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Massachusetts Exports Rise; Trade Policy Remains Unclear

Posted by Kristen Rupert on Feb 16, 2017 9:16:13 AM

Recently-released year-end 2016 trade statistics tell a positive story for Massachusetts.

Product exports from the commonwealth increased 2 percent last year, outperforming many other US states.  Massachusetts exports totaled nearly $26 Billion in 2016.

international.flagssmall.jpgAt the same time, the relationship with our top three trade partners—Canada, Mexico and China—is likely to change as a result of new trade policies sought by the Trump administration.  What might this mean for Massachusetts companies?

The new president and his executive team have committed to renegotiating long-standing trade relationships and agreements.  First in line is NAFTA—the trilateral North America Free Trade Agreement among the US, Canada and Mexico that took effect 23 years ago.

 Many experts agree that changes to NAFTA are long overdue.  However, there is concern that the Trump administration may abandon NAFTA altogether and pursue separate bilateral agreements—one with Canada and a separate one with Mexico.  This would create significant disruption for many companies with global supply chains across North America. 

The new Trump trade team is not yet installed, which will likely delay negotiations about NAFTA.  Advocates within the manufacturing community, however, are already gathering stories about how individual US companies have grown jobs as a result of business with Canada and Mexico.   Getting this data to Congressional leaders and the new presidential administration will be critical in persuading Trump trade professionals to tweak, and not eliminate, NAFTA. 

Another proposal in play is the border tax.  Imports would be taxed at a rate up to 20 percent.  A complementary plan to reduce the overall US corporate tax rate is being touted as a potential offset.  The border tax would mean that large importers such as Walmart and Target would suffer and likely pass along cost increases to customers, while big exporters—Caterpillar, GE, Boeing - would benefit.  Small companies dependent on components produced in China or Mexico would also be hard hit by an import tax.  As with all tax rate changes, we’ll see winners and losers. 

No China trade announcements have been made since President Trump was inaugurated.  His telephone call last week with China president Xi Jinping was a first step toward repairing the damage caused by Mr. Trump’s earlier denunciation of the US’ long-standing “one China” policy.  Mr. Trump had suggested imposing tariffs of up to 45 percent on imports from China, but that proposal has not yet gained traction.

In a promising development, Mr. Trump last week signaled his support for the US Export-Import Bank, which has been operating for more than a year without a board quorum and unable to approve loans of more than $10 million.  Mr. Trump’s statement represents a departure from his previous skepticism about Ex-Im Bank. The president may make a statement about Ex-Im during his visit to Boeing in South Carolina tomorrow. 

If you are one of the more than 10,000 exporting companies in Massachusetts and you have concerns, praise or questions about proposed federal trade policy, please let AIM know.  We are in regular communication with industry and government leaders and your insights are invaluable as we convey what’s important about trade and growing the Massachusetts economy. 

Topics: International Trade, Massachusetts economy, Donald Trump

Employers: Federal Health Reform Must Change

Posted by Katie Holahan on Feb 8, 2017 10:00:00 AM

Massachusetts employers believe overwhelmingly that federal health-care reform must change, but their opinions about how to do so vary widely.

Health_Care_Reform.jpgA new AIM survey finds that 43 percent of Bay State employers think that Congress and President Donald Trump should make changes to the existing Affordable Care Act, or Obamacare. Forty percent favor repealing the law and replacing it with an alternative program.

Eleven percent want to leave the current system in place while seven percent would repeal the reform law without an alternative.

The president and the Republican-controlled Congress have made “repeal and replace” a centerpiece of their governing priorities for the first 100 days. Republicans have yet to agree upon an alternative, but appear to favor eliminating the tax penalties imposed on people who go without insurance and on larger employers who do not offer coverage to employees.

The AIM survey was taken in January and is based upon responses from 162 employers from all sectors of the Massachusetts economy.

“The paperwork for Obamacare is ridiculous and terrifying for the regular person,” wrote one employer.

