Tax foundation: Mass. fiscal situation worsening
Recovery image unclear: W, square root symbol, or Nike swoosh?
THE MASSACHUSETTS TAXPAYERS FOUNDATION released a report on Monday indicating the state’s financial condition is worsening in part because the COVID-19 pandemic is lasting longer than expected, a second wave of the virus seems likely, and additional federal aid is uncertain.
The foundation just a month ago estimated tax revenues in fiscal 2021 would fall $4.4 billion, or 14.1 percent, below the benchmark tax revenue forecast in January. Now the foundation is projecting a drop of $6 billion, or 19.3 percent.
Eileen McAnneny, president of the foundation, said the April forecast assumed a V-shaped recovery with the economy on the upswing by July. Now, she says, the economy’s future is far more uncertain and the shape of the recovery is unclear.
“Is it a W or is it the Nike swoosh? Is it the square root symbol? We don’t know,” she said.
The foundation is projecting the state will lose 725,000 jobs in the three-month period ending in June, raising the unemployment rate to 22 percent. The foundation’s current projection calls for the state unemployment rate to fall to 13.4 percent by the end of June 2021 and fail to return to pre-pandemic levels (in the 3 to 4 percent range) until 2024.For fiscal 2020, which ends June 30, the state is facing an estimated revenue shortfall of $740 million. To balance the budget, with so little time to go, the foundation said the state will most likely have to borrow money in the next month and pay it back in the coming fiscal year or dip into the state’s $3.4 billion rainy day fund.
The Taxpayers Foundation warned that any reliance on the rainy day fund to balance this year’s budget will making balancing next year’s budget, with its $6 billion tax revenue shortfall, more difficult.