Legislation leverages Stabilization Fund interest to compete for federal funds for transportation, housing, climate and economic development projects
BOSTON (01/11/2024) – Today, Senator Cindy F. Friedman (D-Arlington), joined her colleagues in the Massachusetts Senate to pass S.2548, An Act to provide for competitiveness and infrastructure investment in Massachusetts, an economic development bill that takes advantage of the interest accrued from the Commonwealth’s Stabilization Fund and leverages that interest to ensure the state receives the maximum possible share of federal funds. The Commonwealth’s Stabilization fund currently has a historic balance of $8.2 billion.
It is estimated Massachusetts currently has the opportunity to receive up to $17.5 billion through historic, once-in-a-generation federal funding opportunities.
“Our action in the Senate today is both fiscally responsible and prudent as we invest in the future of the Commonwealth,” said Senator Friedman, Vice Chair of the Senate Committee on Ways and Means. “By maintaining a healthy reserve balance in the Commonwealth Stabilization Fund, while also allowing the interest the fund generates to match grants for federal funding opportunities, this legislation opens a key tool for the state to stay competitive and help fund projects that will have a positive impact on residents of Massachusetts for years to come.”
This smart financial accounting initiative will require the Comptroller to transfer interest from the stabilization fund to the Commonwealth Federal Matching and Debt Reduction Fund on a quarterly basis if the stabilization balance is of a healthy amount. The Secretary of Administration and Finance would then pursue federal funding opportunities available thanks to the historic availability of federal funds for infrastructure, resiliency and economic development projects.
Over the coming years, this bill is expected to unlock more than $800 million in funds that will be used to fund the state or municipal match requirement for federal competitive grant opportunities, as well as planning work that will help municipalities with the process of preparing applications for federal grants. Once federal grant opportunities expire, money in this fund will go toward reducing the Commonwealth’s long-term liabilities.
Through three pieces of federal legislation: the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS), over $2 trillion in spending is being made available to states through competitive grant programs and formula allocations. With this bill the Commonwealth will be maximizing its position to capitalize on these substantial federal funding opportunities.
The Senate’s actions have garnered support from organizations around the state.
Key components of the legislation include:
- At its current level, the Stabilization Fund is anticipated to accumulate approximately $250M in interest annually. Currently, that interest is deposited directly back into the Fund.
- This bill proposes redirecting future Stabilization Fund interest when the Fund is at healthy levels, which is defined as when:
- Amounts in the Fund exceed 10% of budgeted revenues of the previous fiscal year; AND
- The balance of the Fund has not decreased in the previous year.
- When a diversion does occur, the interest will be used for two key purposes:
- (i) Matching funds for federal grants, as long as those funds are available; and
- (ii) Long-term debt management strategies.
- By creating a dedicated pool of funds, the Commonwealth can leverage this money to unlock some of the $17.5 billion available in once-in-a-generation federal funding for investments in transportation, housing, climate, economic development, and technology.
- Maintaining a primary pool of funds will signal to the federal government the Commonwealth’s willingness and desire to partner on these projects.
The bill was originally filed by Governor Healey on October 19, 2023. It now heads to the Massachusetts House of Representatives for consideration.