“We used to get one bill and now you get a bill from each doctor and have to wait for explanation of benefits and pre-register for everything. They have made health care so many layers it's no wonder the prices are through the roof.”

Another employer echoed that frustration.

“Trying to make changes to a 2,700-page bill with over 40,000 pages of accompanying regulations is bizarre. Start over,” the employer wrote.

Richard C. Lord, President and Chief Executive Officer of AIM, said employers supported the 2006 Massachusetts health-care reform as a first step to controlling the cost of providing health insurance to workers. Federal reform caused upheaval for many small employers in Massachusetts, but Lord also warns that an ill-considered repeal might put at risk billions of dollars in federal Medicaid funding that made the Bay State reform so successful.

“The expansion of Medicaid is exerting significant financial pressure on the state budget. Our hope is that policymakers in Washington can agree on some common-sense tweaks to Obamacare that would work to everyone’s benefit.”

Republican leaders formulating a replacement health reform have talked about eliminating tens of billions of dollars provided each year to states that have expanded eligibility for Medicaid. They have also discussed repealing subsidies for private health insurance coverage obtained through the public marketplaces known as exchanges.

The 2010 federal reform imposed taxes and fees on certain high-income people and on health insurers and manufacturers of brand-name prescription drugs and medical devices, among others. Republicans have not said for sure which taxes they will scrap and which they may keep.

The policy debate in playing out amid growing signs of accelerating health-insurance premium costs.

“My insurance premiums increased 24 percent this year. That is a little excessive,” one employer wrote.

Topics: Health Care Reform, Health Care Costs, Health Insurance

Employer Confidence Rises for Fifth Consecutive Month

Posted by Christopher Geehern on Feb 7, 2017 8:42:41 AM

Confidence among Massachusetts employers rose for the fifth consecutive month during January despite a marked slowdown in economic growth during the fourth quarter of 2016.

BCI.January.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose one point to 61.4 last month, a full 5.6 points higher than a year earlier and the highest reading since December 2004. The confidence increase came during a month when the Massachusetts unemployment rate fell to 2.8 percent and Bay State employers created more than 72,000 new jobs for the year.

At the same time, national economic growth slowed to an annual rate of 1.9 percent during the final three months of 2016, while the Massachusetts economy downshifted to a 0.5 percent growth rate from 3.1 percent during the third quarter.

“The good news is that unemployment in Massachusetts remains well below the national rate of 4.7 percent, but that low jobless rate may also be creating labor-force capacity constraints that are slowing output,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employer confidence seems to be tracking the overall optimism of financial markets that continue to hit record highs. It will be instructive to see how that enthusiasm holds up as Congress and the new administration get down to the business of governing.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The index has remained above 50 since October 2013.

Constituent Indicators Uniformly Higher

All of the sub-indices based on selected questions or categories of employer were up to start 2017.

The Massachusetts Index, assessing business conditions within the commonwealth, rose to 61.8, leaving it 5.2 points ahead of the same time last year.

The U.S. Index of national business conditions inched up 0.1 points to 57.6 - 7.5 points higher than in January 2016. January marked the 81st consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, increased 0.3 points to 59.4 while the Future Index, measuring expectations for six months out, rose 1.6 points to 63.3. The future outlook was 6.1 points better than a year ago and higher than at any point since March 2015.

Operational Views Strengthen

The sub-indices bearing on survey respondents’ own operations also strengthened.

The Company Index, reflecting overall business conditions, rose one point to 61.9 while the Employment Index gained 1.2 points to 58.4 and the Sales Index 0.7 points to 62.1.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 18 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.

“One of the elements driving the overall increase in employer confidence is a rapidly brightening outlook among manufacturers,” said Katherine A. Kiel, Ph.D., Professor of Economics, College of the Holy Cross in Worcester and a BEA member.

“The AIM Manufacturing Index has risen 8.5 points during the past five months, driven by a positive outlook on sales and hiring. Manufacturing optimism also bodes well for capital investment and research and development going forward.”

