Massachusetts ends fiscal 2020 with $700 million budget hole
Baker proposes diverting capital gains taxes from rainy day fund
MASSACHUSETTS ENDED 2020 with a nearly $700 million budget gap, Gov. Charlie Baker said Wednesday, as he filed a proposed closeout budget with the Legislature.
Baker, in his filing letter, wrote that tax collections for the fiscal year that ended July 30, 2020, were $693 million below expectations, due to the COVID-19 pandemic.
Much of this was due to lower-than-anticipated sales tax revenues, as economic activity ground to a halt from mid-March to mid-May and only gradually rebounded. Deferral of business taxes, lower gaming revenue, and lower gasoline taxes also hurt the state’s bottom line.
But somewhat surprisingly, Baker wrote that income tax collections remained largely steady – likely due to a mix of people moving to remote work and people collecting unemployment benefits, which are taxed. The state also benefited from an influx in federal coronavirus relief money.
Baker is also asking that $108 million that was not spent in fiscal 2020 – likely because the pandemic made it impossible to carry out budgeted programs – be carried over into fiscal 2021 to cover rising costs for things like deferred health care for public employees.
The closeout spending bill that Baker introduced would authorize $424 million in new spending, mainly to cover costs incurred by MassHealth, the state Medicaid program. Although most commercial insurers profited this year as people deferred medical care, Baker wrote that for Medicaid, the costs of responding to the COVID-19 pandemic actually exceeded the savings from people deferring non-urgent care.
Baker also is proposing some policy changes. He would let the MBTA use some capital dollars – which are supposed to be spent on building projects – to pay employee salaries. He wants to allow ride-hailing companies like Uber and Lyft to implement surge pricing during a state of emergency. Amid a pandemic that has caused havoc at nursing homes, Baker wants to expand the Department of Public Health’s authority to suspend a nursing home’s license “for cause” rather than the current standard that requires imminent risk of harm.
The bill now goes to the House for consideration.
In theory, lawmakers have a tight time line for taking action on the budget proposal. The comptroller has an October 31 statutory deadline for closing the books on the prior fiscal year. But the Legislature has gotten into the habit of ignoring that deadline when passing the year’s final budget. Last year, Baker only signed the final supplemental budget for fiscal 2019 in mid-December, after a stalemate that saw the state comptroller threatening to sweep the state’s entire surplus into the rainy day fund if the Legislature did not pass a final budget.The Legislature also still has to pass a full-year budget for fiscal 2021. Lawmakers have passed a temporary budget to fund state government through the end of October. But they have not yet released a draft of a full-year budget – even though passing the annual state budget is usually a months-long process.