The Massachusetts House of Representatives last night passed a $34 billion Fiscal Year 2014 budget that increases spending by 4 percent, avoids increases to the income tax and ensures the privacy of companies that exercise their statutory right to use tax benefits.
The blueprint includes between $500 million and $800 million that Beacon Hill lawmakers have already passed to improve roads, bridges and mass transit. The transportation funding package includes $110 million from increasing the gasoline tax 3 cents per gallon and then indexing the levy to inflation; $161 million from a tax on computer services; $110 million from tobacco taxes; and $83 million from changes to utility classification and sales sourcing.
The House budget also includes several key provisions for employers, including one that would keep private the financial information of companies that use the Investment Tax Credit and the Research and Development Tax Credit. The bill removes two employer health-care contributions - the Fair Share Assessment and Medical Security assessment – while requiring that any increases to a new $50-per-worker Employer Responsibility Contribution for health care be approved by the Legislature.
House members approved the budget by a 127 to 29 margin.
“The House budget takes a prudent approach by reducing dependence on one-time revenues and not instituting dramatic tax policy changes. Such ongoing prudence has been an important element of Massachusetts’ positive standing with bonding rating agencies,” said John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts.
“Speaker Robert DeLeo and Ways and Means Committee Chair Brian Dempsey clearly understand that we remain in a time of slow job growth. This budget and future legislative proposals must maintain a long-term approach that sustains vital government services while creating a predictable environment for investment and job creation.”
The budget now goes to the state Senate for debate in May. A conference committee will then attempt to craft a final bill in time for the start of the new fiscal year on July 1.
The financial privacy provision, contained in an amendment filed by Dempsey, removes the Investment Tax Credit and R&D Tax Credit from new requirements contained elsewhere in the budget that companies receiving credits file detailed financial information that would then be posted to the Web. AIM maintained that the ITC and R&D credit should be exempted because both are granted as a matter of statutory right, while other tax benefits are individual credits granted through a public application process through a state agency.
AIM has supported moves to eliminate the Fair Share Assessment – created under the 2006 state health reform law – and Medical Security assessment because both will become unnecessary under federal health reform. The original proposal to replace those two assessments with the Employer Responsibility charge generated concern because it gave a board of three unelected people broad authority to raise the assessment by up to 5 percent annually. The House budget would require that panel to submit proposed increases to Beacon Hill.
Fair Share mandates that employers with 11 or more full-time equivalent employees make a “fair and reasonable” contribution toward the health-care costs of employees or pay an assessment of up to $295 per employee per year. The Medical Security Program requires companies to contribute money to provide low-income unemployed people with health insurance.
An AIM-supported amendment that would have ended a three-year delay in implementation of the so-called FAS 109 deduction was withdrawn, though the House declined to go along with the administration's proposal to eliminate the deduction altogether. FAS 109 is an accounting standard that requires that financial statements reflect the tax consequences of all book/tax differences. The deduction was adopted as part of the 2008 debate over adoption of combined tax reporting in Massachusetts.
Employers also remain concerned about a section of the budget that impacts the tax audit procedures for entities such as partnerships and limited liability companies (LLCs). The section would allow the Department of Revenue (DOR) to expand audits beyond the legal entity being audited and limit the taxpayer’s appeal options, potentially forcing companies into expensive litigation of issues at the Appellate Tax Board that should be resolved at a more cost-effective administrative level.
Dempsey told State House New Service that the bill addresses many of the priorities Gov. Deval Patrick highlighted in his budget plan in “a balanced a fiscally responsible way.”
Companies are expanding the concept of "succession planning" beyond top executive positions to their entire workforces – and Massachusetts should be thinking along the same lines, Yolanda Kodrzycki, Director of the New England Public Policy Center (NEPPC) at the Federal Reserve Bank of Boston, told an audience representing employers, government and education on Wednesday morning.
Our state's incumbent workforce, Kodrzycki noted, is the twelfth-oldest in the country, but outside Greater Boston, a magnet for young people, it is fourth-oldest, behind only Maine, Vermont, and New Hampshire. The ongoing generational transition is complicated by deficiencies in the skills pipeline and by limited opportunities for young people to gain work experience.
Kodrycki spoke at the release of a report, "Closing the Massachusetts Skills Gap," that completes an 18-month project examining labor demand and supply regionally and statewide. Commonwealth Corporation, a quasi-public workforce agency, commissioned the analysis from NEPPC; Eastern Bank supported the report's production. For employer s concerned about workforce issues, the statewide report and the eight regional reports offer a mine of information and insights.
