To: Members of the Massachusetts General Court
From: Christopher R. Anderson, President; James D. Rooney, Vice President
Date: March 28, 2011
Re: Senate Post Audit and Oversight hearing on jobs

The General Court plays a key role in shaping policies that affect the Commonwealth’s competitiveness and encourage or discourage employers to grow and relocate jobs here. It also helps to “set the tone” of the Commonwealth’s business climate, as state leaders toil to counter historic perceptions that Massachusetts is inhospitable to business.

As such, the Legislature needs to balance its appropriate interest in recent announcements by some Massachusetts employers to move some operations out of the Commonwealth with wider concerns about not sending the wrong message to the increasingly mobile business community and alienating many of the companies and sectors it seeks to support whose growth is crucial to the state’s sustained prosperity.

Rather than holding an inquisition-style hearing Tuesday – one that seems designed primarily to embarrass a significant Massachusetts employer, Fidelity, which employs more than 7,000 state residents and serves as an anchor to the state’s world-renowned financial services cluster – the public would be much better served if the Senate Committee for Post Audit and Oversight took a hard look at the root causes for this so-called “job exodus.”

While employment decisions for each company depend on a variety of factors, particularly in the wake of the “Great Recession,” the overarching factor for job location decisions is pretty straightforward: costs and business climate. Job-creation and retention costs in Massachusetts are very high compared with competitor states. Massachusetts will never be a low-cost state, but state government’s reluctance to move on certain long-needed reforms only exacerbates this disadvantage.

The poster child for high costs and instability is the state’s Unemployment Insurance system. While the Legislature wisely acted to prevent a significant rate hike for 2011, and just last week lengthened the payroll base as advocated for by the Council, Massachusetts still has the highest per employee UI cost in the nation. A recent policy paper by the Council and Pioneer Institute showed that common sense reforms that would bring Massachusetts in line with 48 other states would create 10,000 new jobs in the state over the next decade.

UI is just one example; Massachusetts has some of the nation’s highest taxes and energy and healthcare costs.

For years employers and other taxpayers have been victimized by a capricious and uncompetitive job climate. The state’s corporate tax code has been changed multiple times over the past few years alone. A few years back, the Legislature reversed one of our competitive tax advantages by repealing the reduced capital gains tax law passed just six years earlier. And there are numerous examples of the Legislature not acting upon the will of the voters by ignoring ballot question mandates like the reduction of the state’s income tax. Employers are also dealing with a more onerous and unpredictable regulatory structure as well.

Massachusetts legislators must also grapple with the fact that the economy increasingly is regional in nature and knows no artificial state boundaries. Rather than pointing fingers, state leaders should start working with other New England states to create a regional economic development strategy that creates and retains jobs here. Perhaps that can be the next high profile “hearing” to be called by the Legislature.

Rather than doing a post-mortem on the decisions of a couple of companies, something that probably wouldn’t happen in any other state legislature, let’s have a broader discussion on the state’s economic competitiveness and focus on how to eliminate barriers to a more vibrant economy.