State leaders, fiscal experts predict slow growth, more uncertainty

State budget experts convened on Dec. 16 for the annual consensus revenue hearing, with testimony highlighting continued economic uncertainty and predictions of slow state revenue growth in the coming months.

Experts highlighted the implications of federal policies on the state’s economy and state tax collections, as well as known impacts of the One Big Beautiful Bill Act, “or OB3” — such as changes to federal contributions for MassHealth and a raised state and local tax cap for federal income tax deductions (known as SALT), which could reduce state revenue due to its influence on taxpayer use of the state’s Pass-Through Entity workaround.

Federal policy impacts on the workforce, particularly due to federal immigration enforcement activity, were also raised as a potentially negative factor for the state economy and tax collections.

Department of Revenue Commissioner Geoffrey Snyder said he expects slow tax revenue growth — somewhere between 1.7% and 3.1% — in fiscal 2027. For the current fiscal year, he expects tax revenue to range from $43.46 billion (or $155 million below benchmark) and $44.18 billion ($563 million above benchmark) when accounting for the impacts of OB3.

Snyder said he anticipates a reduction of $664 million in fiscal 2026 state revenue due to OB3, with a smaller reduction, $282 million, in fiscal 2027. Snyder also noted a possible decline in Fair Share Amendment income surtax revenue in fiscal 2027, while predicting above-benchmark collections for fiscal 2026 (between $528 million and $793 million).

Several factors will impact forthcoming fiscal outcomes, Snyder said, including federal funding cuts that affect the state economy’s education, health care, pharmaceutical and biotechnology sectors, impacts of tariff policy changes, inflation, and actions taken by the Federal Reserve.

Other experts at the hearing echoed the commissioner’s prediction for slow growth and uncertainty about several factors that may impact state tax collections.

Administration and Finance Secretary Matthew Gorzkowicz assured lawmakers that fiscal 2026 revenues are on track to meet expenditures due to cautious budgeting for fiscal 2026. He emphasized, however, that uncertainties remain, including pressures on health care expenditures.

Hosted by the Joint Committee on Ways and Means, the consensus revenue hearing convenes the governor’s budget office as well as the Department of Revenue and other invited fiscal experts and economists to provide analysis on current and forthcoming fiscal year revenue to legislative and administration leaders. The event marks the start of the annual budget development season, laying the foundation for the Legislature and administration’s spending decisions for the fiscal 2027 budget and the remainder of fiscal 2026.

Legislative leaders and the administration are expected to reach agreement on a tax revenue forecast for fiscal 2027 in the coming weeks. The forecast will be used in the governor’s state budget recommendation, due to be filed by Jan. 28. The forecast will also inform the House and Senate budget plans that are customarily released in April and May, respectively.