Speakers at the release event included the state secretaries of Labor and Workforce Development and Education, Nancy Snyder of Commonwealth Corporation, Wanda McClain of Brigham & Women's Hospital, and Nancy Stager of Eastern Bank.
Recommendations to address the skills gap are proposed by Commonwealth Corporation fall under four headings:
- Improve employment outcomes for young workers (teens through post-secondary) through work experiences, internships, coaching, and more flexible hiring practices
- Expand the scale and intensity of Adult Basic Education and English language programs, with more cooperation between employers and educational programs.
- Align education with persistent and emerging skill needs, again stressing links between industry and training providers.
- Craft more effective and accessible educational models that support ongoing skill development and lifelong learning, such as the newly streamlined Workforce Training Fund Program.
The Massachusetts Workforce Training Fund Program (WTFP) today announced four policy changes that will streamline the grant process and make thousands of additional employers eligible for the Express Grant program.
WTFP officials said the fund’s advisory board voted recently to cut in half the two-year waiting period for companies that receive a grant and wish to apply for a subsequent award. The board also made companies with between 50-100 employees eligible for Express Grants; eliminated the waiting period between General Program grants and Express Program grants; and increased the allowable grant period for Technical Assistance grants from six months to 12 months.
Express Grants allow small employers to quickly and simply provide training for employees by using existing training courses where a pricing structure already exists.
“The changes acknowledge the fact that training is an ongoing process that employers maintain over many years in an effort to become efficient and competitive,” said Richard C. Lord, President and Chief Executive Officer of AIM and Chair of the WTFP Advisory Board.
“Our hope is that more employers will now come forward to seek training money, even if they have received grants in the past.
WTFP, the commonwealth’s flagship workforce training initiative, has provided $202 million to train approximately 290,000 Massachusetts workers at more than 3,700 companies since 2007. The program allows employers to apply for grants of up to $25,000 for technical assistance programs, or up to $250,000 for full training programs. Training programs may last up to two years.
The reduced waiting period between applications for general workforce training grants is effective for all companies that have previously won grants. The waiting period commences when grant final paperwork has been completed and approved by staff.
Grant awards will take into account:
- The role of Workforce Training Funds as money intended to supplement, not supplant, private investment in training;
- Performance on previous WTFP grants, including, but not limited to, training program completion, achievement of expected results, and grantee compliance;
- Duplication of training efforts previously funded through the Workforce Training Fund.
Employers fund the WTFP through a surcharge on their Unemployment Insurance tax payments. Companies are permitted to use grants from the fund to train workers in areas such as basic skills, English as a second language, supervisory/management skills, customer service and lean manufacturing.
Lord said expansion of the Express Grant program will allow thousands of employers to access training money for the first time through an expedited process. Applications for Express Grants are accepted on a rolling basis.
“The changes simplify the grant application process for a wide swath of companies that make up the core of the Massachusetts economy. The objective is to get money into the hands of employers to improve the skills of workers and make their enterprises globally competitive,” Lord said.
AIM has helped scores for companies develop successful Workforce Training Fund grant applications. Please contact Bill Baldino (email@example.com) for more information.
Associated Industries of Massachusetts is making its members-only Employer Hotline available to all businesses affected by the Boston Marathon bombing.
The AIM Employer Hotline answers more than 800 employer questions each month about employment law, human resource practices and management issues. The hotline features human-resource and employment-law experts with more than 300 years of combined experience.
Scores of businesses in the Copley Square area of Boston near the site of the twin explosions have been closed since Patriots Day as state, federal and local authorities investigate the crime scene. Additional businesses in Watertown and Cambridge were affected by the deadly hunt for the perpetrators.
“AIM is aware that many businesses have been touched by this tragedy, from stores that were damaged in the explosions to companies in and around Boylston Street where employees were seriously injured. We are pleased to place the AIM Employer Hotline and its staff of business experts at the service of these companies that have gone through so much,” said Gary MacDonald, Executive Vice President of the AIM Employers Resource Group.
The Hotline number is: 800.470.6277. Please tell the staff expert who answers the call that your company was affected by the Marathon bombings.
Thousands of Massachusetts businesses remained closed Friday as employers in half a dozen communities complied with requests by public safety officials for people to remain at home.
The lockdown has left many employers wondering about the laws governing employee pay for an unscheduled day off due to public emergency. The primary question: How do you determine what to pay workers if your company is shut down for any period of time?
Human resource professionals emphasize that employers may wish to go beyond the letter of the law when making pay decisions about Friday, considering the protracted emotional toll of the Marathon bombing and subsequent weeklong hunt for those responsible.
