Massachusetts faces tight deadline to spend COVID federal funds, Baker administration official says

Time is running out to spend the roughly $ 550 million in coronavirus relief money Massachusetts pulled from the 2021 budget, Administration and Finance Secretary Michael Heffernan told lawmakers on Wednesday .

That $ 550 million for state spending and the roughly $ 502 million in municipal aid under the Coronavirus Relief Fund, created from the CARES Act, has a December 30 deadline. Anything that isn’t used goes back to the US Treasury – or, as Ways and Means Senate Speaker Michael Rodrigues said, “turns into a pumpkin” like the carriage that Cinderella used to attend the prom. fairy tale.

Administration and Finance Secretary Michael Heffernan told lawmakers on Wednesday he would not let this happen.

“We don’t have a lot of weekends here, but we have plans on how to use all that money so that we don’t waste a dollar of it,” Heffernan said.

The $ 550 million is just part of Governor Charlie Baker’s $ 45.5 billion budget for the remainder of fiscal 2021, which proposes a 3.8% increase over fiscal 2020. The funding is part of a large pool of one-time federal funds that the state can count on. on to help close the spending gap that the Baker administration expects to reach $ 3.6 billion in gross spending.

The Republican governor said he wanted to see a budget plan passed on his desk by Thanksgiving and predicted that the state would need another interim budget to cover costs before the final FY2021 budget. take effect.

COVID-19 has caused more of a financial nightmare than a fairy tale scenario for state spending. The pandemic has closed schools, government buildings and non-essential businesses across the state as residents seek to avoid contracting the virus.

The coronavirus has resulted in more than 9,000 deaths and historic unemployment levels.

State budget writers have delayed writing a budget this summer in hopes Congress could reach an agreement on a coronavirus relief fund that would send stimulus money to states and municipalities. The US House and Senate have been back and forth in recent months before President Donald Trump called off talks until after the election.

The state’s economic situation continues to evolve: unemployment is at 9.6%, well below the peak of 17% in the summer but still three times higher than at the beginning of 2020. The numbers drop Unemployment, however, comes as the state sees an increase in covid19 cases.

As consumer spending returned to pre-pandemic levels, small business incomes fell 32% and the number of small businesses opened fell to 29%, according to Housing and Economic Development Secretary Mike. Kennealy. He did not explain why these small businesses are not open, but some businesses are banned from opening until phase 4, while others have closed for the winter or have closed for good.

“Make no mistake, we are still at the mercy of this pandemic, not only from a public health perspective but also from a budgetary perspective,” said House Ways and Means President Aaron Michlewitz, at the start of the hearing.

In addition to funding for the coronavirus, the Baker administration is counting on $ 422 million to cover its opening balance. These funds come from the Fiscal 2020 Supplementary Budget, which primarily included items related to the COVID-19 response that can be reimbursed by the federal government. Heffernan did not specify exactly which positions were unfunded and led to the balance of $ 422 million, but he said he would give lawmakers more information on Friday.

The state also uses at least $ 834 million in federal reimbursements for health care expenses. As the number of MassHealth registrations in the state increased, the federal government began to reimburse at a higher rate due to the public health emergency.

The state has earned $ 834 million in the past three quarters. Heffernan said it was possible the state would have extra money from the next quarter, but state officials won’t know if that can happen until at least after the election.

Perhaps the biggest source of one-time funds is the proposed transfer of $ 1.35 billion from the “rainy day” fund, which would drain about a third of those reserves for fiscal year 2021.

The Massachusetts Taxpayers Foundation said the Baker administration’s revenue estimate veered to the conservative end of projections made earlier this month, but noted that fiscal 2022 may pose a greater challenge.

“The state will need to replace at least $ 3.5 billion of non-repeatable revenue that bolsters spending in fiscal 2021,” MTF wrote in its analysis last week. “Factor in the cost increases to pay for the Student Opportunity Act reforms as well as the annual inflationary costs and collective agreements that add hundreds of millions of costs, and the state will likely face another multibillion deficit with fewer resources than in fiscal year 2021.. “

Heffernan said despite concerns about the next fiscal year, he considers the proposal to draw down a third of the fund to be reasonable. If Massachusetts earns more tax revenue, he said, the Commonwealth can get less from the “rainy day” fund.

“It’s scary, the unknowns are high, but we think our pressure on the stabilization fund is reasonable,” Heffernan said.

“We have a big hole to get out, but at the end of ’21 with only a third of the stabilization fund, we went from a million people out of work to you know something about 330,000 people out of work‚ and we need to provide these people with safety, security, health care and jobs, ”he said,“ but I hope we’ve seen the bottom of this crisis. ”

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