June 25, 2018

Embrace the grand bargain

Massachusetts legislators and lobbyists had a scant few days to reach a compromise on three ballot initiatives slated for November, otherwise the state economy would have been in for some real shockwaves come 2019. As the July 3 deadline neared for such a deal and lawmakers worked busily last week to pass legislation, the business lobby needs to acknowledge the strong position the other side held in the overwhelming popularity of its cause, and settle on the compromise legislators passed. The result of splitting the baby in half was far from ideal – but still beats the initiatives passing into law.

The three ballot efforts were a staged four-year increase in the state minimum wage to $15 per hour, mandated paid family and medical leave for workers, and a reduction in the state sales tax from 6.25 percent to 5 percent. A fourth potential initiative calling for a 4-percentage-point surcharge on annual incomes of more than $1 million will not appear on the ballot, as the Supreme Judicial Court on June 18 ruled the proposal unconstitutional.

The passage of any of the other three initiatives in November would have had serious ramifications on the state's economy. The $15 proposal would increase minimum wage by 36 percent over a four-year period. The paid-leave initiative, according to the Associated Industries of Massachusetts (AIM), could add up to $1 billion in total benefits to all workers in the state. The sales tax reduction – a move supported by the Retailers Association of Massachusetts – would strip state tax collections by more than $1 billion.

Ballot initiatives have their rightful place in a democracy, and Massachusetts is one of 26 states to allow them. Two years ago, the initiative to legalize recreational marijuana passed, reflecting the will of the people while still allowing the legislature to decide the best way to roll out the new industry. But an overabundance of one-off votes for seemingly good causes can have the wrong kind of snowball effect. State legislators, lobbyists and representatives of the ballot initiatives were in the sausage factory working towards a deal to scuttle the measures in exchange for promised legislation to offer a scaled-back version of their efforts. The potential passage of the three initiatives in one bite this November would have had such a large, negative impact on our economy that it's worth embracing a compromise deal.

This brings us to the so-called grand bargain state leaders and lobbyists used to resolve these questions before they hit the ballot. We've previously said a $15 minimum wage would be an important step forward for the state's businesses, and the grand bargain smartly spreads the increase over five years. The sales tax reduction sounded good in theory, but the compromise to create a permanent sales tax holiday is better than taking too much money to take from state coffers without a proposal to replace it. Paid family leave is a solid aspiration, but the provisions of the ballot measure – allowing 16 weeks of family leave and 26 weeks of medical leave – left too little flexibility for businesses, so the grand bargain exempts small businesses.

The tough reality for lobbyists and legislators negotiating a grand compromise is each of these initiatives enjoyed at least 70 percent support from potential voters and would take an estimated $10 million each in opposition campaign money to defeat, according to AIM. All three passing would have been a worst-case scenario for our economy, and thus the diluted version needs to be championed by the business community as the best viable option.


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