Governor pushes plan for small businesses

Feb 9, 2010 — Sentinel & Enterprise

BOSTON -- A plan to help small businesses grow and create jobs began to shape Monday with Gov. Deval Patrick and legislative leaders pushing tax credits and access to state loans as a way to help guide the state out of its recession.

The governor also wants to freeze the unemployment insurance rate at its current level in order to save small businesses from a major increase scheduled this spring of as much as $158 per employee.

"We need to try everything that might work because people need jobs and that has to be our number-one focus," Patrick told reporters Monday.

Local business leaders reacted to the news with cautious optimism, pleased to see attempts to help small-business owners but skeptical that tax credits would be enough to prompt a hiring spree.

"Clearly any break that an employer gets at this stage is going to be helpful to that business surviving and possibly growing," said David McKeenan, president of the North Central Massachusetts Chamber of Commerce. "The UI rate increases are going to be significant if something isn't done, and that's a huge new burden for small businesses that doesn't relate to whether they're adding employees or not."

McKeehan said job creation could hinge on stimulating people's willingness to consume and spend money. Asked if that meant tax cuts, he said those have worked in the past.

"No employer is going to hire someone unless they already have the revenue from sales and business activity that justify

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hiring somebody, so having a tax credit doesn't really help unless the business is making money," McKeehan said.

Patrick plans to file legislation that would create a $50 million tax credit for job creation. Under the plan, small businesses with 30 or fewer employees would be eligible for a $2,500 tax credit per new job created and retained for a year. The program would be first come, first served and capped at $50 million, creating up to 20,000 new jobs.

The governor is also proposing to merge three state agencies that provide access to capital for small businesses, and to borrow $25 million in order to facilitate lending.

The merger would consolidate the Community Development Finance Corp., the Economic Stabilization Trust and the Massachusetts Technology Development Corp. into a new entity, the Massachusetts Growth Capital Corp.

"We're proposing some means to get greater access to working capital for small business that is a chronic concern," Patrick said.

Senate President Therese Murray also filed legislation yesterday to consolidate many of the state's economic development agencies, such as the Massachusetts Film Office, and give the governor greater control and oversight. Other agencies such as the Sports and Entertainment Commission would be eliminated.

Russ Smith, executive director of the Lowell Small Business Assistance Center, said access to low-interest loans and freezing the unemployment insurance rate could help small business owners stay afloat until the economy recovers.

"My own feeling is the recovery of jobs is going to be driven by spending," Smith said. "If the climate isn't good, I can't see a $2,500 tax credit triggering a hire. The business is going to have to feel optimistic about the future and see the business growing."

Patrick's plan would freeze unemployment insurance rates at their current level for this year, saving businesses on average $158 per employee and a total of $391 million statewide. Some businesses could still see a small increase in unemployment taxes based on the number of employees from those companies who have filed for benefits over the past year.

The state will have to borrow that $391 million from the federal government through a no-interest loan made available to states for this purpose.

Republicans applauded some of the steps outlined by Patrick and Murray, but asked why it took so long to focus on job creation and the economy. The state's unemployment rate jumped in December to 9.4 percent; in Fitchburg and Leominster, it hovers around 12 percent.

"If we are serious about jobs creation and making Massachusetts more competitive, then we must establish a more business-friendly environment that includes a fair and equitable corporate tax rate, a less burdensome regulatory system for employers, and an economic development plan that will help all businesses and ensure that the Commonwealth achieves sustainable long-term growth," said Sen. Richard Tisei, the Senate minority leader and a candidate for lieutenant governor.