The state brought in over half-a-billion dollars less in taxes than expected through the end of fiscal 2023 and almost $2 billion less than they collected the previous year, according to the Healey Administration.
The Department of Revenue says that total tax revenue for the year came in at $39.16 billion, about $605 million below revenue benchmarks for the fiscal year.
“The tax revenue performance against benchmark was driven by a decline in capital gains after unprecedented growth in Fiscal Year 2022,” the Executive Office for Administration and Finance said in announcing the year end totals.
As a consequence of coming in under benchmark the state will cut in half a planned deposit into the stabilization fund, also known as the rainy day fund, but the shortfall “will not impact the budget balance,” according to the administration.
After the Department’s April revenue report came in about $1.6 billion below benchmarks and a full $2.2 billion under the previous year’s April revenue, some were quick to sound the alarm about the Legislature’s plan to consider tax cuts.
However, according to Secretary of Administration and Finance Matthew Gorzkowicz, the following months’ revenue covered the financial hole caused by April enough the state won’t need to drawn down on the rainy day fund, which as of June 30 was sitting at $7.2 billion.
“Despite a disappointing month for tax collections in April, tax revenue in May and June exceeded revised benchmarks and helped to shrink the gap. We are on track to close Fiscal Year 2023 in balance without using the Stabilization Fund,” Gorzkowicz said.
Revenue in May came in $169 million higher than forecast, or about 6.7% above benchmark. June collections came in $394 million higher than expected or 10.5% above benchmark.
About $593 million of fiscal 2023’s missed revenue comes from a decline in capital gains takings, according to Administration and Finance. The Stabilization Fund will still see a $750 million deposit, half what was originally planned but enough to bring it to nearly $8 billion, and the state retiree benefits trust fund and pension liability fund will both get an additional $41.7 million.
More than $100 million in surtax takings collected after the state’s constitution was changed to include a permanent 4% tax on incomes over $1 million will not be added to fiscal 2023’s balance sheets, but instead deposited in a Education and Transportation Fund created by Healey’s 2024 budget for taxes taken under the new law.
All told, even with a smaller rainy day fund deposit, the state will still need to come up with about $39 million to cover all of 2023’s spending, according to the Healey Administration.
“The Executive Office of Administration and Finance continues to finalize FY23, and anticipates filing a supplemental budget later this summer to close Fiscal Year 2023,” a spokesperson for administration and finance wrote.
The year-end numbers come just days after Healey signed the state’s month-late $56.5 billion fiscal 2024 budget.
July’s revenue report showed the state made $264 million or 11.0% more than actual collections in July 2022. Revenue benchmarks were not made for July, the first month in the state’s fiscal year.
“July revenue included increases relative to July 2022 collections in withholding, non-withheld income tax, sales and use tax, corporate and business tax, and ‘all other’ tax” Revenue Commissioner Geoffrey Snyder said along with the July report. “The increase in sales and use tax was the result of typical periodic fluctuations in collections. The increase in withholding reflects current labor market conditions as well as periodic fluctuations. The increase in ’all other’ tax is due, in part, to estate tax, a category that tends to fluctuate.”