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The State of Massachusetts Business

Posted by Rick Lord on Jan 24, 2014 6:36:00 AM

Editor's note: Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts, delivered the following State of Massachusetts Business address this morning at the AIM Economic Outlook Forum.

All the promise and all the challenges of the Massachusetts economy in 2014 meet these days at a massive construction site in Brighton, just off the Turnpike as you drive into Boston. 

AIM member New Balance athletic footwear broke ground in September for its $500 million Boston Landing project, a 1.45 million-square-foot health and wellness district. The project will include a new company headquarters, state-of-the-art athletic complex, hotel, restaurants, retail space and parking.

New Balance is even taking the unprecedented step of building a new commuter rail station on the tracks of the Framingham-Worcester line that abut the site.

Take a look…

The New Balance project may be just a hole in the ground right now, but it represents all we dare to hope about the Massachusetts economy.

A 107-year-old manufacturing company uses technology to evolve and grow in the new economy, providing good jobs to 1,350 men and women; it is the only athletic footwear company in the world determined to make its products in the United States through intelligence, lean manufacturing and efficiency.

But the project also lays bare our worst fears about the economic future of Massachusetts. The governor of Ohio called New Balance a dozen times offering generous incentives for the company to move its headquarters to that state. What will happen if the next growing company does not share New Balance’s loyalty to Massachusetts? What if the next company does not have the resources to improve the transportation infrastructure by building a train station?

Will there be enough skilled employees in Massachusetts to engineer and build the high-tech running shoes New Balance will use to double its size during the next five years?

As you know, Associated Industries of Massachusetts (AIM) engages in public policy work on behalf of employers who provide jobs to nearly 650,000 Massachusetts residents. We do so guided by the belief that only a vibrant, private-sector economy creates opportunity that binds the social, governmental, and economic foundations of our commonwealth.

The creation of a job and a person’s ability to do it weaves together every important aspect of social and economic stability – the desire for a better life, the ability to support a family, the confidence to start a business, and the need for efficient government management of services such as education, health care, and public safety.

Economic growth strengthens these bonds.  The employer buys new equipment; workers use pay increases to send their children to college; and communities find ways to fix broken water mains.

Economic downturns, such as the one that unfolded five years ago, strain the bonds between employers and the community, which suddenly worry about layoffs, turmoil in the markets, the value of savings and municipal budget cutbacks.

So, which way is the Massachusetts economy pointing as we enter 2014? Are we entering a “New Balance” economy, poised for new buildings, new jobs, new discoveries, new opportunities and new prosperity? Or do we remain mired in a lackluster economy, struggling against the loss of federal defense and research funds, a continuing recession in Europe, and an unemployment rate that for the first time in many years now stands higher than that of the rest of the country?

There is ample evidence for both optimists and pessimists.

Like your glass half full? U.S. stock markets posted their largest annual gains since 1997 last year, with the Dow rising more than 26 percent on stronger-than-expected economic growth.   The economy created an average of 195,000 jobs per month and the US unemployment rate fell from 7.9 to 6.7 percent. In Massachusetts economic output grew 3.5 percent during the third quarter, while Bay State venture capital firms raised $5.4 billion for new investments, more than triple the amount raised in 2012.

Prefer your glass half empty? The Massachusetts unemployment rate rose from 6.4 percent in April to 7.0 percent in December as the innovation economy that outperformed the rest of the nation for half a decade slipped into neutral. More than a quarter million Massachusetts residents remain out of work. Sequestration alone cost the commonwealth an estimated 14,000 jobs in Fiscal Year 2013.

It’s no wonder that the monthly AIM Business Confidence Index for 2013 looked like this:

Massachusetts Employer Confidence

 

Employers are clearly as puzzled about the course of the recovery as anyone else.

AIM believes it is time for Massachusetts to restart its economic engine. It’s time to build the momentum needed to navigate beyond what Ray Torto, Chairman of the AIM Board of Economic Advisors, recently called a “lost year” for business confidence.

As the campaign for governor of Massachusetts takes shape, the employer community believes that two public-policy issues hold the key to accelerating job growth and putting some of the 250,000 Massachusetts residents who are currently unemployed back to work.

One is excessive business costs, which in a global business environment challenge employers daily. The second is a pervasive shortage of trained and qualified employees.

First, let’s look at business costs.

If you think business costs don’t affect jobs, take a look at the frenetic competition among multiple states to land the New Balance project.  Or consider the recently concluded free-for-all among a dozen states to land the Boeing 777x manufacturing line.

In such a competitive environment, can Massachusetts, or will Massachusetts, provide a hospitable business climate for the new and developing enterprises that will become the New Balances, Fidelitys and EMCs of the next 50 years?

Massachusetts must first and foremost continue the progress it has made to control the most troublesome non-wage cost confronting employers – health insurance.

