Senate Ways and Means Committee Chair Michael Rodrigues, and House Ways and Means Committee Chair Aaron Michlewitz

After keeping watch on the economy and state finances over the summer, the House and Senate budget committees are gearing up to attempt a full-year spending plan for fiscal 2021, which has been delayed due to uncertainties arising from the COVID-19 pandemic and the related recession.

So far this fiscal year, state spending has been governed by interim budgets to cover July 1 through the end of October. The state has made monthly payments to cities, towns and school districts, and has deducted assessments, using temporary rules that were updated in September based in part on fiscal 2020 amounts.

Payments for Unrestricted General Government Aid and Chapter 70 school aid have been based on a July 30 agreement by the governor and legislative leaders to protect these two major local aid accounts from cuts when the fiscal 2021 budget is finally set.

UGGA is slated to be level-funded at $1.13 billion, with the same amounts as in fiscal 2020 allocated to individual cities and towns. School districts are slated to receive at least level-funding of their Chapter 70 education aid. Some districts will receive aid increases due to inflation and enrollment under the current formula.

Under the agreement, Chapter 70 school aid will increase by $107 million, bringing that account up to $5.28 billion. This commitment has been helpful to cities and towns trying to finalize local budgets this fall in time to seek approval of their tax rates from the Division of Local Services.

Revenue roundtable is Oct. 7
As the Legislature works toward the goal of passing an annual budget, the administration and the chairs of the House and Senate budget committees have scheduled a special revenue roundtable for Oct. 7 beginning at 10 a.m. to hear from economists and fiscal experts on the state of the economy and prospects for state finances over the rest of the year. (The roundtable will be live streamed on the Legislature’s website.)

While state tax collections for July and August were better than expected, even after accounting for collections credited to fiscal 2020, the full first quarter numbers through the end of September, which will be available for the Oct. 7 roundtable, will provide a better indication of the state of the economy.

The customary annual revenue hearing for fiscal 2021 was held last December, before the pandemic, and resulted in a growth forecast for state collections of 2.8%, to $31.2 billion. At a follow-up hearing in April, in the midst of the COVID recession, the Massachusetts Taxpayers Foundation warned that collections could fall by $4.4 billion, or 14.1% from last year. A month later, the foundation updated its forecast to project a $6 billion drop in collections, or nearly 20%.

Budget writers are also hoping for news on a possible relief measure from Congress for states and local governments that could help balance the fiscal 2021 budget, though prospects for timely action appear to have dimmed considerably.

The fiscal 2021 budget process began on Jan. 22, when the governor filed his recommendation (House 2) based on economic forecasts made in December. The House and Senate held hearings in the spring, including a hearing on municipal and school aid on March 6.

The customary budget process was halted in March, before the House started its budget debate, as the COVID-19 recession took hold and revenue forecasts began to indicate a steep drop.

Once they arrive at an updated fiscal 2021 revenue projection, legislative leaders say they will expedite budget deliberations – a process that typically takes three months.

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