MASSACHUSETTS BUDGET-WRITERS started the process of crafting the Fiscal 2021 budget in December with a hearing with economic experts about the state’s anticipated revenues. Four months later they’re starting over with those same experts invited back to testify at a second revenue hearing next week.
“This is the start of a new process in putting together an FY21 budget,” said Senate Ways and Means Chair Michael Rodrigues, a Westport Democrat.
State revenues have been yet another casualty of the COVID-19 pandemic. As large swaths of the economy are shut down to prevent spread of the virus, the state is expected to lose literally billions of dollars next year. That makes the process of crafting a budget for fiscal 2021, which starts in July, much harder. State lawmakers must also deal with what is expected to be a hole of hundreds of millions of dollars in the current fiscal year’s budget.
The three men charged with overseeing the state’s budget process – Administration and Finance Secretary Michael Heffernan, Rodrigues, and House Ways and Means Chair Aaron Michlewitz – announced Tuesday that they will hold a “virtual roundtable” with economic experts on April 7 to discuss the fiscal implications of coronavirus on the state.
Many of the same economic experts and organizations who testified in December have been invited back – the Massachusetts Taxpayers Foundation, the Federal Reserve, Northeastern University professor Alan Clayton-Matthews, University of Massachusetts Dartmouth professor Michael Goodman, and others – as well as the new Center for State Policy Analysis at Tufts University.
The event will be held in the State House, and participants can join either in person or by phone or video. It will be closed to the public but livestreamed on the Legislature’s website.
“In the midst of the continued fallout from the COVID-19 pandemic, the fiscal situation the Commonwealth is facing is both dire and unprecedented,” Michlewitz said in a statement. “It is crucial that we have as clear of a picture as possible before we make any substantial budgetary decisions.”
Heffernan said the roundtable “will aid us as we continue coordinating on the potential budgetary and economic impacts of this public health crisis while working to maintain the solid fiscal foundation that our collaborative financial discipline has helped create and build.”
In an interview, Rodrigues said he, Michlewitz, and Heffernan have been working closely together since the beginning of the outbreak. They wanted to give economists time to determine the impact of the crisis before scheduling the new hearing.
“This is uncharted waters,” Rodrigues said. “We’re hoping by next Tuesday we can hear some forecast with some level of confidence from people that we have a lot of respect for and confidence in.”
Rodrigues would not say when he anticipates the budget getting done this year. The governor released his budget proposal in January. Typically, the House Ways and Means Committee releases its proposal in April, and the Senate follows suit in May. A final budget is supposed to be signed by the governor by July 1, although in recent years lawmakers have been pushing that further into July and putting in place temporary budgets that continue existing funding levels until the annual budget is completed.
Michlewitz has called it “highly unlikely” that a House budget would be released in April. Rodrigues called the timing a work in progress. “We kind of hit the pause button for now until we can get some good information,” Rodrigues said. “We’re not going to put out a budget just to put out a budget unless it’s based on information we have some sort of confidence in.”
Rodrigues said while Baker’s January budget was based on the best available information at that time, the state is now in a very different place. “We all know that revenues are taking a big hit in FY20, and we don’t know how long this is going to last into FY21,” he said. “Certainly, we’re in a much different place than we were even four weeks ago.”
The Massachusetts Taxpayers Foundation estimated the revenue shortfall in the current fiscal year will be between $300 million and $500 million, while the Center for State Policy Analysis pegged it at between $500 million and $750 million. Both organizations said the shortfall could exceed $2 billion in fiscal 2021.
Rodrigues called those estimates “well within the realm of reasonable.”
Rodrigues said he had not discussed the possibility of mid-year budget cuts yet with the governor’s team. Asked how the state would deal with the shortfall in the current year’s budget, with just three months left to the fiscal year, Rodrigues said, “There are only two ways to deal with it. Either you make cuts or you dip into the rainy day fund. We’re reluctant to do either, but we’ll do what we have to do. At the end of the day, we will have a balanced budget, period.”
The state can also expect an influx of money from federal relief packages. Rodrigues said lawmakers are still analyzing exactly how much is expected to come in from the latest $2.2 trillion relief bill and where that money can go.
The federal government has increased funding for MassHealth and is expected to provide enhanced unemployment benefits. The Center on Budget and Policy Priorities estimated that Massachusetts will get $2.67 billion in state and local government aid.