AIM supported the commonwealth’s Health Care Cost Control Law of 2012, which linked medical spending to the overall rate of economic growth, and we are hopeful that health-care spending will not exceed the 3.6 percent benchmark for 2013.

Insurance premiums have moderated nationally, increasing at their lowest rate in a decade last year. More employers are offering coverage that allows employees to better manage their health care. Employees are increasingly seeking high-quality care in moderate-cost community settings.

A good start, but the hard work of solving the health insurance crisis is just beginning.

Unfortunately, health-care analysts expect premium increases to accelerate during 2014 as the economy strengthens and the Affordable Care Act is integrated into the health delivery system.

In Massachusetts, health care spending still accounts for a staggering 16.6 percent of the state economy. Health-care spending per capita in Massachusetts is 36 percent higher than the national average.

Even more staggering is that fact that a recent study by the state Health Policy Commission found that 21-39 percent of medical expenditures in our state are wasteful – that’s $26.9 billion in wasted money on the high end, almost as much as the entire state budget.

And thousands of small employers in Massachusetts enter 2014 facing the prospect of double-digit premium increases because key provisions of federal health reform threaten to accelerate the already burdensome cost of providing insurance to employees. AIM calls upon state officials and our Congressional delegation to continue to seek a waiver from these onerous provisions.

AIM believes that Massachusetts must address the cost of health insurance in a meaningful way to ensure that the commonwealth remains an attractive place to do business.

But we also urge lawmakers to address other business costs that set Massachusetts out of the economic mainstream:

  • We call upon the Legislature and Governor Patrick to freeze the unnecessary and imprudent $500 million increase in Unemployment Insurance rates that took effect January 1. The Unemployment Insurance Trust Fund used to pay benefits to jobless residents showed a balance of $800 million in November and needs no additional infusion of funds. We further call upon Beacon Hill to finally make structural reforms to an antiquated and expensive unemployment insurance system.
  • We call upon lawmakers to resist the temptation to increase the tax burden. We seek to avoid a repeat of last year’s ill-fated expansion – later repealed - of the sales levy on software and computer services that made national news and set back the commonwealth’s reputation as an innovation-friendly state.
  • And we call upon the commonwealth to do everything it can to relieve the burden of electric rates that are among the highest in the nation.

The objective is to create a uniformly vibrant ecosystem of interdependent companies - large and small, Berkshires to Boston, bistros to biotech – that together create the moments when a job opportunity meets the person who needs it. It must be an ecosystem that allows a family sports apparel company like 47 Brand in Westwood to come full circle from its roots with two Italian immigrants selling newspapers outside Fenway Park to a $200 million a year business today.

Take a look at their story…

Please join me in acknowledging brothers Steven, Bobby and David D’Angelo of 47 Brand, who are with us this morning.

The second key to accelerating job growth is solving the troubling paradox of persistent worker shortages in a high-unemployment economy.

Ask any Massachusetts employer about what worries him or her most and you’ll hear the same response: “I can’t find enough qualified people to run my business.” It’s a concern shared by technology and bioscience enterprises in Cambridge, manufacturing companies in the Pioneer Valley, health care providers in Worcester, and restaurants and hotels throughout the commonwealth.

Worker shortages caused by both skill gaps and demographic changes are pervasive throughout the Massachusetts economy. The 2013 Massachusetts Job Vacancy Survey indicates that five percent of all jobs in the Bay State – 135,000 positions in all – stood vacant at year end.

Vacancy rates ran 6.1 percent in computer and mathematical occupations, 4.8 percent in healthcare support occupations and 2.7 percent in manufacturing.

What’s wrong with this picture? We have urban high-schools where half of all students drop out before graduating while employers located less than a mile from these schools remain desperate for smart, motivated workers. With a quarter million Massachusetts residents unemployed, why are technology companies in Cambridge paying their workers thousands of dollars in referral bonuses for new employees?

The picture doesn’t improve as we look into the future. Northeastern University Economist Barry Bluestone estimates that 100,000 skilled manufacturing jobs in Massachusetts will open up in the next decade as older workers retire. The number of young people graduating from Massachusetts high schools, meanwhile, is projected to fall by 9 percent by 2020.

AIM challenges employers and the commonwealth to work together to make 2014 the year Massachusetts begins to solve the worker dislocation crisis once and for all. Innovative and creative initiatives are taking place throughout commonwealth - it’s now time to take these success stories and scale them into a comprehensive solution.

Massachusetts needs first and foremost to complete the task of creating public schools that effectively prepare students for the rigors of the knowledge economy. We may have the best schools in United States, but we do not lead the world, and in fact we're losing ground. AIM members recently participated in a survey about the steps schools need to take to improve, and business will soon offer specific reform proposals based on international benchmarking.

We support the Department of Higher Education's Vision Project to align the state's public higher education system with the knowledge demands of the global economy.

