REMARKS OF TREASURER DEBORAH B. GOLDBERG FY24 Consensus Revenue Hearing
Tuesday, January 24th, 2023
Today, State Treasurer Deborah B. Goldberg joined the Massachusetts' House and Senate Committees on Ways and Means for a hearing to discuss the state’s revenue projections and the fiscal outlook for Massachusetts. Treasurer Goldberg provided testimony regarding how departments and agencies within Treasury performed at extraordinary levels and how the Treasury will continue to provide critical services in the next fiscal year. Below are the Treasurer's remarks prepared for delivery:
As prepared for delivery:
Secretary Gorzkowicz, Chairman Michlewitz, Chairman Rodrigues, and members of the Committee –
I always appreciate the opportunity to have an open conversation with you about our revenue projections and the fiscal outlook for Massachusetts.
I would like to begin by thanking the Legislature and the Administration for your continued commitment to sound fiscal practices, including the collective effort to rebuild the state’s reserves. From Fiscal Year 2017 to the present, the Rainy-Day Fund balance has increased from $1.3 billion to $7.4 billion and is on its way to $8.4 billion this summer, providing excellent coverage for when, no doubt, it rains again.
I would also like to thank you for the continued collaboration and commitment to tackling and improving the pension liability. Actions taken have included lowering the actuarial rate of return to 7%, which more accurately reflects potential returns, to steadily increasing annual appropriations to the fund, by an average of 9.5% from Fiscal Year 2011 through Fiscal Year 2022. The new three-year funding schedule reflects this continuing commitment. Again, I thank you!
My debt management team is hard at work, actively managing the debt portfolio of the Commonwealth. Our debt affordability is very manageable at this time and key debt metrics have improved significantly since 2011. Debt service as a percentage of expenditures has decreased from 6.1% in 2011 to 4.6% in 2022 and over the same time period, debt to personal income improved significantly from 9.3% to 4.4%.
Like everyone, we have certainly experienced market volatility over the past year! But, I am happy to report that investor demand for our bonds remains strong.
In fact in October, Standard & Poors changed the outlook for Massachusetts’ general obligation bonds from stable to positive. This past December, we met with the three rating agencies in New York City to further emphasize our progress. I highlighted the Commonwealth’s culture of collaborative leadership and the statutory frameworks that reinforce and promote sound financial management. Yes, we have significant long-term liabilities relative to our peers, however, as we emphasized to the agencies, they have been well managed over time. I am hopeful that our continued commitment to strong fiscal practices will ultimately result in an increase to our bond rating.
The strong Stabilization Fund, budgets based on conservative revenue forecasts, and the influx of significant federal aid, has bolstered our state’s finances. I look forward to working alongside you to maximize the impact of the incoming Federal Infrastructure Funds and my team and I stand ready to help capitalize on this tremendous opportunity.
Clean Water Trust
Speaking of maximizing Federal Funds. Our Clean Water Trust was the first state in the nation to apply for and receive all of its Bipartisan Infrastructure Law 2022 State Revolving Fund grants totaling over $265 million. This represents a 178% increase from 2021, resulting in almost $900 million to 93 water infrastructure projects across the Commonwealth leveraging these federal funds – over 60% of the projects are to disadvantaged communities.
By design, The Massachusetts Pension Reserves Investment Trust (or PRIT Fund) has constructed a portfolio that performs well in both strong and weak markets. It now sits at approximately $92 billion, despite a challenging market and persistent geopolitical and economic crises. The Fund continues to outperform its peers and its benchmark and as of September 30, 2022, the Fund’s total return was 6.7% gross of fees annualized over 3 years, more than 2% above benchmark.
All this was achieved while also moving forward on many initiatives.
PRIM management successfully implemented the Russian divestment legislation.
The Fund has also continued to advance the Investment Equity legislation, known as the Future Initiative. As we work to ensure that at least 20% of the Fund’s investment managers are diverse, much has already been achieved. With allocations in 2022 of over $2.8 billion to women, people of color, and people with disabilities, in addition to the over $2.4 billion that was allocated in 2021, the total now stands at more than $9 billion. Due to these efforts, PRIM received the Commonwealth’s “Equity in Governance Award”.
Additionally, the Fund stands at the forefront of Environmental, Social, and Governance investment research. Its groundbreaking partnership with MIT Sloan School will enable PRIM to be among the first investors in the world to utilize more reliable ESG ratings and to design and implement more impactful investment programs. A newly created, standing ESG Committee will enhance this work. Tasked with creating an investment framework that will help the Fund more comprehensively account for risks that may not show up a balance sheet, the ESG Committee will improve our ability to deliver long-term returns for beneficiaries.
