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.

McAnneny said the foundation’s analysis was completed before Gov. Charlie Baker released his plan for the state’s reopening on Monday. She said the foundation’s analysis assumes that economic activity will resume this summer, but it will be slow and uneven, resulting in lower tax revenues. She said the expectation is that major employers will continue remote working, consumers will be slow to venture out to restaurants and retailers, and many of the unemployed will curtail their expenditures.

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.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

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.