But our greatest human capital deficiency compared to other countries comes in training both students and current workers to master the demanding skills that drive areas such as high-value manufacturing, information technology and health care.

Precision manufacturing companies in greater Springfield struggle to find men or women who can operate five-axis machining centers under just-in-time conditions. An online educational startup in Kendall Square would hire 40 programmers today if they were available. The Brookings Institution reports that many of the people filling jobs in health care are not even trained here - half of the medical scientists and 40 percent of pharmacists in Massachusetts are foreign born.

The good news is that employers in various sections of the state are taking matters into their own hands.

Let’s look at just a few examples.

The Manufacturing Advancement Center in Worcester has developed a training pathway for manufacturing skills that can take individuals from basic knowledge though 26 credits of an associate of science degree in Applied Manufacturing Technology. State government, to its credit, recently announced four awards totaling more than $1.3 million to support regional programs to train unemployed and underemployed individuals, including veterans, for careers in the state’s advanced manufacturing industry.

Beth Israel Deaconess Hospital in Boston has established pipeline programs to attract, train, enhance and to retain a talented technical and professional workforce.

And nearly two dozen Massachusetts school systems recently participated in “Hour of Code,’’ a nationwide campaign to help introduce millions of students to programming during Computer Science Education Week.

AIM supports these efforts and urges the private and public sectors to expand such creative initiatives to benefit the entire commonwealth. We also look forward to working with education officials on ideas to integrate computer science courses into the high school curriculum and to convince students and parents that advanced manufacturing represents a challenging and rewarding path to success.

The alternative is a future in which high-octane companies run out of the human fuel they need to remain in the innovation fast lane.

Today I have touched upon two of the primary challenges facing Massachusetts employers – high business costs and persistent worker shortages.  AIM believes these issues must be addressed to maintain the growth we have finally achieved, accelerate it, and create the thousands of new jobs we still badly need.

We must embrace and expand policies to drive growth; and reform or modernize policies that threaten to choke it off.

I very much look forward to hearing what our panel of business leaders has to say about these important issues. And don’t be shy – we want to know what you think as well.

Thank you very much.

Anthony…

Topics: Associated Industries of Massachusetts, Massachusetts economy, Massachusetts employers, Economy, Business Costs

A Wake-Up Call on Health, Energy Costs in Massachusetts

Posted by John Regan on Jul 11, 2012 10:45:00 AM

Massachusetts’ plunge from sixth to 28th in CNBC’s annual ranking of Top States for Business yesterday should provide incentive to the Beacon Hill conference committees currently addressing two key business competitiveness issues – the high cost of health care and energy.

Top StatesMassachusetts took the largest drop among the 50 contenders in the cable station’s sixth annual ranking based upon criteria the states use to sell themselves. The commonwealth ranked near the top in access to capital and education, but slid from 41st to 49th on the cost of doing business and from 29th to 45th on infrastructure.

Texas topped the rankings, followed by Utah, Virginia, North Carolina and North Dakota.

It’s dangerous to treat unscientific media rankings as a blueprint for the state economic climate, especially since both Democrats and Republicans are fond of using the CNBC rankings as a political poker chip. But the fact that the cost of doing business in Massachusetts remains among the highest in the nation should motivate lawmakers on the health care and energy cost conference committees to act boldly to address the issues most responsible for strangling job creation from Boston to the Berkshires.

The conference committee on health care costs is ironing out the differences between a House bill that would limit the growth of medical spending to one-half a percentage point below overall economic growth and a less aggressive Senate measure that would keep medical spending even with gross state product beginning in 2016. The CNBC rankings suggest that anything less than the House version would represent a missed opportunity.

Energy conferees must likewise reduce electricity costs that make Massachusetts one of the most expensive places in American to turn on a light switch. The conference committee must craft a bill that encourages open and transparent bidding for power without government intervention that tips the scales in favor of one source of power over another.

Members of the two conference committees have it within their power to ensure that Massachusetts sees its ranking rise on next year’s CNBC study. We urge them to do so.


 

Topics: Health Care Costs, Issues, Massachusetts economy, Business Costs

State Energy Policy Built on Ineffective Programs that Drive Up Costs

Posted by Robert Rio on Dec 2, 2011 10:21:00 AM

Editor’s note – AIM Senior Vice President Robert Rio wrote an article in this space Monday about the fact that a rare political consensus is developing on Beacon Hill around the need to address the staggering cost of electricity in Massachusetts.

Rio’s article was later posted by Commonwealth magazine, where it drew a response from Lisa Capone, Assistant Secretary for Communications and Public Affairs at the Massachusetts Executive Office of Energy and Environmental Affairs. Rio’s subsequent article appears below.

Electricity CostsAIM appreciates substantive debate on issues as important as the high cost of energy in Massachusetts. But the recent posting in Commonwealth magazine by Assistant Secretary Lisa Capone is disappointing in its grasp of the issues.

