Financial downturn might trump impacts of federal funding cuts to Mass. – NBC Boston

Massachusetts might face billions in misplaced federal income and heightened financial danger below the second Trump administration, a finances skilled warned lawmakers Thursday, however he emphasised {that a} broad financial downturn might deal the toughest blow.

Testifying earlier than the Home Committee on Federal Funding, Coverage and Accountability, Doug Howgate, president of the Massachusetts Taxpayers Basis, laid out the size of the state’s dependence on federal cash: about $25 billion every year. That features about $14.4 billion in Medicaid funds, in addition to transportation and water infrastructure funding, and billions extra in federal grants administered by means of state companies.

“One in each $4 you simply voted to spend within the FY26 working finances is straight from the federal authorities,” Howgate instructed lawmakers. “To contextualize that, that is about one and a half instances what we get from the gross sales tax — it is like 10 instances what we get from the lottery. So simply to place your thoughts round how a lot that issues, it is a huge component of the state finances, second solely on the income aspect to the revenue tax.”

President Donald Trump has focused or promised to come back down on areas that Massachusetts, particularly, has a vested stake in — akin to increased training and analysis funding the place the Bay State has a nationally aggressive benefit. In different instances, like Medicaid spending reductions, the president and Republican-led Congress’s insurance policies are prone to have an effect on each state.

Advantages in Massachusetts and throughout the nation might be on the chopping block if it passes the Senate and reaches President Donald Trump’s desk.

Trump and Republicans in Congress say their shift in nationwide coverage will put the nation on a affluent path, however the view from many on the State Home, the place Democrats rule, is much totally different.

The U.S. Home voted final week to chop the medical health insurance program by almost $700 billion — which state officers have warned might put Massachusetts in jeopardy of dropping greater than $1 billion yearly, with 250,000 residents prone to dropping protection between MassHealth and backed insurance policies on the Well being Connector.

But even with these coverage risks, Howgate warned {that a} attainable financial downturn might hit the state finances even more durable.

“A serious change within the international financial system, particularly a downturn, can have a far better affect, actually on public funds, but in addition on any of the packages we’re speaking about, than a particular federal coverage motion,” he stated.

Howgate in contrast potential cuts to Medicaid income to the state income losses in the course of the Nice Recession.

The rapid-fire adjustments introduced on below President Donald Trump had been a focus Monday as Beacon Hill labored towards a Massachusetts finances.

“When you take the income lack of 2009 in the course of the Nice Recession and also you simply prorate that ahead as state revenues have grown, that is a one-year income lack of $6 billion, and people income losses endured for a number of years,” he stated. “The order of magnitude of a worldwide recession often far outstrips any of the particular coverage issues we’re speaking about.”

Lawmakers pressed Howgate for perception into how the state might shore up income if each federal cuts and a downturn hit without delay.

“In the event that they achieve slicing these packages, other than reallocating a part of the finances, there’s a want for income, and I am curious to what MTF’s view is on methods we are able to increase income if these issues do occur” stated Rep. Erika Uyterhoeven of Somerville, pointing to the affect on Head Begin, meals help and Medicaid in her district, all of which the Trump administration has threatened to chop.

Howgate responded by pointing to classes from previous crises.

“Once we have a look at the final two financial downturns — the 2001 downturn and the 2008 downturn — what did we see from a state finances standpoint? You noticed use of reserves, you noticed will increase in taxes, and also you noticed main cuts,” he stated.

Clarifying that it wasn’t the official stance of MTF, Howgate added, “If there was a serious financial recession in Massachusetts that lasts years, these are the three issues you are going to see on the desk.”

The state’s $8 billion stabilization fund has dramatically grown during the last 5 years. Legislative leaders have been reluctant to faucet into it even in the course of the COVID-19 pandemic.

An financial recession is outlined as a big and widespread decline in financial exercise for a number of months.

Howgate suggested the Legislature to deal with three methods: carefully observe federal finances and tax laws, put together for the potential scale of an financial slowdown, and establish which state packages and sectors are most crucial to guard.

“There’s going to be so many calls for on issues that the federal authorities does that the state does not do, that ensuring we’re staying true to the core objectives of what authorities does, I believe, needs to be entrance and middle,” Howgate stated.

He additionally urged the state to play to its strengths — significantly increased training and analysis — that are below federal scrutiny however stay key to Massachusetts’ financial system.

Lastly, Howgate underscored that if Massachusetts is to climate this storm successfully, it would require coordinated planning among the many Home, Senate and administration.

“We won’t be transferring in three totally different instructions,” he stated. “On the finish of the day, so many of those are going to boil all the way down to useful resource selections.”

The Senate has its personal response effort to the second Trump administration, which they’ve dubbed Response 2025. The 2 branches seem to have procedural variations which can be slowing down that work of that committee.

Quentin Palfrey, Gov. Maura Healey’s director of federal funding, additionally testified about ripple results Massachusetts might face — together with adjustments in how the state and municipalities apply for and administer federal funds.

Rep. Mark Sylvia of Fairhaven requested Palfrey if his workplace is actively monitoring any adjustments to the federal utility course of for grants.

“Simply to make use of for example, if a municipality or county applies for a federal grant, and it is for infrastructure, and resulting from both an government order from the federal authorities or another coverage edit, they’re being directed to not consult with local weather change as a justification for that infrastructure? Are you monitoring any of these developments as a part of your workplace?”

“The reply is completely sure,” Palfrey responded. “It is a bit little bit of a tough problem, the place, on the one hand, we need to be in shut communication with our companions … and on the identical time, we now have to be very clear in regards to the limitations that the state finances has to soak up a few of these prices.”