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Local Aid and Finance State tax collections expected to slow next year
Economists gathered at the annual state revenue hearing told budget officials from the governor’s office and the Legislature that a slowing economy is expected to provide much smaller growth in state tax collections than over the past several years.
The “consensus” revenue hearing held on Dec. 13 marks the first step toward reaching agreement among state-level budget writers on a common revenue projection for the fiscal 2009 state budget.
The hearing was chaired by the governor’s chief budget officer, Leslie Kirwan, House budget committee chair Robert DeLeo, and Senate budget committee chair Steven Panagiotakos.
In opening remarks, Rep. DeLeo said the fiscal 2009 budget was shaping up to be the most challenging in all his years in the Legislature.
In briefing materials provided at the hearing, the Department of Revenue forecast tax revenue growth of only about 2.3 percent this year and about 3.3 percent for fiscal 2009. Tax growth over the past five years since the last recession has averaged 6.7 percent.
The Department of Revenue forecast is based on expectations that the Massachusetts economy will slow in the first half of 2008 and maintain a slow pace into 2009, with employment growth of less than 1 percent annually.
In an analysis released at the hearing, the Massachusetts Taxpayers Foundation projected tax revenue growth of 4.5 percent this year (to $20.62 billion) and 2.5 percent next year (to $21.12 billion), an increase of about $500 million.
The MTF noted that its projections are based on the expectation of a weakening national economy, but not a recession. Under a separate forecast, there would be no tax growth in fiscal 2009 if a national recession were to occur in the first half of 2008. The foundation noted that one of the economic forecasting firms contributing to the MTF forecast has increased its view of the chances of a recession to 40 percent.
The MTF also projected slow employment growth of only 1 percent in fiscal 2008 and 2009, down from almost 2 percent in fiscal 2006 and 1.6 percent last year.
“Closing the budget gap in fiscal 2009 will be even more difficult than in 2008,” said MTF President Michael Widmer. “The state’s sluggish economy is not creating the jobs and revenues needed to address the state’s financial difficulties.”
State Treasurer Timothy Cahill told the revenue hearing that despite his cautious optimism for modest Lottery revenue growth this year and next year, he did not think revenues in fiscal 2009 could reach the level needed to fully fund the $935 million in fiscal 2008 Cherry Sheet Lottery distributions. The state financial statement pegged the Lottery revenue shortfall for fiscal 2007 at $119 million and forecasted a $124 million shortfall for fiscal 2008. The MMA has estimated the fiscal 2009 gap at more than $100 million.
The governor’s budget recommendation is due to be released by Jan. 23.
Local Aid and Finance State tax collections expected to slow next year
State tax collections expected to slow next year
Economists gathered at the annual state revenue hearing told budget officials from the governor’s office and the Legislature that a slowing economy is expected to provide much smaller growth in state tax collections than over the past several years.
The “consensus” revenue hearing held on Dec. 13 marks the first step toward reaching agreement among state-level budget writers on a common revenue projection for the fiscal 2009 state budget.
The hearing was chaired by the governor’s chief budget officer, Leslie Kirwan, House budget committee chair Robert DeLeo, and Senate budget committee chair Steven Panagiotakos.
In opening remarks, Rep. DeLeo said the fiscal 2009 budget was shaping up to be the most challenging in all his years in the Legislature.
In briefing materials provided at the hearing, the Department of Revenue forecast tax revenue growth of only about 2.3 percent this year and about 3.3 percent for fiscal 2009. Tax growth over the past five years since the last recession has averaged 6.7 percent.
The Department of Revenue forecast is based on expectations that the Massachusetts economy will slow in the first half of 2008 and maintain a slow pace into 2009, with employment growth of less than 1 percent annually.
In an analysis released at the hearing, the Massachusetts Taxpayers Foundation projected tax revenue growth of 4.5 percent this year (to $20.62 billion) and 2.5 percent next year (to $21.12 billion), an increase of about $500 million.
The MTF noted that its projections are based on the expectation of a weakening national economy, but not a recession. Under a separate forecast, there would be no tax growth in fiscal 2009 if a national recession were to occur in the first half of 2008. The foundation noted that one of the economic forecasting firms contributing to the MTF forecast has increased its view of the chances of a recession to 40 percent.
The MTF also projected slow employment growth of only 1 percent in fiscal 2008 and 2009, down from almost 2 percent in fiscal 2006 and 1.6 percent last year.
“Closing the budget gap in fiscal 2009 will be even more difficult than in 2008,” said MTF President Michael Widmer. “The state’s sluggish economy is not creating the jobs and revenues needed to address the state’s financial difficulties.”
State Treasurer Timothy Cahill told the revenue hearing that despite his cautious optimism for modest Lottery revenue growth this year and next year, he did not think revenues in fiscal 2009 could reach the level needed to fully fund the $935 million in fiscal 2008 Cherry Sheet Lottery distributions. The state financial statement pegged the Lottery revenue shortfall for fiscal 2007 at $119 million and forecasted a $124 million shortfall for fiscal 2008. The MMA has estimated the fiscal 2009 gap at more than $100 million.
The governor’s budget recommendation is due to be released by Jan. 23.
Written by MMA Legislative Director John Robertson