Ms. Capone attempts to rebut arguments that AIM never made in its November 28 article Consensus Emerges on Need to Address Massachusetts Electricity Costs. Her ad hominem representation of AIM’s position on numerous issues is false. And the “facts” she cites are either incorrect or verify our initial points.

Ms. Capone spends an inordinate amount of time accusing AIM of flip-flopping in our support for energy efficiency. The only problem is that the November 28 AIM article was not about energy efficiency, but about state-mandated programs of questionable benefit diverting money out of the productive economy.

For the record, AIM has been clear and consistent in its support of energy efficiency.  We stated in our recent testimony before the Joint Committee on Telecommunications, Utilities and Energy, that we support a vibrant, cost-effective energy efficiency program.  We may debate the actual monetary benefit of energy efficiency versus its cost, but all energy should be used wisely and we are proud to be a leader in supporting cost-effective energy efficiency programs.

While efficiency measures create measurable results, the same cannot be said of other programs developed under the Massachusetts Green Communities Act, including net metering, long-term contracts for renewable energy, smart grid, additional RPS categories, utility owned solar and solar carve outs. These programs are either of questionable benefit or run so inefficiently and without any accountability or review that their added costs will wipe out any benefit from energy savings.

These are the programs that contribute unnecessarily to the $4 billion of additional costs that Attorney General Martha Coakley, the statutory ratepayer advocate, cited in testimony on Beacon Hill. The Massachusetts Division of Energy Resources (DOER) does not dispute the attorney general’s numbers.

AIM supports cost-effective, competitively bid renewable projects and other programs that demonstrate real results at the least cost to ratepayers. 

Ms. Capone’s claims about impressive job gains in the so called “clean-energy sector” - a rhetorical sleight of hand suggesting that industries that don’t fit the administration’s political agenda are somehow “unclean” - prove AIM’s point about the problem of government picking winners and losers. Could it possibly be that the anemic growth in the so called non-clean energy sector cited by Ms. Capone is partly due to the imposition of more than $1 billion worth of electricity cost increases under Green Communities in order to transfer it to favored sectors of the economy?   Clean-energy jobs are not being created - just transferred.

Massachusetts deserves an energy policy that treats all ratepayers and companies equally. A diverse economy is more sustainable than one based on government-imposed cross subsidies. 

Massachusetts has the highest electricity prices in the nation, almost double the average rate for industrial users, despite the promises that these programs reduce rates. Even a recent 40 percent decline of the cost of natural gas, a key fuel for electricity generation, failed to lower electric rates in Massachusetts. The only way to address the problem is through rigorous, cost-effective, transparent and competitively bid projects and policies that put the consumer first.

 These standards benefit all members of the Massachusetts economy. They will bring jobs to all regions of the state, create stable or lower electricity costs and result in more renewable energy being built in Massachusetts.

AIM calls upon the commonwealth to take the following actions:

  • itemize and maintain a list to share with ratepayers of all added costs for every program instituted since the Green Communities Act was signed;
  • project these costs out over three years;
  • update bill impacts for Cape Wind (now almost triple the original estimate).

Such reporting would allow consumers and employers to debate the merits of each program.  Open debate would bring certainty to ratepayer planning, and credibility to the commonwealth. Absent the data, we are left with a government that appears to want to maintain the status quo and marginalize anyone who questions their agenda.

 

Topics: Issues, Energy, Business Costs

AIM Backs Motion for Regulators to Revisit Cape Wind Contract

Posted by Robert Rio on Mar 21, 2011 1:25:00 PM

Associated Industries of Massachusetts is supporting a request to have state regulators revisit their approval of the Cape Wind/National Grid power sales agreement now that other utilities are seeking to purchase wind-generated electricity at less than half the price of the proposed offshore project.

Cape WindAIM submitted a letter Friday to the Massachusetts Department of Public Utilities (DPU) supporting a motion by The Alliance to Protect Nantucket Sound for DPU to reopen the Cape Wind/National Grid case to admit new evidence. That evidence includes filings by the utility NSTAR, which is seeking permission to buy 109 megawatts of land-based wind power for a price experts estimate at less than 10 cents per kilowatt hour.

The NSTAR price compares to the 24 cents per kilowatt hour on average over 15 years that businesses and residents in the National Grid territory will pay for Cape Wind electricity.

AIM is currently appealing the commonwealth’s approval of the Cape Wind/National Grid agreement to the Massachusetts Supreme Judicial Court. AIM has argued for months that customers of National Grid face needless increases in their monthly bills because the utility has decided to pay a premium price for electricity from Cape Wind instead of buying much cheaper renewable power available from other sources.

The association also seeks in its Friday letter to include similar renewable power agreements from Western Massachusetts Electric Company (WMECO) in the Cape Wind/National Grid case.

