Massachusetts could turn to an additional $800 million in state dollars to help bolster its position when applying for federal grants under legislation Gov. Maura Healey filed Thursday.
A trio of laws — the Inflation Reduction Act, the CHIPS and Science Act, and the Inflation Reduction Act — signed by President Joe Biden made more than $1 trillion in federal funds available to states. Local officials estimate Massachusetts can compete for a remaining $17.5 billion that could support everything from transportation to technology services and security.
Most federal grant programs require states to put up cash to cover a portion of proposed project costs and Healey said having money in hand to match federal dollars will make applications from Massachusetts more competitive when they are sent down to Washington. Healey’s bill creates a fund to build up matching dollars.
“This Capital Investment and Debt Reduction Fund will give Massachusetts a competitive edge in pursuing this historic federal funding grant opportunities,” Healey said. “And after we get through the push for federal funding, the remaining funds will be available to invest in state assets, taking pressure off traditional capital programs and our debt portfolio.”
Officials have already identified more than $2 billion in state matching funds from various sources like the fiscal 2024 budget and the state’s capital investment plan.
But estimates show a need for roughly $3 billion in matching funds if Massachusetts applies for and receives all $17.5 billion in grants the state is eligible for, according to the Executive Office of Administration and Finance.
Healey proposed using interest earned on the state’s rainy day fund, an $8 billion account that is typically reserved for emergencies, to pay for the $750 million in state matching dollars.
State officials anticipate the interest generating $250 million each year for the Capital Investment and Debt Reduction Fund, which will also be seeded with $50 million in revenue from a surtax on incomes over $1 million.
The principal of the stabilization fund “will remain preserved for mitigating the impacts of a substantial, unanticipated reduction in revenues that cannot be managed with normal budgetary reductions and savings measures,” the Executive Office of Administration and Finance said in a policy memo.
The state would stop drawing on the interest of the rainy day account if its balance is declining or it drops below 10% of the state’s total operating budget, which in fiscal 2024 neared $56 billion.
“We think those are guardrails that are both fiscally responsible and support our needs in terms of what we’re trying to accomplish, while not jeopardizing the commonwealth’s physical health in terms of its ability to weather a rainy day,” Administration and Finance Secretary Matthew Gorzkowicz said.
Having a “plan of attack” for going after federal grant programs that require state matching funds “is a really solid approach,” said Massachusetts Taxpayers Foundation President Doug Howgate.
He said protecting the balance of the stabilization is important.
“We got to make sure we protect our stabilization fund, right, and we’re not kind of robbing Peter to pay Paul. And so I think the idea of ensuring that our stabilization fund balance doesn’t decline as we’re gonna go down this road is a really important thing to have,” he said. “As a principal, that makes sense.”
Healey also signed an executive order establishing the Federal Funds and Infrastructure Office led by Director Quentin Palfrey, who unsuccessfully ran for attorney general in 2022. Healey said Palfrey and his team have already “yielded results” even before the office was cemented.
Healey pointed to $108 million from the U.S. Department of Transportation for East-West Rail, a successful bid to serve as one of three hubs for a Biden administration-backed “nationwide health innovation network,” and an application for roughly $1.5 billion for the Cape Cod bridges as examples of Palfrey’s work.
“Today’s executive order also creates a new clearinghouse that will help us to be systematic and strategic and thoughtful in our pursuit of these federal funds,” he said.
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