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Massachusetts House approves plan to use Rainy Day fund interest for federal grants, debt

Matthew Medsger, Boston Herald on

Published in News & Features

BOSTON — The state House has approved a plan to use the hundreds of millions in interest spun off the Rainy Day fund to compete for federal funding and help pay the Commonwealth’s bills.

Lower chamber lawmakers unanimously passed the proposal which would send Rainy Day fund interest into a new “Commonwealth Federal Matching and Debt Reduction Fund” and allow the state’s check writers to tap the money as down payment when applying for the billions in federal funding currently available and tackle some of the state’s outstanding debts.

According to an estimate accompanying a similar proposal offered by Governor Maura Healey last year, the Rainy Day fund earns about $250 million in interest each year. The fund — officially its called the Commonwealth Stabilization Fund — currently carries a record balance of $8.2 billion.

Talk of tapping into the money made by the fund comes as lawmakers stare down a series of unexpected revenue shortfalls which have stretched through most of this fiscal year.

“Ensuring that the Commonwealth is able to aggressively compete for the federal funding being made available to states is critical, especially given the challenging revenue conditions that we are facing here in Massachusetts this fiscal year,” House Speaker Ron Mariano said.

It also comes just when Massachusetts will need to compete with the other 49 U.S. states for grant money provided by the Biden Administration’s passage of the $1.2 trillion Infrastructure Investment and Jobs Act, the about $800 billion Inflation Reduction Act, and the $53 Billion CHIPS and Science Act. Those bills, according to policymakers, present a once-in-a-generation opportunity to tackle expensive but necessary infrastructure projects — but they’re only if the money is there for matching funds.

 

“The projects and investments that will be funded throughout the U.S. because of Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act will transform this country and create a significant number of jobs in the process. It’s vital that Massachusetts does everything that it can to share in that prosperity,” Mariano said.

The proposal would allow Administration and Finance Secretary Matthew Gorzkowicz to spend the interest made by the Rainy Day fund to “pay down the Commonwealth’s debt or pension obligations, OPEB, capital leases, general or special obligation contract liabilities, or transfer any amount back to the Stabilization Fund.”

The bill would also allow up to $750 million to be transferred from the Rainy Day fund “to provide matching funds for federal programs through December 1, 2026.”

The state Senate passed its own version of the bill on a 39-0 vote earlier this year and it’s quite different from the House plan, notably changing the formula by which the Stabilization Fund is fed by the state’s excess capital gains taxes. The differing versions will likely require a conference committee to iron out the difference before a final plan sees the governor’s desk.

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