“Again, the new and timely evidence from the NSTAR filings provides invaluable information, data and insight about a number of facts currently in the record, shedding new light on the availability of renewables, the timing of such supply, and cost. The Department would be remiss in not admitting the NSTAR filings, and hopefully the WMECO filing, because of the facts and decision-making value they bring to the proceeding,” AIM wrote.

The letter cites three reasons for opening the Cape Wind decision: 

  • The NSTAR filings were executed under Section 83 of the Green communities Act, the same section under which National Grid executed the Cape Wind contracts.
  • The NSTAR filings contain information that is germane as to whether National Grid testimony was accurate about the cost-effectiveness of the Cape Wind contract and the availability of other less expensive renewable projects region wide.
  • Since one of the NSTAR filings was executed with a wind project in Massachusetts (D.P.U. 11-06), the NSTAR filings contain information that is germane as to whether the National Grid testimony about cost-effectiveness of the Cape Wind contract and the availability of other less expensive renewable projects in Massachusetts was accurate

The numbers confirm that AIM has been right on the money to identify Cape Wind as an overpriced  project that represents one of the largest potential transfers of wealth from productive sectors of the economy to a single private developer. The recent competitive electricity bids provide the good news that Massachusetts can move toward a future of wind and renewable power without bankrupting the rest of the economy and the jobs that go with it.

Topics: Associated Industries of Massachusetts, AIM, Energy, Cape Wind, Business Costs

The AIM Top 10 Massachusetts Business Stories of 2010

Posted by Christopher Geehern on Dec 16, 2010 11:09:00 AM

2010 shifted the always unpredictable alchemy of business and politics in the Bay State.

Top 10A year that began with a political earthquake when Republican Scott Brown won the Senate seat formerly occupied by Edward M. Kennedy ended amid hopeful signs that the halting economic recovery was here to stay. Massachusetts employers spent 2010 trying to put the economic crisis behind them while dealing with developing crises surrounding the cost of health care and electricity.

What were the top 10 stories that affected Massachusetts employers during 2010?

  1. Massachusetts economy recovers fitfully, but faster than the nation as a whole.

    The unique mix of knowledge-based, high-value companies that drive the Massachusetts economy helped the commonwealth end 2010 with an unemployment rate of 8.1 percent, well under the national rate of 9.3 percent. The AIM Business Confidence Index rose throughout the spring, and then returned to positive territory late in the year after turning bearish in the third quarter.

  2. AIM challenges expensive National Grid/Cape Wind power agreement.

    Associated Industries of Massachusetts (AIM) asked the Massachusetts Supreme Judicial Court in December to set aside the commonwealth’s approval of a power-purchase agreement between National Grid and Cape Wind that will increase electric bills for thousands of Massachusetts employers. AIM said the agreement sets a dangerous precedent for allowing utilities to negotiate expensive power agreements outside of the competitive bidding process and to allocate the costs of those contracts unfairly to commercial and industrial customers.

  3. Rising cost of health care reaches crisis stage in Massachusetts; Governor Patrick and Legislature respond.

    The cost of providing health insurance to workers reached the tipping point for employers as rates rose up to 40 percent and virtually everyone agreed that the Massachusetts health care market is unsustainable without fundamental changes to the way companies and consumers purchase medical services. Governor Patrick rejected scores of proposed rate increases by insurance plans, then signed a cost-containment law requiring insurers to offer low-cost, limited or tiered network plans, and setting the stage for broad changes in the way insurance companies pay for medical care.

  4. Political scramble - Scott Brown elected to the Senate and Governor Patrick re-elected despite national Republican landslide.

    Republican Scott Brown of Wrentham shook the political world in January when he won a special election to fill the Senate seat held for decades by the Kennedy family. The election made Brown a superstar in Washington and unleashed a tidal wave that returned Republican control to the House of Representatives in the November elections. Ironically, one of the only states the tidal wave missed was Massachusetts, where Governor Patrick won re-election and every Democratic representative was returned to office.  

  5.  Corporate acquisitions are back.

    Two years after the global financial crisis, New England companies with strong balance sheets pulled out their wallets and began to make strategic acquisitions. Connecticut-based Northeast Utilities agreed in October to buy NStar for $4.17 billion in a deal that will create the largest New England utility company. German drug giant Merck KGaA bought life sciences company Millipore of Billerica for $6 billion in March. Massachusetts companies were also buyers: Thermo Fisher Scientific announced in December that it would purchase Dionex Corporation of California for $2.1 billion.

  6. Congress passes federal health care reform; judge later declares portions of the law unconstitutional.

    President Barack Obama in March signed landmark national health reform legislation that bore a striking resemblance to the Massachusetts health care reform law of 2006.  The federal law requires individuals to carry health insurance, changes underwriting rules and imposes a fee if an employer does not offer coverage. The fact that Massachusetts was the only state in the nation with its own health reform initiative was a mixed blessing for employers – the concepts were familiar, but there are significant differences between the state and federal laws that must be reconciled. In December, a U.S. District Court judge in Virginia ruled that the individual mandate is unconstitutional.

