The Beacon Hill Report - August 21, 2014

Date: August 20, 2014

After
contracting in the first quarter, the Massachusetts economy bounced back during
April, May and June as real gross domestic product grew at an annual rate of
4.9 percent during the second quarter, according to economic index results from
the UMass Donahue Institute. Payroll employment grew 1.7% in the second quarter
as well. But in July, the state’s unemployment rate ticked up to 5.6%. Even
that may be good news as a growing state’s workforce is largely responsible.
The number of jobs in the state increased 13,800 in July with every sector
except government adding jobs. After more than a decade of moribund jobs
numbers, the state has added 67,300 in the past 12 months although the recovery
remains geographically uneven in the Bay State. The fact that the labor force
has increased by nearly 25,000 in 2014 has tempered the unemployment rate,
which is still a half point below the national average.

July tax
collections reflect the jobs picture as revenues hit $1.59 billion or $12
million more than July 2013 and $11 million more than budgetary projections.
One bit of caution: these are July numbers reflecting one month and one month a
trend does not make.

Tax collections
for FY14 concluding June 30 were 5.6% — $1.25 billion – above FY13. And
although the benchmark was increased mid-year, the state finished with revenues
$570 million above expectations for the year — a good year indeed for the
Commonwealth.    

Governor Signs Economic Development Bill

Governor
Patrick signed the so-called jobs bill into law, but also filed legislation to
restrict non-compete agreements and to allow cities and towns to grant liquor
licenses without state approval – two of his priorities that the legislature
left out of the final bill. Neither measure have much chance of passage this
year as the legislature has concluded formal sessions and legislation
essentially requires unanimous consent to become law. The Governor also vetoed
sections creating a tax credit for live theater and an angel investor tax
credit. While preferring broad based tax and regulatory reductions, NFIB hopes
the overall bill, containing many tax incentives and initiatives to encourage
job creation, will help spread the current economic expansion to areas of the
state that are not currently experiencing the expansion, i.e. beyond the 495
belt.      

MA Health Care Connector

The beat goes on, the costs keep rising. The MA Health Care
Connector announced that they would proceed with a Massachusetts only web site
after all to be operational on November 15. The additional cost is pegged at
$80 million (the state is hoping the feds will pay $75 million of it) bringing
the total cost to $274 million for a system that was working fine prior to the
federal health care reform. In addition, 400,000 MA residents will have to
re-enroll this fall and winter. Finally it was announced that small business
premiums will be increasing again in 2015 and at a faster rate than larger
businesses. It is hoped that the average increase will remain below the
targeted benchmark of 3.6%, but that is an average and individual companies may
incur much larger increases.

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