The state’s budget writers announced on Jan. 8 that state tax collections are expected to grow by 2% in fiscal 2025 over a recently reduced projection for fiscal 2024 revenue.

Administration and Finance Secretary Matthew Gorzkowicz, Senate Ways and Means Chair Michael Rodrigues and House Ways and Means Chair Aaron Michlewitz announced a consensus state tax revenue forecast of $40.2 billion for the fiscal year that will begin on July 1.

The figure does not include an additional $1.3 billion in projected revenue from the state’s new surtax on annual incomes over $1 million, which was adopted by voters in November 2022 and is known as the Fair Share Amendment. Dispensing funds from the surtax is subject to appropriation, but the ballot measure stipulated that the funds must be spent only in areas of transportation and education.

The adjusted fiscal 2024 revenue estimate, also announced on Jan. 8 by Gorzkowicz, decreases the revenue estimate for the current fiscal year after six consecutive months of tax collections not meeting benchmarks. The decrease, based on year-to-date collections and economic data, brings the current fiscal year forecast to $40.41 billion, including $1 billion in Fair Share revenue.

This new estimate for the current fiscal year is $1 billion lower than the $41.41 billion figure that was used in the fiscal 2024 state budget law. To keep the budget in balance, the administration announced $375 million in mid-year budget cuts.

The Healey-Driscoll administration and the House and Senate will use the consensus revenue forecast to build their respective fiscal 2025 budget recommendations.

While state tax collections are expected to continue growing, albeit slowly, it is unclear what the consensus revenue forecast will mean for local aid accounts. The previous administration’s practice was to link its proposed percentage increase in Unrestricted General Government Aid to the forecasted growth rate in state tax collections. In fiscal 2023 and 2024, however, in recognition of the state’s strong revenue collections, the Legislature doubled the administration’s proposed percentage increase for UGGA.

Under state law, the three budget officials convene every year to establish a joint revenue forecast, and their estimate must be announced by Jan. 15. Part of the process is a public hearing — which was held this year on Dec. 8 — where budget writers hear testimony on the tax revenue outlook from the Department of Revenue, the Office of the State Treasurer, and independent, local economists.

The consensus revenue forecast announcement marks a key initial step in the fiscal 2025 state budget process. Gov. Maura Healey is scheduled to file her administration’s budget by Jan. 24, and the House and Senate budget plans are customarily released in April and May, respectively.

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