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Eileen McAnneny (center) and Michael Goodman (right) testify at the annual Ways and Means Committee consensus revenue hearing. (Photo: Sam Doran/State House News Service)
At an annual hearing held yesterday to arrive at a state revenue projection for the coming fiscal year, state budget writers heard warnings from fiscal experts that the exceptional revenue growth enjoyed by the Commonwealth over the past two years may be coming to an end.
The hearing, convened by the chairs of the House and Senate Ways and Means committees and Administration and the secretary of Administration and Finance, marks the official start of the fiscal 2021 state budget season.
Noting over-target tax growth in both fiscal 2018 and fiscal 2019, the experts said that labor market constraints, the diminishing impact of federal tax cuts and other factors would likely reduce increases in future years.
Revenue Commissioner Christopher Harding and Massachusetts Taxpayers Foundation President Eileen McAnneny both said revenues may modestly exceed the current benchmark for fiscal 2020, but tax collections for fiscal 2021 are expected to grow more slowly – in the neighborhood of 2%.
Revenues available to fund the fiscal 2021 state budget will be somewhat limited by tax cuts slated to take effect on Jan. 1 and by rules capping the use of capital gains income tax collections over a certain threshold to fund the state budget.
Harding released a tax growth forecast of 2.3% for next year (midpoint of a range) above fiscal 2020 expectations, and the Massachusetts Taxpayers Foundation provided a growth forecast of just 2%.
State budget writers from the Baker administration and each legislative branch are expected to release a “consensus” revenue forecast sometime later this month or in early January. This revenue forecast is the basis on which the administration, the House and the Senate will build their respective fiscal 2021 budget recommendations.
For the past several years, the consensus growth rate has been used to set the rate of increase for Unrestricted General Government Aid, the major discretionary local aid account.
Gov. Charlie Baker is scheduled to file his fiscal 2021 budget recommendation by Jan. 22.