“Friday’s shutdown of an entire metropolitan area was unprecedented and employers should keep in mind that workers did not report to the job because they were asked by the governor and other officials to remain locked in their homes,” said Karen Choi, Senior Vice President of Management and HR Services at AIM.
Massachusetts regulations define reporting pay this way: “When an employee who is scheduled to work three or more hours reports for duty . . . and that employee is not provided with the expected hours of work, the employee shall be paid for at least three hours on such day at no less than the basic minimum wage.”
Here are specific examples:
- A non-exempt (hourly) employee reports for work, but the company is closed - The employer must pay the employee at least $24 in wages (3 hours x minimum wage).
- A non-exempt employee reports for work, the company opens for a short period and then closes - The employee must be paid actual wages for time worked and minimum wage for remaining time, up to 3 hours.
- A non-exempt retail employee reports for work on a Sunday (law requires 1.5 times base pay for Sunday and holidays) - The employee must be paid at least $36 (3 hours x Sunday minimum wage of $12 per hour).
- Exempt employees - Employers may not deduct time from an exempt employee’s pay when closing early due to the weather. Any unauthorized deduction runs the risk of losing exempt status.
Many companies find it too difficult to rely on managers to reach all employees in a timely fashion before they report to work. Employers wishing to avoid this problem should consider establishing a phone message loop and require that all employees call into the message system before leaving their house if there is a risk of closing due to the weather.
Put the requirement in your handbook and make sure all employees are aware of it. And then enforce the rule. That means that if someone ignores it and reports to work when you were closed, you will owe the employee show-up pay, but you may also discipline the employee for violating the policy.
Alternatively, employers should use local media (radio and television) to communicate that they are closed. While you may also post the closing notice on your Web site, remember that asking employees to check the Web site/email prior to leaving for work may invite requests to be paid for that time by non-exempt employees.
Although an employer is required to pay only minimum wage, many companies elect to pay employees their actual wage for the three or four hours (half day pay) in the interest of employee relations. Most AIM members pay more than minimum wage. According to the AIM’s Statewide Compensation Survey:
- 34 percent of employers pay four hours, with most paying regular wages;
- 28 percent pay 3 hours, with most paying regular wages;
- 15 percent pay more than four hours, with most paying regular wages; and
- The remaining 23 percent report other pay practices.
If a non-exempt employee wants to be paid for the balance of the day (5 hours), allow the employee to charge paid time off to make up for the lost pay.
Employers throughout the commonwealth have contacted Associated Industries of Massachusetts in the past 48 hours to ask where to make donations to the victims of Monday’s Boston Marathon bombing.
AIM urges employers to make their donations to The One Fund Boston, which was established yesterday to provide financial assistance to families directly affected by the Patriots Day tragedy. Governor Deval Patrick and Boston Mayor Thomas Menino announced creation of the fund, and AIM member John Hancock Financial Services immediately donated $1 million.
Two explosions near the finish line of the Boston Marathon killed three people and injured 176, including many who lost limbs and who remain in critical condition. The dead included an eight-year-old boy from Dorchester, a 29-year-old woman from Medford and a Boston University graduate student from China.
Employers and individuals may donate at onefundboston.org.
“I am humbled by the outpouring of support by the business community and individuals who are united in their desire to help. The One Fund Boston will act as a central fund to receive much needed financial support,” Patrick said.
“At moments like this, we are one state, one city, and one people.”
Craig Bromley, President of John Hancock, said, “John Hancock is honored to contribute to The One Fund Boston, aiding those who were affected by this terrible event. The Boston Marathon is about courage and resilience and community.”
The Boston Herald reports that the fund has also received donations from Hill Holliday co-founder Jack Connors; John Fish, CEO of Suffolk Construction; Brian Moynihan, president and CEO of Bank of America; Paul Grogan, president of The Boston Foundation; Steve Pagliuca, managing director of Bain Capital and co-owner of the Boston Celtics; Larry Lucchino, CEO of the Boston Red Sox; and Mike Sheehan, CEO of Hill Holliday, and Karen Kaplan, president of Hill Holliday.
The Massachusetts Senate approved a transportation funding bill Saturday that would dedicate approximately $800 million per year in new taxes and other revenue to roads, bridges and public transit by 2018.
The Senate measure is larger than the $500 million package approved on April 8 by the House of Representatives, but still well below Governor Deval Patrick’s original proposal to raise $1.9 billion annually for transportation and education by raising the income tax and corporate taxes. The governor praised the Senate bill on Saturday as a significant step toward a “safe, functional, modern transportation system to keep pace with a growing economy.”
