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Our members are the local governments of Massachusetts and their elected and appointed leadership.
On Dec. 31, Administration and Finance Secretary Michael Heffernan and the leaders of the House and Senate Ways and Means committees announced a consensus state revenue forecast for fiscal 2020 of $29.3 billion, representing 2.7 percent growth in tax revenue over the adjusted projected revenue collections for fiscal 2019.
The adjusted fiscal 2019 revenue estimate of $28.53 billion includes a $200 million increase in projected state tax revenues announced by Heffernan, which is based upon current year-to-date revenues and economic data. Approximately $100 million is estimated to be from capital gains above the annual threshold and would be transferred to the Stabilization Fund, which now stands at more than $2 billion, and other off-budget funds.
Both the adjusted fiscal 2019 estimate and the fiscal 2020 estimate are exclusive of marijuana sales and excise taxes. The announcement from Heffernan, Senate Ways and Means Vice Chair Joan Lovely and House Ways and Means Chair Jeffrey Sanchez states that they decided to set aside the marijuana forecast so that the administration, House and Senate can make independent decisions on marijuana revenue for fiscal 2020 based on available information as each goes to print with their budget proposals.
Heffernan said the fiscal 2020 forecast “reflects modest growth in the Commonwealth’s economy, consistent with testimony we have heard from economic experts.”
The consensus revenue forecast is the basis on which the Baker-Polito administration, the House, and the Senate will build their respective fiscal 2020 budget recommendations.
The consensus tax growth rate has been used in recent years to determine the rate of increase in the Unrestricted General Government Aid appropriation.
The fiscal 2019 consensus forecast growth rate was 3.5 percent. It was 3.9 percent for fiscal 2018 and 4.3 percent for fiscal 2017.
On Dec. 5, at the annual “consensus” revenue hearing at the State House, state budget officials heard cautious tax collection forecasts from economists and other fiscal experts concerned about the impact of a slowing economy on state revenues.
Department of Revenue Commissioner Christopher Harding reported that his department’s revenue forecast for fiscal 2020 assumed slowing economic growth that is expected to reduce growth in some areas of the personal income tax, including the traditionally volatile capital gains tax.
In addition to global and local economic trends and uncertainties, the Department of Revenue forecast reflected several state tax changes, including the expectation that an automatic income tax rate cut will be triggered effective Jan. 1, reducing the rate from 5.1 percent to 5.05 percent, and again on Jan. 1, 2020, cutting the rate to 5 percent. Together, these decreases will reduce state tax collections in fiscal 2020 by $263 million.
Gov. Charlie Baker is scheduled to file his fiscal 2020 budget recommendation by Jan. 23.