Massachusetts State Lottery
And now onto the Massachusetts State Lottery.
This past year, the Lottery celebrated a historic milestone – its 50th anniversary! Since its inception in 1972, the Lottery has sold over $143 billion in tickets, paid out over $100 billion dollars in prizes, provided over $8 billion in commissions and bonuses to our agents, and generated over $31 billion dollars in unrestricted local aid for the 351 cities and towns across the Commonwealth.
The Lottery continues to innovate and to proactively protect its market share, with the goal of delivering similar returns for our customers, agents and communities for the next 50 years.
This fiscal year, the Lottery is still on track to meet its projection of $1 billion in net profit, despite tightening consumer spending and an increasingly competitive marketplace. This projection is bolstered dramatically by the three Mega Millions and Powerball jackpots that have topped $1 billion since July.
To build sustainable revenue, we launched a new monitor game, “The Wheel of Luck”, just last week. And, we are excited to release our first ever $50 instant ticket game, “Billion Dollar Extravaganza”, next month.
We have also sought to maintain and build our customer base even within our statutory constraints, and with one of the lowest advertising budgets in the business. In October of 2021, we launched a remote ticket cashing feature on the Lottery app for prizes valued at $601 to $5,000. After just 16 months, players have shown just how much they want online conveniences. The app has been used to cash over 42,000 tickets and to claim over $55 million in prizes. It now accounts for over 20% of all prize claims in this price point, more than any of our 6 regional Lottery cashing locations across the state.
Customers can now watch all KENO and Wheel of Luck draws directly on the app, in real time. And, 100% of Lottery agent license applications and renewals have been converted to an online, paperless process. Since we implemented the new process last Spring, the Lottery has completed over 4,800 agent license renewals and 580 new applications online.
These efforts have created a more business and customer friendly experience.
Looking forward to Fiscal Year 2024, the Lottery projects flat sales and, therefore, a flat net profit of $1 billion. The dip in sales across our most successful product lines – Keno, the Daily Numbers, Mass Cash, and instant tickets – persists.
While large jackpots helped boost our bottom line this Fiscal Year, they are unpredictable and not a reliable source of revenue. In fact, in the past, these jackpots would drive increased sales in our other product lines, resulting in higher profits to the Lottery. Recently, it has merely helped hold us even. The success of the Lottery should not be up to chance.
I hope to partner with you to ensure that the Lottery has the tools and resources necessary to deliver for your communities and constituents.
Moving on to Unclaimed Property, I am pleased to report the Division continues to provide superior service – reuniting owners with lost assets.
In the past 5 years, the Division has returned almost $735 million [$735,848,373] to individuals and businesses across the Commonwealth.
Unclaimed Property is on track to revert $145 million in Fiscal Year 2023. For Fiscal Year 2024, we anticipate a total reversion of $175 million, a net gain of $30 million year-over-fiscal-year. This increase is possible due to the liquidation of securities held in custody over three years, along with enhanced compliance efforts taken by the Division.
Moving on to the ABCC, as you know, the pandemic has taken a major economic toll on restaurants and bars across the state. To meet these challenges head on, the ABCC has partnered directly with the Legislature and the Administration, alongside affected communities, industry leaders, and small businesses, to support licensees as they rebuild and recover.
Despite these challenges, the ABCC was able to generate $5.76 million in revenue in Fiscal Year 2022, and we project $5.8 million for Fiscal Year 2023.
The ABCC has also taken proactive steps to provide information and encourage compliance to prevent future issues and/or violations. In furtherance of this goal, the ABCC has implemented regular training sessions for local boards, licensees, and attorneys, and has expanded outreach efforts to support diversity, equity and inclusion.
Additionally, the ABCC continues to work on streamlining the application process by making it more user-friendly, and by educating all stakeholders.
The ABCC reports on licenses and transactions by calendar year. With all license renewal requirements in place, the annual license renewal process for 2023 is well underway, and we will have annual numbers available soon.
The ABCC continues to be a lean operation that recognizes its impact on the business community and its connection to economic growth. My team at the ABCC will continue their work to provide education and support to all stakeholders. I look forward to working with you to further enhance operations, as we can seek new and innovative ways to stimulate these local and statewide businesses.
Thank you again for inviting me to testify today. I know we will have many more conversations about these issues in the weeks and months ahead. I look forward to our continued collaboration.
Now I am happy to answer any questions.