Budget surplus could reach $3.6 billion

Lawmakers face major spending decisions this month

MASSACHUSETTS CONTINUES TO be swimming in cash.

After dire warnings early in the pandemic, COVID-19 has proven to be an economic boon to Massachusetts, primarily because of federal largesse. Congress’ COVID recovery packages have funneled billions of dollars into the state, through government aid and aid to individuals and businesses, which translates into higher tax revenue.

On Wednesday, the business-backed Massachusetts Taxpayers Foundation provided the latest stunning figures. The organization estimates that for the fiscal 2022 year, which ended June 30, Massachusetts will have a budget surplus of nearly $3.6 billion.

The initial fiscal 2022 budget was around $34.5 billion, and collections have come in nearly $6 billion above that, according to MTF. Some of that extra money was eaten up by additional spending and required deposits into the rainy day fund, the MBTA, and the School Building Authority, leaving an estimated $3.6 billion available.

That is a huge figure, even in comparison to the prior fiscal year, where there was a $1.5 billion surplus.

The reason this is important is as lawmakers finish up the two-year legislative session this month, they will have to make some major spending decisions. If lawmakers do nothing, the entire surplus will be deposited in the rainy day fund. But with that fund already at a record high, more likely they will look to spend a large chunk of the money.

One option is tax relief. Gov. Charlie Baker has proposed a $700 million tax break package, and lawmakers are considering but have not yet released their own tax relief package. The Revenue Committee recently released Baker’s bill and a slate of others, indicating that they are still considering changes to the estate tax, the earned income tax credit, and tax breaks for seniors and renters. Notably, the committee did not release Baker’s proposal to lower the tax rate on short-term capital gains. Senate Revenue Committee chair Adam Hinds said this is because lawmakers “really want to focus on tax relief for those who need it most.”

Baker in May filed a $1.7 billion supplemental budget for fiscal 2022 that included money for a wide range of transportation, housing, environmental, education, and economic development initiatives. It included funding for offshore wind port development, Cape Cod water and sewer projects, housing construction, financial assistance to businesses, and public college building projects. The Legislature has not yet acted on this bill, but if they do, lawmakers are likely to replace many of Baker’s priorities with their own.

Baker also filed the FORWARD Act, a $3.5 billion economic development bill that relied on federal American Rescue Plan Act money in addition to state surplus to invest in a range of building projects, including money for climate resiliency, clean energy, state parks, downtown reinvestment, housing production, and workforce training. A House committee reported out a slimmer, $1.2 billion bill that did not rely on the ARPA money, according to the State House News Service. That bill is still pending.

“My sense is you’ll see the Legislature take up some pretty big spending bills using some FY22 resources,” predicted Doug Howgate, executive vice president at the Massachusetts Taxpayers Foundation.

Meet the Author

Shira Schoenberg

Reporter, CommonWealth

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

While formal sessions end July 31, lawmakers have in recent years delayed passing a closeout budget for the prior fiscal year until sometime in the fall – often upsetting the state comptroller who can’t close the year’s books until that happens. So some decisions could be delayed. But if lawmakers are not in formal sessions, the opposition of a single lawmaker can derail a bill, and they cannot override Baker’s vetoes.

The more complicated or policy intensive a big spending bill is, the more benefits there are to get it done before July 31,” Howgate said.