Senators voted 30 to 5 to approve the same basic group of tax changes passed by the House - $110 million from increasing the gasoline tax 3 cents per gallon and then indexing the levy to inflation; $161 million from a tax on computer services; $110 million from tobacco taxes; and $83 million from changes to utility classification and sales sourcing.
The Senate bill adds revenue from several sources, including $40 million by requiring utility companies to pay for light poles and other structures on public rights of way, and $80 million by redirecting 2.5 cents per gallon from the gasoline tax currently earmarked for cleanup of underground storage tanks.
A conference committee will now hammer out differences between the two versions, but analysts expect the final measure to be closer to the Senate’s $800 million number. Governor Patrick had threatened to veto the House blueprint, but has not said directly whether he would sign a final bill with the Senate numbers.
Associated Industries of Massachusetts has maintained throughout the debate that lawmakers should fund transportation improvements with transportation-specific sources of revenue rather than business taxes such as the one on computer software. The association nevertheless believes that the legislation passed by the House and Senate takes positive steps toward fixing the transportation system without crippling increases to the income tax or other broad-based levies.
AIM also remains encouraged that both the House and Senate bills would require the MBTA and Department of Transportation to accelerate reasonable benchmarks for revenues, savings, and reforms. A menu of reforms approved in 2009 was supposed to generate $6.5 billion in savings over 20 years, but has so far reduced costs by just $500 million.
“Employers understand the need for Massachusetts to maintain a transportation infrastructure that supports economic growth. The Senate and House measures solve the immediate and long-term structural deficit of the state transportation system,” said John Regan, Executive Vice President of Government Affairs at AIM.
The increase in the gasoline tax would cause an average driver to pay an additional $12 to $30 per year to fill the tank. The Legislature said it did not want to rely solely on increasing the gas tax because gas consumption has declined in recent years and is expected to continue to fall.
The plan would provide “forward funding” for regional transit authorities in 2014 and allow the Department of Transportation to move all employees onto the operating budget by 2016, ending the current practice of paying for personnel with borrowed funds.
Information provided by the Legislature indicates that their proposal to apply the sales tax to software modifications and systems design does not impose taxes on cloud-based services such as remote data storage. Downloads of computer games, music and books would also remain outside the new sales tax.
Other elements of the Senate bill include:
- A provision directing the Department of Transportation (DOT) to move towards open road tolling on major routes other than the Turnpike.
- A commitment to transfer up to approximately $160 million per year from the general fund to the transportation fund in years beyond Fiscal 2018.
- A directive to the MBTA to pursue naming rights sales on its stations and other assets.
PriceWaterhouse Coopers Analysis of Business Taxes in Murray/DeLeo Plan
Ernst & Young Analysis of Tax on Computer Services
What do AIM members expect from the sequester?
The mandated reductions in federal spending, divided between defense and non-defense accounts, which took effect in March will of course be felt directly by some government contractors. Other employers may suffer some consequences as a result of reductions in certain services, such a federally-funded workforce development programs.
Many economists have been concerned about macroeconomic effects – a slowdown in overall growth because of reduced federal spending – although the prospective increase in tax rates, largely averted, was considered the more dangerous part of the 'fiscal cliff.' And a substantial body of opinion holds that the cuts won't hurt (or not much) in the short run, and will be beneficial in the longer term.
Member responses to a special question on AIM's March Business Confidence Survey indicate that the direct impact of the spending cuts is limited – only 3 percent of respondents cited direct effects (which they are already feeling). A plurality of respondents, 57 percent expected indirect negative effects; and 40 percent did not foresee negative effects from sequestration.
Responses from manufacturers and from employers in other sectors were virtually identical; but there were clear differences by size. All of the companies reporting direct impact were in the medium size range (the respondents did not happen to include large defense contractors or healthcare/research institutions). The small and medium-size groups otherwise responded similarly, with slightly more expecting negative effects than discounting them. Among larger employers, by contrast, more than three out of four (76 percent) expected negative indirect effects from the spending cuts.
These results are generally in line with past surveys showing small employers most concerned about government spending while larger ones are more likely to value government programs.
On this evidence, direct benefits (contracts) do not appear to be a major factor; but it is not clear to what extent the divergence is an effect of, for example, different tax situations, ability to access programs, or simply varying political and economic views. The balance of responses does hint at why fiscal issues, at least on the spending side, may be challenging for business organizations.
Life sciences company EMD Millipore of Bedford, metal forming and process technology leader Kinefac Corporation of Worcester and premium performance saw-blade and tool-accessory maker LENOX of East Longmeadow have been named winners of the 2013 AIM International Business Council Global Trade Awards.