  7. Defense industry emerges as the untold success story of the Massachusetts economy.

    A report by AIM and the University of Massachusetts in December showed that as the overall economy has struggled in the face of two recessions and fundamental industry shifts, Massachusetts defense contractors quietly tripled the value of their contracts to $15.6 billion. They doubled their employment rolls to 115,563 people and increased their overall economic output by 146.2 percent. The report also found that innovation-rich Massachusetts defense contractors are well positioned to offset overall defense cutbacks by addressing technology needs at the Departments of Defense and Homeland Security.

  8. Business blocks organized labor priorities; Obama appointments to labor board create challenge for employers.

    Furious lobbying by AIM and business interests around the country prevented passage in Congress of the so-called Employee Free Choice Act, which would have deprived workers of the right to a private ballot in union elections. Congress also declined to pass another labor priority, the Paycheck Fairness Act. But President Obama’s appointment of union lawyers Craig Becker and Mark Pearce to the National Labor Relations Board shifted the labor relations playing field steeply away from employers.

  9. Massachusetts approves wide-ranging economic development measure.

    The Legislature approved and the governor signed an economic development bill that limits the scope of combined tax reporting, creates a 3 percent capital gains tax rate for individual investors in start-up companies, and provides most industries with the ability to extend a net operating-loss (NOL) carryforward from five to 20 years. The bill also places an automatic sunset provision on state regulations and requires proposed new regulations to include a business impact statement. The state will undertake a study of the factors driving the high price of electricity for Massachusetts employers.

  10. State lifts charter school cap, adopts national standards and wins Race to the Top dollars for education reform.

    A controversial decision to endorse national education standards paid off for Massachusetts in August when the commonwealth won some $250 million in federal education money through the Race to the Top (RTTT) competitive grant program for school improvement. The money will support reform efforts in four areas: standards and assessments; statewide data systems; effective educators; and turning around low-performing schools. These priorities were supported by employers, who recognize the importance of educated citizens to fuel economic growth.

What is your opinion about the most important business developments of 2010? We welcome your comments.

Topics: Employers, Associated Industries of Massachusetts, Health Care Reform, AIM, Health Care Costs, Education, Cape Wind, Health Insurance, Govenor Patrick, Charter Schools, Business Costs, Senator Scott Brown

Misguided Energy Policy Magnifies Shock of Electric Rate Increases

Posted by Robert Rio on Aug 26, 2010 2:10:00 PM

(Editor's Note: Associated Industries of Massachusetts testified Thursday night at a public hearing conducted by the Department of Public Utilities on a rate increase request filed by Western Massachusetts Electric Company.)

energy policyMisguided state energy policy makes even sound rate proposals by responsible utilities hazardous to the economic health of Massachusetts.

Take the pending $28 million rate increase filed by Western Massachusetts Electric Company (WMECO), which serves most of the four western counties of the commonwealth.

WMECO’s proposal includes positive steps on rate design, reduction of on-peak hours, and the value of high electricity load factors. But the ill-conceived state energy mandates and cross subsidies that have been forced on WMECO mean that the proposed rate increase still threatens to chase away key employers who form the backbone of the western Massachusetts job market.

Lose those large electricity users and the jobs they provide and you’re left with a continuing downward spiral in which fewer and fewer ratepayers carry an ever-increasing cost burden for electricity.
 
Here’s the problem.  Massachusetts policymakers have created energy regulations that promote environmental policy over economic development.

Decoupling, for example, allows utilities to recover revenues lost when customers reduce their electricity usage though conservation. Originally proposed by the Patrick administration, AIM has opposed decoupling as a giveaway to utilities at the expense of ratepayers.

State regulators also promote non-economic renewable energy policies that raise rates while accomplishing little in the way of adding renewable power to our energy mix. Some examples:

  • Solar carve outs (expected to add hundreds of millions to ratepayers over the next 15 years);
  • Utility owned solar (unnecessary and a long term burden on ratepayers;
  • Long-term contracting provisions for renewables – a multiyear burden on ratepayers.

All of these government mandates will add between $6 billion and $7 billion to the electric bills of Massachusetts consumers and employers during the next several years. Almost none of those dollars will make WMECO a healthier utility or improve electric reliability for the people of western Massachusetts.

WMECO proposes a number of steps in its rate filing that will create savings for ratepayers:

  • Better rate design to more accurately reflect the cost of service;
  • Elimination of kWh in demand charges;
  • Recognizing the value of higher load factors and effect usage patterns;
  • Reducing on-peak times from 16 hours to 8 hours;
  • Residential rates which encourage efficient use patterns.

