State budget writers forecast continued growth in tax revenues
Raise estimate for this year by $1.5b, project 2.7% gain next year
STATE REVENUES keep rolling along.
Budget officials on Friday revised upward their revenue forecast for the current fiscal year by $1.5 billion and then projected the state’s tax take would rise 2.7 percent in the next fiscal year, which begins July 1.
The “consensus revenue” figure of $26.915 billion for fiscal 2023 agreed on by Secretary of Administration and Finance Michael Heffernan, Senate Ways and Means Chair Michael Rodrigues, and House Ways and Means Chair Aaron Michlewitz was toward the middle of the range forecasted by the state Department of Revenue at a hearing last month.
The policymakers were swayed by economists’ predictions of a rise in revenue ($967 million) as society continues to recover from the pandemic. But those same economists, at December’s hearing, warned that there is also significant uncertainty. In the last couple of years, taxes have come in far higher than expected, mainly due to federal recovery efforts injecting large sums of money into the economy, and the state has revised its tax revenue numbers during the course of the year.
“The fiscal year 2023 consensus revenue forecast aligns with expert testimony delivered in December and acknowledges improved revenue trends in the current fiscal year,” Heffernan said in a statement. “We thank our colleagues in the House and Senate Ways and Means Offices for their continued partnership as we begin to develop a budget that will maintain fiscal discipline while providing necessary funding to protect essential government services and support key priorities throughout the Commonwealth.”
Of the $36.9 billion, an estimated $2.27 billion is projected to come from capital gains, of which $873 million would be deposited in the state’s rainy day fund and a fund for other long-term liabilities, like retiree health benefits. Under state laws that require automatic earmarks for certain items, there would be $3.744 billion transferred to the state pension fund, keeping it on track to be fully funded by 2036. Another $1.325 billion would be earmarked for the MBTA, $1.165 billion for the Massachusetts School Building Authority, and $25 million for a workforce training fund.
Rodrigues said the revenue agreement “lays down the foundation for an impactful fiscal year 2023 budget that values the needs of our communities and our most vulnerable populations hardest hit by the pandemic, while ensuring our state remains in sound fiscal health.”Michlewitz said similarly that the agreement “is a reasonable and appropriate forecast that will allow the Commonwealth to continue to provide the services our constituents deserve, while at the same time preserving our fiscal health.”
The consensus revenue figure provides the basis for the governor’s budget plan, which he will release January 26, and for the House plan released in April and the Senate plan that comes out in May. Those proposals will then have to be reconciled to arrive at a final budget before the 2023 fiscal year starts on July 1, 2022.