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September 8, 2023

Report: State needs to do more to maximize federal money

A large brick building with columns in front and a gold dome on top with a long staircase leading up to it and an American flag on the left hand side. Photo | Courtesy of Commonwealth of Massachusetts Massachusetts State House

Massachusetts could secure up to $17 billion in federal infrastructure spending through three federal laws set to deploy a total $751 billion across the country, but only if it puts more of its own money on the line, according to a new report.

The Massachusetts Taxpayers Foundation report estimates that Massachusetts could maximize how many federal dollars are sent to the Bay State through the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA) and Creating Helpful Incentives to Produce Semiconductors Act (CHIPS) by committing nearly $3 billion in state resources.

"While the state has signaled its commitment to identifying these resources through recent bond bills and direct appropriations, an estimated $800 million need remains to meet state match requirements for federal programs," a press release from MTF said. The organization said it anticipates a potential state match requirement of about $2.67 billion and has identified $1.87 billion in potential sources of state matching funds for federal grant programs.

There is no shortage of need for the potential federal funding. The money could go toward repairing aging infrastructure, like the Cape Cod bridges or the MBTA, investing in climate and energy resources, and supporting the state's science and research centers.

Gov. Maura Healey has promised that she will give her all to compete for federal dollars. She created a new position in her office, director of federal funds and infrastructure, which is focused solely on securing money from D.C. for infrastructure, climate and economic development projects.

The governor picked former candidate for lieutenant governor and attorney general Quentin Palfrey for the job in March.

"Massachusetts has a unique opportunity to aggressively compete for billions of federal dollars to support crucial infrastructure, climate and economic development projects in our state -- from the Inflation Reduction Act to the Bipartisan Infrastructure Law to the CHIPS and Science Act and beyond," Healey said when her administration hired Palfrey, who makes $160,000 a year.

MTF found the largest potential funding opportunity for Massachusetts through the IIJA, estimating the state could receive $14 billion. Across all three federal laws, the policy research center has identified 134 programs that require a commitment of matching state funds.

Most of the funding through the IIJA, IRA and CHIPS Act will be made available over the next five to 10 years, the report says.

It identifies two bond authorization bills the Legislature passed in 2022 and 2023 -- the second of which was Healey's "immediate needs" fiscal year 2023 supplemental budget -- which combined included at least $9 billion in bonding authorizations that could be used to meet state match requirements for federal grant programs

"However, while this total represents the amount of state bonding approved by the Legislature, it does not reflect the amount of state borrowing that is affordable within the state's Capital Investment Plan," the MTF report warns.

The administration's five-year spending plan is subject to certain debt affordability policies that limit how much new borrowing a state can issue.

In June, the Healey administration released its fiscal year 2024 to 2028 capital investment plan, which called for $14.5 billion in capital investments over five years -- with about $1.8 billion in spending to access federal funds made available through the IIJA, IRA or CHIPs Act, the study says.

The plan features $262 million towards "the federal government's efforts" to replace the Bourne and Sagamore bridges to Cape Cod -- after previous efforts to secure federal funding to replace the bridges stumbled -- ultimately ramping up to a $700 million long-term state commitment.

Healey's office announced in August that her administration would submit applications over the next few weeks for a combined $1.45 billion in federal grants, most of which would go toward replacing the Sagamore Bridge but not yet the nearby Bourne Bridge. The price tag to replace both bridges has soared from a $1.5 billion estimate in 2019 to roughly $4.5 billion today.

Even with the Legislature's bond commitments and the administration's capital plan, MTF estimates that there remains an outstanding match need of at least $800 million.

To meet that remaining $800 million, the policy research center recommends that administrative and agency officials be allowed to access matching resources outside of the typical appropriations process to avoid delays that could mean missing out on a funding opportunity. They also recommend the state uses one-time revenues to tap into the grant money.

"A commitment of state funding to meet matching requirements is a one-time expenditure, and therefore well-suited to be supported by one-time revenue sources," the report says. "State budget-writers foresaw the value of setting aside surplus revenues from FY 2022 in the Transitional Escrow Fund, to be tapped for future needs. Dedicating a portion of these remaining funds for state match requirements to unlock federal funds could maximize their impact."

Assistant Secretary for Federal Funds Heath Fahle wrote in an administration budget brief in March that the state needs to adopt a "new, more proactive approach" to taking full advantage of available funds, which included creating a new Federal Funds and Infrastructure Development Office.

"The Commonwealth of Massachusetts is well-positioned to compete and win federal resources for key priorities due to its highly educated workforce and robust innovation economy. These strengths must be complemented with a relentless, priority-driven pursuit of federal resources, proactive coordination and support, a streamlined and simplified approach to resources, and transparent data-driven management to bring more federal money to the Commonwealth," Fahle, who has since joined the Executive Office of Economic Development as assistant secretary for finance, wrote.

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