The three winners will be honored at AIM’s 98th Annual Meeting on Friday, May 10, at the Waltham Westin Hotel. The event will include a keynote address by Massachusetts Governor Deval Patrick.
“Our Global Trade Award winners are exemplary Massachusetts businesses that don’t think in terms of boundaries or borders, but in terms of opportunity,” said Richard Lord, president and CEO of AIM. “Taking advantage of all that Massachusetts has to offer positions companies like our winners for exceptional global success.”
The 2013 Global Trade Award Winners are:
EMD Millipore, the Life Sciences division of Merck KGaA of Germany, offers a broad range of innovative, performance products, services and business relationships that enable customers to succeed in research, development and production of biotech and pharmaceutical drug therapies. EMD Millipore serves as a strategic partner to its customers by collaborating on new scientific and engineering insights. As one of the top three R&D investors in the Life Sciences Tools industry, the company is committed to advancing the promise of life sciences. Headquartered in Billerica, Massachusetts, EMD Millipore has 10,000 employees worldwide, with operations in 66 countries and 2012 revenues of $3.4 Billion. The company is known as Merck Millipore outside the U.S. and Canada. EMD Millipore serves a global customer base and employs approximately 1,400 people in Massachusetts.
Founded in 1952, Kinefac Corporation is recognized as a world leader in precision metal forming and processing technology, with its tools serving the medical device, aerospace and power generation industries among many others. The company has 54 employees, all in Massachusetts. With 30 years of productive export experience in more than 25 countries, Kinefac has actively pursued a global strategy. In 2012, Kinefac opened a sales office in India, following the 2005 establishment of its first overseas office in China. Also in 2012, the company landed the largest single export order in its history, to provide advanced rolling machinery to a Chinese commercial refrigeration company. Kinefac’s international business makes up 30-40% of its annual sales, and its U.S. designed and manufactured machines can be found on every continent, including Antarctica.
Originally known as the American Saw & Manufacturing Company, LENOX has been a leader in premium-performance tools such as band saw blades and power tool accessories since its founding in 1915. LENOX counts 900 employees worldwide, including over 600 in Massachusetts. Nearly half of production is exported around the world, to China and Asia, Brazil and Latin America, and Europe. LENOX has continued to grow by understanding its customers’ needs and adapting its products and services for new industries in global markets. Over the past 10 years, LENOX has invested $100 million in new capital for its only manufacturing facility worldwide, located in East Longmeadow. The company has hired over 120 people in western Massachusetts in the past two years. LENOX is part of Newell Rubbermaid, the global marketer of consumer and commercial products.
The AIM International Business Council helps Massachusetts employers engage in international trade and expand their global business activities. Through seminars, referrals, and e-newsletters, the AIM International Business Council provides companies with the resources they need. For more, visit www.aimnet.org/international.
The federal government will allow Massachusetts three years to phase in rules under the Affordable Care Act (ACA) that could increase insurance premiums for some small employers by 17 percent.
The U.S. Department of Health and Human Services (HHS) notified the commonwealth Friday that it could take extra time to eliminate rating factors designed to mitigate premium increases in the health insurance market that covers individuals and companies with 50 or fewer employees. The action satisfied Massachusetts officials, who previously indicated that they were “seriously considering” de-merging that market.
Associated Industries of Massachusetts commends the Patrick Administration for securing relief from the potential sticker shock of implementing the rating changes in 2014. At the same time, the extension represents a temporary solution rather than a permanent fix.
“We need to amend the ACA to allow us to keep the rating factors permanently,” said Kristen Lepore, Vice President of Government Affairs at AIM.
“We established most of these factors when we merged the individual and small group markets in 2007 to mitigate the effects on small employers. At the end of the day, when the transition is over, we will still have a merged market but no rating factors. That is not fair to small employers who have done the right thing over the past six years.”
The merged health insurance market uses the same rules to rate coverage for individuals and small companies. Limited premium differentials are currently permitted based upon group size and other factors, but will no longer be permitted under the ACA. The merged market is due to expand in 2016 to include employers with 100 or fewer workers.
Elimination of rating factors in the merged health insurance market is just one of several elements of federal health care reform that threaten to increase premiums for Bay State employers and consumers. A separate health care premium tax, for example, is projected to cost Massachusetts insurance purchasers $213 million in 2014 and $3 billion during the next decade.
State Insurance Commissioner Joseph Murphy, said the extension on eliminating rating factors will benefit both individual consumers and employers.
“This is good news for small businesses and individual insurance consumers all across the commonwealth,” Murphy said in a statement. “We thank HHS for acknowledging the work of the commonwealth in providing health insurance to our residents prior to the Affordable Care Act.”