Senate budget writers who have the next shot at crafting the 2024 state budget say their outlook remains on track despite a massive shortfall in revenues reported in April, which is typically the most significant revenue month of the year.
A one-month reversal of Massachusetts’ strong tax figures hit hard on Beacon Hill Wednesday when state officials reported collections for April came in nearly $1.5 billion below original projections for the month and $2.2 billion under collections from the same time last year.
But the Senate’s chief budget writer said his chamber has been planning for a decline in revenues given recent forecasts and economic volatility.
The Senate has “deliberately been cautious in our spending and revenue projections,” said Michael Rodrigues, a Westport Democrat who heads up the Senate Ways and Means Committee.
“While we must be fiscally prudent moving forward, our actions thus far have put us in a strong position as we face this uncertainty,” he said in a statement. “We remain confident that, by working closely with our partners in the House and the (Healey) administration, we will advance a balanced and strong fiscal year 2024 budget and maintain the long-term fiscal health of our commonwealth.”
Historic pandemic-era tax hauls were expected to eventually level out and the upcoming state budget was built on revenue projections that took into account a likely drop in revenues, economic experts told the Herald.
That includes a drop in capital gains collections this year after they were “just through the roof” over the past two years and the likelihood that pass-through-entities would claim credits owed to them by the state, which in turn lowered how much they paid, said Doug Howgate, executive director of the Massachusetts Taxpayers Foundation.
As far as revenue projections used by Gov. Maura Healey and House leaders to craft the state budget, Howgate said those assumptions “remain reasonable.”
“That’s not to say we’re not closely monitoring May and June revenues and stuff can change,” he told the Herald Thursday. “The times of the last two years, those are not normal budget times, and we can’t pretend like they are. But I don’t think we also want to hit the panic button.”
But the scale of the April slowdown has some taking a pause.
Eileen McAnney, a senior fellow at the Pioneer Institute, said any time someone is talking about over a billion dollars in lost revenue, “it’s a big number.”
“The short answer is, it is a significant number,” McAnney said. “The question is, was this kind of expected or anticipated? And I would say, I think a drop in capital gains was anticipated because there were unique circumstances in fiscal years ‘21 and ‘22 that wouldn’t be repeated.”
The viability of tax relief proposals simmering in the State House, however, is a different question. Gov. Maura Healey and House leaders have proposed tax cut proposals with similar goals but varying costs.
Progressives have hammered the proposals, claiming they give breaks to the wealthy.
After the April revenue report, now is not the time to be giving “a permanent tax cut to the ultra-rich and large corporations,” said Andrew Farnitano, a spokesperson for Raise Up Massachusetts, a progressive group.
“We need flexibility in the state budget, and we need to be prioritizing the investments that will support economic growth in the future, like childcare, housing, higher education, and transportation,” Farnitano told the Herald.
But Administration and Finance Secretary Matthew Gerkowicz said the administration’s budget proposal, including the associated tax relief package, “remains affordable for the state.”
“We believe [it] is essential for delivering urgently needed economic relief to families, seniors and renters and improving Massachusetts’ economic competitiveness,” Gerkowicz said in a statement. “We do not believe it’s necessary at this time to revisit our FY24 consensus revenue estimate.”
An even bigger question mark hangs over other legislative proposals that have large price tags affixed to them.
Farnitano said talk around expanding access to public higher education, housing affordability, and childcare could now be at risk.
“It’s not just the new proposals that are at risk, but also things that are already being done, investments that are being made,” Farnitano said. “The question is, can they be sustained?”