Companies in the eastern part of the Massachusetts were more optimistic at 63.0 than those in the western part of the state at 59.0.

AIM President and CEO Richard C. Lord, also a BEA member, said the emerging labor-force constraints underscore the importance of maintaining a world-class training and education system in Massachusetts. He noted that in the area of manufacturing, AIM has filed legislation to provide a 50 percent tax credit for eligible expenses for employees who receive certification through the Massachusetts Manufacturing Advancement Center Workforce Innovation Collaborative’ s (MACWIC) Applied Manufacturing Technology Pathway Certification Program.

“As employers find it increasingly difficult to locate appropriately skilled employees, we are reminded that our economic future depends upon the ability of Massachusetts to educate all children and all incumbent workers with the knowledge our companies need to prosper in a complex global economy,” Lord said.

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

New Solar Subsidy Program Gets It Right

Posted by Robert Rio on Feb 2, 2017 2:00:00 PM

The Massachusetts Department of Energy Resources (DOER), after months of public comment, released on Tuesday its proposal for a new solar-energy incentive program to replace the complex and overly expensive program now in place.

solarpanels.small.jpgWe think the state got it right. And employers and other electric customers will be the better for it.

The proposal adopts suggestions made by AIM to rely on market competition to establish the amount of incentives that developers will receive to install solar energy. The result will be a program that costs half as much as the current one and still encourages the development of solar installations throughout the commonwealth.

Total savings to employer and other electric ratepayers: $250 million per year.

The new program will eliminate Solar Renewable Energy Credits (SREC), one of two methods through which solar developers currently collect subsidies. The other, net metering credits, will remain unchanged.

While some of the details are still being worked out, the new program, called the Solar Massachusetts Renewable Target program or SMART program, will establish a solar tariff rate only after bidding is complete for an initial 200 megawatt block of solar projects. Developers will receive that bid price for 20 years.

That incentive rate will remain the same for all solar projects and will automatically decline 4 percent for every 200 MW block in the future. There will be some “adders” to the base price - for building-mounted systems, solar canopies, and cases in which solar is combined with storage technologies - that would add small amounts to the baseline price.

Projects may still receive net metering credits, but those will offset the tariff to determine the final subsidy. So if the base rate is established at 15 cents and the developer receives net metering credits of 10 cents, the utility will make up the 5-cent subsidy through the tariff.

AIM opposed the scope of the current solar program and was concerned that early proposals for the new program relied on government officials to set tariff levels for solar incentives without using the competitive market to drive down costs to the ratepayer. Such a system would fail to pass along to the ratepayer the 50 percent reduction in solar installation costs that have occurred over the last few years. 

Driving down costs is important for the future of the Massachusetts economy. Massachusetts not only has one of the highest electricity costs in the country, but one of the most generous solar and renewable incentive programs, adding up to nearly $1 billion in 2016 and $2 billion by 2020. Those subsidies add up to nearly 4 cents per kilowatt hour for individual customers even before the new solar incentive program kicks in.

AIM, in a series of comments, urged DOER to adopt a model based on competition. Other states where solar installations cost half as much as Massachusetts already use the competitive model.

Read First Set of AIM Comments

Read Second Set of AIM Comments

Competition reduces prices. Competition is also the hallmark of the recently passed Massachusetts energy bill, which requires utilities to solicit market proposals for hydropower and offshore wind, a notion AIM supports.

The solar proposal still needs to go through public comment and any tariff needs to be approved by the Massachusetts Department of Public Utilities. During the transition period between now and the point at which the new program is approved by the Department of Public Utilities (DPU) – expected January 2018 - the existing solar incentive program will remain in place at a lower incentive rate.  

DOER has developed a program that is well thought-out and enjoys wide support. AIM commends DOER for this step in the right direction and we look forward to working with the Baker Administration and others to get this program approved and implemented as soon as possible. 

