Lawmakers moved Wednesday to open up the state's unemployment insurance system for thousands of residents put out of work by public health precautions for the coronavirus. It's one way Beacon Hill is reacting to the virus's effect on businesses, but every relief measure comes with a price tag that could significantly effect the state's pool of savings.
"The year was challenging prior to the coronavirus epidemic, and I think that those challenges are now exacerbated," Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, told WGBH News.
Gov. Charlie Baker wants people put out of work by the crisis to take advantage of the unemployment insurance system the Legislature just loosened restrictions on.
"I fully expect we're going to see a significant spike in the number of people on unemployment and frankly, given the circumstances and situation, I hope that turns out to be the case," Baker said at a press briefing Tuesday.
At the same time the cost of providing unemployment surges, there's little doubt Massachusetts is going to see a huge plunge in tax revenue for the month of March and beyond since so many businesses are at a standstill.
"Restaurant tax revenue. Hotel revenue, none of that's going to be coming in. Right. But then that's going to trickle down to income tax isn't going to be coming in. You know, so it has a snowball effect," Jennifer Benson, president of the Alliance for Business Leadership and until recently a senior House lawmaker, said.
Benson's former colleagues in the Legislature have to deal with balancing the state's spending plans, which include hundreds of millions in new money for schools, mounting debt and pension obligations and expanding health costs, with the new reality that the state may need to dip into its savings.
"This is a rainy day, so we need to have further policy debates about whether it makes sense to pull in the 'rainy day' at this point. And if so, where do we make the investments?" said Marie-Frances Rivera, president of fiscal group MassBudget. Rivera says that first and foremost, the state needs to use the rainy day fund to shore up that strained unemployment system.
"People are going to be out of work and they're already starting to be out of work and be laid off, etc.," Rivera said.
"So really, we see direct income supports for workers as being very important, especially low wage workers."
McAnneny disagrees that the rainy day fund should be tapped. The savings are meant for long-term problems, she said, like a global recession that could be sparked by the virus.
"Should this be a prolonged downturn, then I think we're going to need the rainy day fund in other years. And so certainly we wouldn't recommend not using it at all, but if we use it, to use it very judiciously in the next year," McAnneny said.
The rainy day fund is flush with $3.5 billion after several great years of tax collection. Baker and lawmakers now need to sort out the short and long-term fiscal needs of the state and its citizens by reworking the budget that's due in June - all while managing the escalation of a deadly public pandemic.