WMECO should also be congratulated for its enormous commitment to energy efficiency.  We have in the past supported modest increases in energy efficiency investments supplemented by federal stimulus money.

But make no mistake: WMECO’s proposed rate increase will reduce competitiveness, discourage investment, and dampen job creation throughout the Pioneer Valley and the Berkshires. The regulatory framework in which WMECO must operate has become unsustainable.

And the WMECO case is only part of the energy cost picture in western Massachusetts. Westborough-based National Grid, which serves 40 towns in western Massachusetts, last year won a $50 million rate increase that includes the same decoupling provisions contained in the WMECO proposal. National Grid ratepayers also face a $1.2 billion increase in their bills as a result of the utility’s pending agreement to buy above-market power from Cape Wind.

The Department of Public Utilities, which is reviewing the WMECO proposal, can take practical steps to help both the utility and its ratepayers:

  • WMECO needs to be excused from some low-income cross subsidies. With almost half of customers eligible for reduced electricity cost, the cost to the remainder of the ratepayers is significant.
  • DPU should examine the return on equity contained in the WMECO proposal and determine whether the amount is consistent with established standards.

AIM is an intervener in the WMECO case and looks forward to working with regulators to ensure that any rate increase is justified and has the least possible impact on ratepayers.

The energy cost challenges in western Massachusetts underscore the need for Massachusetts to conduct a vigorous review of policies that raise electricity costs without providing benefits to customers and the economy. The long-term solution is an energy policy that preserves jobs and economic opportunity rather than murky political agendas.

Springfield Republican | Speakers Oppose Rate Hike

Topics: Associated Industries of Massachusetts, AIM, Energy, Cape Wind, Business Costs

Massachusetts Employers Comment on Government, Economy

Posted by Christopher Geehern on Aug 3, 2010 11:56:00 AM

Here are comments from employers who participated in the July Associated Industries of Massachusetts Business Confidence Index survey. Please feel free to share your opinions by commenting below. 

“I do not see anything on the horizon that will change the business climate until the November elections.  I have real concerns that any small gains that have been achieved through belt tightening, not investment, will have any lasting effects.”

“We are afraid to hire employees with all the regulation and related costs that go along with hiring.”

“Our business is international as well as national.  We are up everywhere.”

“Health care continues to be a major problem.  Insurance companies don’t seem to be able to make things simple or easy and are quick to blame the government. “ 

“Electricity costs remain a problem.  Where we are moving to in TX, our $4200 June electricity bill would be $1800.  The difference is the ‘transmission and distribution’ charge.” 

“The current governmental policies are making it very difficult for businesses to grow and add additional employees.”

“Get government out of the way and including red tape, taxes and fees and let the private sector function.  Stop changing policies every three months so business owners can plan!”

“Significant material increases occurring throughout the supply chain.  Extremely challenging to pass along any increased costs to our customer.”

“What recovery?”

Topics: Employers, Associated Industries of Massachusetts, AIM, AIM Business Confidence Index, Business Costs

AG's Cape Wind Deal Leaves Customers Paying Twice Market Rate

Posted by Robert Rio on Jul 30, 2010 2:58:00 PM

Associated Industries of Massachusetts (AIM) and the Massachusetts employer community expressed deep disappointment today that the Attorney General has elected to reach a settlement with Cape Wind and National Grid that will leave consumers paying more than twice the current market rate for electricity.

cape windThe settlement short-circuits what should have been a full review by the Department of Public Utilities (DPU) of price and other issues surrounding the largest electricity rate case in recent memory.  We had hoped that the Attorney General would be a stronger advocate for the interests of financially struggling employers and citizens of the commonwealth.

Meanwhile, AIM today filed testimony with the DPU contending that the proposed Cape Wind/ National Grid agreement violates the Massachusetts Green Communities Act by forcing customers who will never use power from the offshore wind farm to pay 50 percent of the excess cost of that power.

The settlement with the attorney general requires National Grid to buy power from the offshore Cape Wind project for 18.7 cents per kilowatt hour, down from an original starting price of 20.7 cents per kilowatt hour. The price escalates by 3.5 percent annually over the 15 years life of the contract. The 18.7 cent price for 2013 is still twice the current market price and well above the price of renewable power from other sources.

The bottom line: a bad deal for ratepayers negotiated behind closed doors and without public input. It is a process unfortunately consistent with the Cape Wind/National Grid agreement itself, which was concluded without competitive bidding and without regard to the objective of acquiring the largest possible amount of renewable power at the best available price.

Employers favor “smart” renewable development that is more competitive, cheaper, and less impactful on the business climate than the proposed Cape Wind/National Grid agreement. AIM remains committed to a full and fair examination of the agreement and its potential effects on the Massachusetts economy.

In its testimony submitted to the DPU, AIM urges regulators to disallow National Grid’s proposed plan to pass along the cost differential between Cape Wind and other, more cost-effective renewable power.

