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

This afternoon, Administration and Finance Secretary Michael Heffernan, Senate Ways and Means Chair Michael Rodrigues and House Ways and Means Chair Aaron Michlewitz announced a consensus state tax revenue forecast for fiscal 2023 of $36.92 billion, representing a 2.7% increase over the adjusted projection for fiscal 2022 revenue.

The adjusted fiscal 2022 revenue estimate incorporates a $1.55 billion upgrade announced by Secretary Heffernan based upon year-to-date revenues and economic data.

The Baker-Polito administration and the House and Senate will use the consensus revenue forecast to build their respective fiscal 2023 budget recommendations.

Under state law, the three budget officials convene every year to establish a joint revenue forecast by Jan. 15. As part of the process, they hold a public hearing in mid-December to receive testimony on the tax revenue outlook from the Department of Revenue, the Office of the State Treasurer, and independent, local economists.

At this year’s hearing, fiscal experts and economists recognized that tax collections have far exceeded benchmarks in fiscal 2021 and the first half of fiscal 2022, but they offered cautious outlooks for the economy and state revenues over the second half of fiscal 2022 and for fiscal 2023.

The consensus revenue forecast provides insights into the direction of the economy and anticipated state revenues available to fund municipal and school aid programs next year, particularly Unrestricted General Government Aid. In recent years – with the exception of fiscal 2021 – the UGGA account has increased at the same rate as the consensus projection for the growth of state tax collections.

Of the forecasted $36.195 billion in state tax revenues for fiscal 2023, an estimated $2.28 billion is projected as capital gains tax revenue, of which $873 million will be transferred, by statute, to the state stabilization fund and other long-term liability funds for pension and retiree health insurance costs.

In addition, the following off-budget transfers are mandated by state law:
• $3.74 billion to the pension fund, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
• $1.33 billion for the Massachusetts Bay Transportation Authority
• $1.17 billion for the Massachusetts School Building Authority
• $25 million for the Workforce Training Fund

After these transfers, $29.783 billion will be the maximum amount of tax revenue available for the budget in fiscal 2023, absent statutory changes.

Today’s announcement marks the beginning of the fiscal 2023 state budget process. Gov. Charlie Baker is scheduled to file his budget by Jan. 26, and the House and Senate budget plans are customarily released in April and May, respectively.

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