If you are interested in following this issue and engaging with AIM on Massachusetts electricity prices, contact me at rrio@aimnet.org or 617-262-1180

Review the DOER Proposal

Topics: Energy, Solar Subsidies

Proposed Assessment Will Hurt Employers Who Provide Health Insurance

Posted by Rick Lord on Jan 26, 2017 3:00:40 PM

Governor Charlie Baker yesterday described his proposal for a $300 million health assessment on employers as an attempt “to wrestle with the fact that a huge portion of people who are working full-time are either not taking coverage that's available through their employer and going on MassHealth, or are working for people who aren't offering them coverage at all, and going on MassHealth."

health_care.jpgHe added, according to State House News Service, that “the centerpiece of this budget really is a smart and common-sense approach to address the problem of costs being shifted from private sector employers for their employees onto state government."

Set aside for the moment the questionable premise of rampant cost shifting in a commonwealth where 76 percent of employers offer health insurance compared to 55 percent in the rest of the country.

The important point is that the governor’s sweeping proposal goes far beyond targeting employers who offer no health insurance, and instead penalizes employers who already offer high-quality insurance coverage to their employees.

It appears that money, not fairness, is driving the new fair-share assessment.

The administration plan would impose a $2,000-per-employee fee upon companies at which at least 80 percent of full-time worker equivalents do not take the company’s offer of health insurance, and that do not make a minimum contribution of $4,950 annual contribution for each full-time worker. If 70 percent of a company’s employees accept company health insurance, the company would be assessed $2,000 per employee for the number of employees represented by the 10 percent difference.

The employer assessment, which would bring an estimated $300 million into state coffers, represents a revival of the so-called fair share contribution plan that was a linchpin of the 2006 universal health care law in Massachusetts before it was repealed to make way for the federal Affordable Care Act. The state employer mandate was repealed in 2013 as lawmakers and former Gov. Deval Patrick worked to bring Massachusetts into compliance with federal health-care reform.

AIM asked multiple employers of varying sizes to determine whether they would be subject to an assessment under the governor’s plan. Every one of the companies, from small manufacturers to international financial institutions to corner retailers, reported that they would face assessments. Most fell short of the 80 percent threshold because of employees using spousal health plans or because of the calculation of full-time equivalent employees.

“There is widespread concern among responsible employers that they are being dragged into an assessment intended for companies that provide no health coverage,” said Katie Holahan, Vice President of Government Affairs at AIM.

Holahan said AIM has developed an online calculator that will allow employers to determine how much they might owe under the governor’s proposal.

AIM opposes the employer assessment because the growing shortfall at Masshealth, which provides health insurance to 1.9 million low-income Massachusetts residents, is attributable solely to problems arising from the federal Affordable Care Act (ACA), a law that may well be repealed by the time Massachusetts solves its Medicaid problems. 

ACA made access to health insurance an entitlement based on expanded income eligibility.  Under the Massachusetts health care reform law of 2006, employees who were offered employer-sponsored health insurance were ineligible for MassHealth.  The ACA reversed that policy and allowed employees to decline employer coverage and still seek insurance through MassHealth.

The change created a migration of newly-eligible individuals from their employer-sponsored insurance to MassHealth, substantially increasing the commonwealth’s financial burden.  ACA made it an economically rational choice for eligible residents.

As MassHealth enrollment grows, the commonwealth experiences the reality that employers have faced for years - the high cost of health care coverage in this state threatens the underpinnings of the state economy.  This challenging moment underscores the fact that policymakers have concentrated too heavily on access issues instead of controlling the cost of health insurance, and now face a renewed imperative to lower costs for everyone in Massachusetts.

AIM looks forward to working with the administration and the Legislature to find a fair solution to the commonwealth’s challenging health-care financing issues.

Topics: Health Care Costs, Health Insurance, Charlie Baker

Infographic: The Governor's Proposed Health Assessment

Posted by Katie Holahan on Jan 25, 2017 4:21:34 PM

The Baker Administration filed a budget proposal today that, as expected, would impose a $2,000-per-employee tax on some employers to close a deficit in MassHealth. AIM opposes the assessment as unfairly burdening employers for a problem they did not create.

