Legislators see tax revenue boom fading
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State Rep. Aaron Michlewitz
State budget managers are preparing to deal with less revenue growth in next year's budget cycle.
At the outset of Wednesday's hearing held by the Joint Committee on Ways and Means and the Executive Office of Administration and Finance, both chairmen mentioned last year's $1.1 billion surplus but also the need to plan for years when the state's finances are tighter.
"Revenue forecasting is difficult and an uncertain process. While we had a $1.1 billion surplus this past fiscal year, we must remain thoughtful as we plan for the future," House Chairman Rep. Aaron Michlewitz said.
The annual consensus revenue hearing is a chance for state budget managers to probe the status of the local economy, take into account other factors and then guess about the availability of tax revenues for fiscal 2021 budget-building purposes.
Senate Chairman Sen. Michael Rodrigues pointed out that the last several years have run the gamut from budget shortfalls necessitating unilateral spending cuts by the governor to revenue surpluses.
Tax revenue growth estimates for the coming fiscal year range from a low of 0.8 percent to a high of 3.5 percent. By Jan. 15, state officials must pick a growth number and base their spending bills off it.
For fiscal 2019, which ended June 30, Massachusetts government revenue collections totaled $29.693 billion, which was $1.1 billion or 3.8 percent above expectations. The sum represented a 6.9 percent -- or $1.916 billion -- increase in actual collections over fiscal 2018.
Revenue Commissioner Christopher Harding told budget writers he is not projecting a recession to begin this fiscal year or next. He said there's an "upside potential" beyond the fiscal 2020 revenue estimate of up to $250 million and pegged the midpoint of the agency's fiscal 2021 revenue forecast at 2.3 percent growth in actual tax collections.
Harding also foreshadowed the next round of tax relief once the state income tax falls to 5 percent. Automatic tax relief associated with charitable donation deductions will result in a $64 million hit to the fiscal 2021 state budget and a $300 million impact in fiscal 2022.
Numbers to be released later Wednesday will show tax collections over the first five months of fiscal 2020 exceeding the state's benchmarks by $271 million, and up 5.4 percent over the same period in fiscal 2019, Harding said. He cautioned that $160 million in over-benchmark revenues this fiscal year are associated with the "volatile" estate tax.
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