An uncharacteristic air of rapprochement descended upon Beacon Hill during the first eight months of 2011. The political and economic battles that usually consume Massachusetts raged mostly outside the borders of the commonwealth.

As the fragile global recovery gave way to fears of another recession and federal budget negotiations devolved into a desperate game of chicken, Massachusetts legislators embraced the idea that the only way to solve the commonwealth’s long-term fiscal issues is through economic expansion and job growth.

It is an approach that recalls Winston Churchill’s quote that “some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon.” The Patrick administration and legislative leaders seem determined during 2011 to allow the healthy private-sector horse to pull a wagon that may not be sturdy just yet, but is certainly in better shape than wagons in other states.

The most encouraging development so far this year has been the forging of a consensus around the need to control and reduce the soaring cost of health insurance. AIM has pushed aggressively to change the financial model of health care in Massachusetts from the current fee-for-service system, which rewards volume, to one in which insurers pay doctors and hospitals global fees that reward quality patient care.

Payment reform appears to enjoy almost universal support – from doctors and hospitals to employers, insurance companies, and policymakers such as Governor Deval Patrick and Attorney General Martha Coakley. More importantly, payment reform is already shifting the landscape of the health-care market as new players such as Steward Health Care System expand and Partners Health Care diversifies by announcing its intention to purchase insurer Neighborhood Health Plan.

The political season has been far from perfect for employers and many dangerous proposals such as mandated sick leave and a ban on chemicals remain in the pipeline. But the headline for employers during the first half of 2011 appears to be “so far, so good:”

• The Legislature enacted, and Governor Patrick signed, a Fiscal Year 2012 state budget designed to close a $1.9 billion deficit without new taxes.
• The Legislature in February approved an Unemployment Insurance rate freeze that limited the average UI tax increase for Massachusetts employers to $61 per employee and kept more than $400 million in the private sector. The measure averted an average 40 percent jump in UI taxes that was set to hit employers after rates automatically increased from Schedule E to Schedule G.
• Lawmakers gave cities and towns the ability to control soaring health insurance costs by changing the design of employee health coverage. The provision matters to employers who have been concerned that spiraling health costs threaten the ability of cities and towns to provide the educational, safety and public works services that businesses need.
• The employer-funded Massachusetts Workforce Training Program was placed into a trust that will remove the program from the uncertainties of annual budget deliberations. The flagship program through which Massachusetts improves the skills of workers has provided $193.2 million in grants since its inception to some 2,500 Massachusetts employers to train 277,351 people.
• The 2012 budget included three tax reforms designed to strengthen the state’s business climate and enhance fairness and predictability for taxpayers: speeding tax audits, establishing equal rules for taxpayers and the Department of Revenue and providing early notification of changes in tax policy.
• AIM appealed the approval by state regulators of the power sales agreement between Cape Wind and National Grid because it will add $1 billion in unnecessary charges to the electric bills of businesses and consumers in the utility’s territory. The 15-year deal approved in November will saddle ratepayers with the highest power price ever negotiated in Massachusetts.
• President Barack Obama signed a bill repealing a provision of the national health reform law that would have required businesses to file 1099 tax forms for every vendor that sold them more than $600 worth of goods and services. AIM and other business groups opposed the reporting requirement as an undue burden on small business.

“The Massachusetts Legislature deserves high marks for balancing its budget without tax increases or other impediments to job growth and economic recovery,” said John Regan, Executive Vice President of Government Affairs at AIM.

The positive political environment in Massachusetts fed an economy that remained significantly stronger than the nation as a whole. Continued strength in export sectors and technology industries helped the Bay State post a 7.6 percent jobless rate in July while the rest of the country continued to struggle at 9.1 percent.

There were significant disappointments during the first half as well:

• The final 2012 budget omitted a proposal originally passed by the House of Representatives to narrow the treble damages provision for violations of wage and hour laws.
• Also omitted was a House-passed measure to repeal the state’s onerous pharmaceutical gift ban that threatens job growth in one of the economy’s most important sectors.
• Supporters of a proposal to mandate seven sick days ratcheted up pressure on lawmakers this summer by delivering a pair of swimming goggles and a packet of 110 stories from workers who say they have benefited from – or would benefit from – guaranteed paid sick time. AIM opposed the proposal at a contentious hearing in July.
• The Legislature has undermined its own efforts to reduce health insurance costs by failing to comply with the Mandate Review Law, which requires the Division of Health Care Finance and Policy (DHCFP) to conduct a cost analysis of new mandated insurance benefits before a legislative committee can recommend them. AIM has objected to recent proposals to expand HIV screening and mental health services because no cost-benefit analysis was done.

AIM expects to remain focused for the remainder of 2011 on the two primary cost issues facing Massachusetts employers – health insurance and electricity. While the timetable for consideration of health cost reform remains unclear, AIM is determined to ensure that the emerging consensus around health cost reduction translates into legislation and rate relief for employers sometime in 2012.

Electricity will take center stage next month as AIM argues its appeal of the Cape Wind decision before the Massachusetts Supreme Judicial Court. The association also expects to continue its support of utilities that are finding renewable power at less than half the cost of Cape Wind through competitive bidding.