National Grid proposes to use Cape Wind power to satisfy “basic service customers” -  small companies and residents who do not buy power from independent energy suppliers – but  charge half of the excess costs of the project to “non-basic service customers” who use National Grid as their distribution company but buy power elsewhere. The non-basic service customers, most of them commercial and industrial enterprises, would end up footing the bill for Cape Wind even though they use none of the power from the project.

AIM maintains that the Green Communities Act does not allow utilities to use the power for their own customers and spread the excess cost of a long-term power contract among all ratepayers. The Act instead requires National Grid either to charge the full cost of the power to those who receive the power or to sell the power into a competitive wholesale market and only charge ratepayers the difference between what National Grid gets for the power and the contract price.  AIM believes the benefits of selling the power into the market will reduce the ultimate costs to consumers.

The Green Communities Act, passed in 2008, allows distribution companies to enter into cost-effective, long- term contracts for renewable energy sources such as wind and solar, in order to meet the Commonwealths goal of having 20 percent of the electricity used in Massachusetts come from renewable sources by the year 2020.

Topics: Associated Industries of Massachusetts, AIM, Environment, Energy, Cape Wind, Business Costs

Cape Wind Project is Exhibit #1 for Massachusetts High Cost of Energy

Posted by Robert Rio on Jun 17, 2010 12:48:00 PM

The facts are the facts.  If approved, Cape Wind will represent the largest ratepayer commitment in recent history - a decades-long mortgage paid by ratepayers. 

In today’s Boston Herald, the developers of Cape Wind are attempting to silence this and other significant facts about the project.  AIM recently filed as a full intervener in the review of the National Grid and Cape Wind project proposal citing significant cost implications in addition to a substantial lack of transparency with the proposal.

The ongoing controversy with Cape Wind is now being discussed in public hearings and provides a primary example of the state’s current posture – increase the cost of electricity on Massachusetts businesses and ratepayers to pay for boutique projects like Cape Wind.  Today’s Boston Globe highlights the ongoing public debate regarding Massachusetts’ public policy toward electricity which has resulted in increased costs for businesses and ratepayers. FOX 25 television also aired a story recently about the staggering costs of the project.

AIM’s filing shows how the Cape Wind project provides another example of how Massachusetts will again have a "significant impact" on employers and should concern all Massachusetts ratepayers.  Among other significant concerns, the association has already expressed the following about the project:

  • It threatens to raise already high electric bills by $50,000 to $100,000 for medium-sized companies in the first year alone and
  • This additional cost is on top of the $2-$3 billion dollars added in recent years to subsidize other renewable energy projects and programs

Employers are not silent about these cost increases.  Wal-Mart, an AIM member, also filed complaints regarding the project’s costs.  In today’s Boston Globe, the employer questioned the National Grid’s cost estimates and how the cost will be passed on to customers.

AIM supports a diversified energy portfolio to meet the Commonwealth's energy demands, which should include cost effective renewable energy initiatives.  Cape Wind is not the answer.  The Cape Wind project is double the price of other renewable energy sources and there are other ways to get to the same goal in manner that is much cheaper and does not come at the expense of losing Massachusetts headquartered businesses and jobs.  Employers and jobs are leaving the state or at worse shuttering because Massachusetts has one of the highest costs of electricity in the nation.

AIM members can contact Robert Rio, Senior Vice President of Government Affairs, by callling 617-262-1180 or by email rrio@aimnet.org for more information about these cost implications for your business.


Topics: Massachusetts economy, Massachusetts employers, Environment, Energy, Cape Wind, Business Costs, Common Wealth 2010

Charles Baker Speaks at AIM/Denterlein Candidate Series

Posted by Christopher Geehern on Jun 4, 2010 1:54:00 PM

AIM and Denterlein Worldwide yesterday wrapped up a series of forums with the candidates for governor with Republican candidate, Charlie Baker. The forum series gave candidates the opportunity to discuss their approaches to business and economic issues with a small audience of executives from throughout the commonwealth.

Mr. Baker yesterday covered topics ranging from the regulatory process and budgetary planning to health care reform, education and taxes. AIM President and Chief Executive Officer Richard C. Lord introduced the program.

 

AIM has posted segments of candidate remarks at these forums to give employers an opportunity to hear directly how each intends to steer Massachusetts out of the deepest recession in 80 years. Please share on our blog, your questions for any of the gubernatorial candidates, and AIM will attempt to secure a response.

Governor Deval Patrick visited the forum in March. State Treasurer and Independent candidate Timothy Cahill visited the forum in April. Click the links below to hear their remarks.

Patrick Remarks

Cahill Remarks

Topics: AIM, Massachusetts economy, Health Care, Deval Patrick, Candidates, Taxes, Massachusetts, Richard Lord, State Budget, Business Costs, Timothy Cahill, Charlie Baker

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