue. I think the question is, when is there enough tax revenue? To come full circle to the beginning of our conversation, this budget grew by 3.8 billion year over year. That’s a sizable increase. One does have to ask, when is enough enough? I think some people question whether, when last year, we gave back refunds to taxpayers because there was so much tax revenue, whether we needed a tax increase like the income surtax in the first place. But that was the voters decided to go forward with it, and that will be with us for a while. The question is, though, in this new post-pandemic economy, is Massachusetts able to compete for the talent we so desperately need? I think a lot of people have more options than they used to because of remote work and hybrid work and everything else, and just technology in general. I think people are more attuned to the relative cost differences between and among the states. Some people are voting with their feet. The problem is, because Massachusetts actually has a really progressive income tax code already, that some of the high-income folks pay the majority of taxes in the state. If you get enough of them to leave, it causes real budgetary and fiscal problems for Massachusetts. We need to provide tax relief to make sure we keep a sufficient number of taxpayers in Massachusetts funding state government.

Joe: Yeah, indeed. I think folks don’t realize how substantial this increase. You mentioned $3.8 billion. I think it’s a 6.6% increase over the last year. But an article I read very recently that appointed the fact that this is Governor Healey’s first budget. Governor Baker’s first budget of his eight-year term was $38 billion, which is about 50 percent — this budget is 50 percent larger than it was eight years ago. We don’t have 50 percent more people. We have almost exactly the same number of people. And yet the budget is 50 percent larger. As you say, I’m open to suggestions, but I would just honestly ask, what’s the limit? Is it just directionally more is more? We’re getting into the normative elements of tax and spend. But to me, I think, this is sort of, we don’t need to spend all this money. We just choose to spend it all.

Eileen: So, what I would just say, I mean, just to take a stab at that, I mean, I think obviously it’s a subjective question, right? You know what I think maybe different from what you think. But I think you need it to be sustainable. I also think people need to have a better sense of where their money is being spent. So, I think some more transparency would be helpful, because there are a lot of programs maybe that have outlived their usefulness or maybe are duplicative, you know, or maybe they’re just not having the effect that was intended. So, I do think it’s worth kind of just making sure before we need more money that we’re using the money, the sizable resources that go into the annual budget as efficiently and as appropriately as possible.

Joe: Yes, indeed. I’m amazed, again, as both a citizen and as a podcaster, how little coverage there is about the budget and about the budget debate or very little concern that all of these priorities and this debate seems to happen behind closed doors in complete secrecy. I don’t know anybody who’s for secrecy or opacity. Almost everyone I meet is for transparency and yet there seems to be almost no transparency. So, again, one can never know how we got here entirely. But is it your view that we, our legislators don’t think we deserve to know or can’t be bothered to share it with us? Is it because they don’t feel accountable largely based on perhaps that we’re a one-party state or with supermajorities in both houses? Or is this something very Massachusetts-like, we’ve come to be ignored by the idea that our legislators work independent of any feedback from ordinary citizens?

Eileen: Again, I don’t know if there’s any right answer or a single answer. I mean, I will say though, that I think some of the budget practices have been going on for a number of years. So, both during, you know, Republican governor and Democratic governors. So, I’m not sure it’s just that, although what I will say is so many people in office run unopposed. So, there isn’t a lot of accountability with respect to the voters. And I think some of it has to do with changes in the media. I mean, there used to be people dedicated to the State House, many reporters who would be up at the State House covering just issues that were happening at the State House. You’re seeing fewer and fewer reporters, certainly for some of the major news publications. And so, you know, some of that is just changing media circumstances as well. There is some information available, certainly on the comptroller’s website and all of that, but you got to dig for it. You know, so I do think with the internet, with the transparency, it seems like everything else that we could do a better job, just making sure everyone knows exactly how their tax dollars are spent.

Joe: Indeed. This black box we call the Legislature, I don’t think there is anyone to blame. And I certainly don’t blame legislators for not being forthright with all the information. You don’t want to give the voters the rope to hang you with. But, you know, it is concerning to me. And, you know, the little media we do have covering, it seems to be very biased towards incumbents when there are meaningful challenges. So, I don’t know how this ends, and what we can do about it. Perhaps our listeners should stay dialed into Hubwonk. We’ll do our best to uncover the story. So, we’re running out of time. Before I let you go, when is it that the governor — we’re recording this on the 7th — when is the governor due to sign or when does she have to decide? And also, as a matter of process, can she veto, pass, or line-item veto all the items in this budget?

Eileen: So, my understanding is that the Legislature sent the budget to the governor or finalized the budget on July 31. And she has 10 days to review the budget and send it back. And as you say, she can veto it outright. She can accept it. And it’s in totality. She can use her line-item veto power and go through and be more precise. The question I have is, and I should know the answer and I don’t, do Sundays count as one of the days? And so, it’s 10 working days from when the Legislature put it on her desk. So, sometime soon, perhaps before the end of the week.

Joe: By the end of the week. So, we’re just in time. This is a very timely topic for our listeners.  So, I appreciate you taking time out of your busy day to join us and share your very, very comprehensive knowledge and your very specific knowledge on a topic on which very few people really understand. So, thank you very much, Eileen, for joining us on Hubwonk today.

Eileen: My pleasure. Thanks.

Joe: This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support the podcast and Pioneer Institute. It would be easier for you and better for us if you subscribe to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find Hubwonk if you offer a five-star rating or a favorable review. We’re always grateful if you want to share Hubwonk with friends. If you have ideas or comments or suggestions for me about future episode topics, you’re welcome to email me at Please join me next week for a new episode of Hubwonk.

Joe Selvaggi talks with Pioneer Institute’s Senior Fellow in Economic Opportunity Eileen McAnneny about the features and flaws of the recently passed 2024 Massachusetts state budget now waiting for Governor Healey’s approval.

Eileen McAnneny is a Senior Fellow in Economic Opportunity at Pioneer Institute. She was formerly president of the Massachusetts Taxpayers Foundation, and has experience in government relations, public policy, advocacy, and management in both the public and private sectors. She was president and CEO of the Massachusetts Society of CPAs, Director of Public Policy at Fidelity Investments, and served as Senior Vice President of Government Affairs and Associate General Counsel at Associated Industries of Massachusetts, where she focused on healthcare and tax policy issues. McAnneny served on the state’s 2007 Tax Commission and was formerly a staff attorney for the Joint Committee on Revenue of the Massachusetts legislature. In 2018, she served as Vice Chair of the Governor’s Commission on the Future of Transportation. She is a cofounder of the Massachusetts Employers Health Coalition, serves on the Group Insurance Commission, is on the board of the Massachusetts Business Alliance for Education, and is secretary of the National Taxpayers Conference. McAnneny holds a bachelor’s degree in politic science, cum laude, from Tufts University and earned her juris doctorate in law from Suffolk University Law School.