Which employers will be subject to the assessment? Here is an infographic that summarizes the administration proposal. AIM is developing a calculator that will allow employers to determine exactly what their costs will be under the new assessment.

If you have any feedback or questions about this proposal, please contact Katie Holahan at keh@aimnet.org or 617.262.1180.

Fair Share 2017.jpg

 

Topics: Health Care Costs, Health Insurance, Charlie Baker

Business Leaders Share Outlook for 2017

Posted by Christopher Geehern on Jan 23, 2017 10:10:11 AM

What lies ahead for Massachusetts employers as a new administration comes to Washington in 2017? Listen as three distinguished business leaders - Robert Reynolds, President and Chief Executive Officer of Putnam Investments in Boston; Donna Cupelo, region president of Verizon in New England; and Lisa Chamberlain, managing partner of The Chamberlain Group in Great Barrington – share their opinions as part of the AIM Economic Outlook Forum. Moderator is Jeff Brown, Business Editor of WBZ Radio in Boston.

Topics: Massachusetts economy, Massachusetts employers, AIM Executive Forum

IBM Watson Health Redefines Boundaries of Health, Information Technology

Posted by Christopher Geehern on Jan 20, 2017 2:24:55 PM

Associated Industries of Massachusetts President Richard C. Lord used his annual State of Massachusetts Business Speech this morning to highlight IBM Watson Health in Cambridge as emblematic of the commonwealth's growing economy.

IBM Watson Health is prospering by exploring the still unknown boundaries between health care and information technology. The company seeks nothing less than to redefine the relationship between technology and humanity in a manner that improves the quality of medical care for all of us. IBM Watson Health could have located anywhere, but decided to establish its operations and hundreds of employees in Kendall Square, Cambridge, the epicenter of the global biosciences and software industries.

The idea behind IBM Watson Health is to use cognitive computer systems that understand, reason and learn to make sense of the estimated 80 percent of health data that is currently invisible to computer systems because it is unstructured.

Topics: Massachusetts economy, Technology, State of Massachusetts Business Address

State of Massachusetts Business - The Age of Uncertainty

Posted by Christopher Geehern on Jan 20, 2017 10:47:52 AM

The success of diverse Massachusetts companies like VIBRAM and IBM Watson Health underscores the need for employers to engage in public policy debates, Associated Industries of Massachusetts President Richard C. Lord said Friday.

Lord used his annual State of Massachusetts Business address to more than 350 business leaders to call for call upon elected officials and all involved in public policy to set aside polemics and engage instead in civil debate on behalf of the large number of Americans who clearly feel restive, uneasy and suspicious of institutions like government and business.    

“Let us resolve to talk with each other, not at each other. Let us resolve to speak in full sentences, not 140-character missives that reduce to two dimensions the complex issues with which we must wrestle,” Lord said just hours before Donald J. Trump took the oath of office as the 45th president of the United States.

“Let us seek bipartisan consensus rather than intractable fiscal cliffs and government by inaction. Let us make hope and hard work our watchwords and not allow cynicism to leave undone the important work of business and government.”

Lord warned that conservative administrations in Washington often prompt progressives in Massachusetts to make the commonwealth an example of big government, higher taxes, inefficient regulation and fiscal instability. Employers are already on the defensive, he said, having barely held off scores of expensive social-engineering bills ranging from a ban on non-compete agreements to the creation of a state-run pension system for private-sector workers.

The first step for business, according to Mr. Lord, is to articulate a positive agenda for economic growth. He noted that AIM is attempting to do that through its Blueprint for the Next Century, which makes four primary recommendations to create economic growth and opportunity for the people of Massachusetts:

  • Government and business must develop the best system in the world for educating and training workers with the skills to allow Massachusetts companies to succeed in the global economy.
  • Massachusetts must create a uniformly competitive economic structure, including an efficient transportation infrastructure, across all industries, geographic regions and populations.
  • Establish a world-class state regulatory system that meets the highest standards for efficiency, predictability, transparency, and responsiveness.
  • Massachusetts must find a way to moderate the substantial burden that health care and energy costs place on business growth.

A panel of business leaders responded to Lord’s speech and underscored the sense of uncertainty surrounding the transfer of power in Washington.

Robert Reynolds, Chairman and Chief Executive Officer of Putnam Investments, expressed optimism that the new Trump Administration and Republican Congress will accelerate economic growth and move away from the monetary approach that has dominated US economic policy.

“They already have so-called shovel ready plans,” on taxes, replacement of federal health reform and other issues, Reynolds said.

Donna Cupelo, New England Regional President of Verizon, said that a national technology sector that did not strongly support Trump is now “getting its boots back on” to address issues such as infrastructure, taxes and work-force development.

Lisa Chamberlain, Managing Partner of The Chamberlain Group in Great Barrington, said the potential repeal of the Affordable Care Act’s tax on medical-device companies is good news for her company’s customers, but repeal also creates uncertainty for small employers like herself.

“The instability of the present moment brings me some concerns and it concerns some of my neighbors,” she said.

Topics: Associated Industries of Massachusetts, Massachusetts economy, Donald Trump

Proposal to Revive Fair-Share Assessment Raises Concerns

Posted by Katie Holahan on Jan 17, 2017 8:17:07 AM

The 4,000 member employers of Associated Industries of Massachusetts (AIM) believe that the Baker Administration’s proposal to impose a $2,000-per-employee tax on some employers is an unfair way to close a deficit in MassHealth.

health_care.jpgThe proposal would force employers to foot the bill for a problem they did not create. The $600 million shortfall at Masshealth, which provides health insurance to 1.9 million low-income Massachusetts residents, is attributable solely to problems arising from the federal Affordable Care Act, a law that may well be repealed by the time Massachusetts solves its Medicaid problems 

AIM acknowledges that the ACA-generated deficit at MassHealth is not the creation or responsibility of the Baker Administration.

The Affordable Care Act (ACA) made access to health insurance an entitlement based on expanded income eligibility.  Under the Massachusetts health care reform law of 2006, employees who were offered employer-sponsored health insurance were ineligible for MassHealth.  The ACA reversed that policy and allowed employees to decline employer coverage and still seek insurance through MassHealth.

The change created a migration of newly-eligible individuals from their employer-sponsored insurance to MassHealth, substantially increasing the commonwealth’s financial burden.  ACA made it an economically rational choice for eligible residents.

As MassHealth enrollment grows, the commonwealth experiences the reality that employers have faced for years - the high cost of health care coverage in this state threatens the underpinnings of the state economy.  This challenging moment underscores the fact that policymakers have concentrated too heavily on access issues instead of controlling the cost of health insurance, and now face a renewed imperative to lower costs for everyone in Massachusetts.

State House News Service reports that the administration plan would impose a $2,000 fee for all full-time workers - defined as someone who works 35 hours or more - upon businesses that don't cover at least 80 percent of their workers and share at least 60 percent of the premium cost with employees.

The employer assessment, which would bring an estimated $300 million into state coffers, represents a revival of the so-called fair share contribution plan that was a linchpin of the 2006 universal health care law in Massachusetts before it was repealed to make way for the federal Affordable Care Act. The state employer mandate was repealed in 2013 as lawmakers and former Gov. Deval Patrick worked to bring Massachusetts into compliance with the ACA.

There are positive elements to the administration’s proposal as well. AIM supports a freeze on new mandated health-insurance benefits and a cap on provider rates.

AIM recognizes that the administration’s proposal is the opening bid in what will be a protracted debate. We look forward to productive discussions with the administration and the Legislature to find a solution that does not wreak irreparable harm on the Massachusetts economy.

Topics: Health Care Reform, Health Care Costs, Health Insurance

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