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CLT UPDATE
Tuesday, March 14, 2017
Stop the false
"expectations" game
|
State tax revenues will grow by 3.9 percent
next fiscal year, state budget managers predicted Thursday,
giving Gov. Charlie Baker and the Legislature about $27
billion to help build the state's fiscal year 2018 budget.
Gov. Charlie Baker's budget chief and the
chairs of the House and Senate Ways and Means Committees
announced on Thursday an agreement over how much tax revenue
that state expects to collect in the next fiscal year that
begins on July 1. The estimate of $27.072 billion in tax
revenues for fiscal 2018 amounts to $1.02 billion more than
the estimate used to finance the current year's spending
plan....
At that hearing, the Department of Revenue,
budget-tracking think tanks and Massachusetts economists
provided estimates of revenue growth that came in as low as
2.65 percent and as high as 5.2 percent. The consensus
revenue figure announced Thursday is closest to the 3.7
percent growth estimate offered by Northeastern University
economist Alan Clayton-Matthews.
State House News Service
Thursday, January 12, 2017
Beacon Hill budget leaders agree on projected FY18 revenue
growth
For the fiscal year to date, revenues of
$15.855 billion are below benchmark by $134 million or 0.8%,
and above prior year by $305 million or 2.0%. February is
historically the lowest collection month of the year.
“Revenues for the month of February were
below expectations,” said Commissioner Heffernan.
Commonwealth of Massachusetts
Department of Revenue
Friday, March 3, 2017
February Revenue Collections Total $1.177 Billion
Monthly revenues $117M below monthly and $134M below
year-to-date benchmark
Despite an economy that seems to be humming
and a newly updated employment rate of 3.2 percent, state
tax revenues have grown modestly, often failing to meet the
more optimistic estimates of the administration and
legislative leaders.
"Our revenues are in flux," Senate Ways and
Means Committee Chair Karen Spilka said. "Unfortunately for
right now, particularly after the month of February, they
are in the negative and we recognize we have to be
responsible stewards of taxpayer dollars while preserving
the services and programs for the most vulnerable residents
in our state and ensure we that invest in the commonwealth's
future."
Eight months into fiscal 2017, state tax
collections are up 2 percent, according to the Department of
Revenue, but are trailing budget benchmarks by $134 million.
February collections were off by $96 million compared to
February 2016, and ran 9.1 percent, or $117 million, below
benchmark....
In a 20-minute presentation Lepore gave an
overview of the administration's budget, a plan that boosts
state spending by about $1.655 billion and calls for reforms
to the health insurance market and tax policy changes aimed
at responding to modern commerce.
Baker's third budget since taking office
represents 4.3 percent gross spending growth over projected
spending for the current fiscal year, including a $997
million increase for MassHealth, a $117 million increase in
education spending, a $29 million increase in debt service
and a $40 million increase in unrestricted local aid,
according to the administration....
The fiscal 2018 spending plan, the first in
state history to exceed the $40 billion mark, relies on a
forecast of $27 billion in tax collections next year and
state officials are counting on tax revenues to grow by 3.9
percent next fiscal year in order to keep the budget in
balance.
Over the last few years the projections
baked into the foundation of the budget have not
materialized as expected, forcing the governor and
Legislature to frequently revise their budgets....
The current budget was originally built on
the assumption that the state would see tax revenues climb
4.3 percent over fiscal year 2017. But through eight months
of the fiscal year, revenues are up just 2 percent, though
the remaining months account for roughly 40 percent of
annual collections....
House Speaker Robert DeLeo also defended the
Legislature's budgeting practices, suggesting lawmakers have
not been "overly optimistic, but quite frankly we're more on
the conservative side than anything else."
"So it wasn't a question of the figures that
we built into our budget were, we felt, an astronomical
risk," DeLeo said.
Baker said that the fact that revenues this
fiscal year are trailing estimates by less than 1 percent is
a manageable problem, even if tax receipts don't rebound
over the final four months of the year.
Thursday's hearing was the first in a series
of eight such hearings around the state this month. The
hearings mark the first step in the budget process beyond
the governor's proposal. The House and Senate will each
develop their own budgets, adopting some of Baker's plans
and rejecting others while boosting planned spending in some
account and cutting others.
State House News Service
Thursday, March 9, 2017
Lepore touts smaller structural deficit, despite revenue
struggles
Gov. Charlie Baker's top budget official
says the administration is open to compromise with business
leaders over a proposed health insurance fee.
The proposal contained in the Republican
governor's $40.5 billion state budget plan would impose a
$2,000-per-worker assessment on companies that have more
than 10 employees but do not currently offer health
insurance benefits.
Secretary of Administration and Finance
Kristen Lepore (Leh-POR-ee) said Thursday at a hearing of
the Legislature's Ways and Means Committee that the
assessment would raise $300 million to help offset rising
Medicaid costs that currently eat up 40 percent of the
state's entire budget.
Several leading business groups have
criticized the employer charge as an unfair shift in costs.
Lepore said the administration was open to
other suggestions but added: "Something has to be done."
Associated Press
Thursday, March 9, 2017
Official: State open to compromise on health insurance fee
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|
Chip Ford's CLT
Commentary
"The fiscal
2018 spending plan, the first in state history to
exceed the $40 billion mark, relies on a forecast of
$27 billion in tax collections next year and state
officials are counting on tax revenues to grow by
3.9 percent next fiscal year in order to keep the
budget in balance.
"Over the last
few years the projections baked into the foundation
of the budget have not materialized as expected,
forcing the governor and Legislature to frequently
revise their budgets."
Here we go again into another spring with the usual state
budget dance. Can we at least stop playing this false
"expectations" game?During this ritual a coterie of
self-anointed economic experts gather annually at the State
House to participate in the game of "Revenue Projections."
Each year they place their best bets on which among them can
guess closest on how much of our money the state will rake
in over the coming fiscal year. Beacon Hill pols then
base their next budget on these divinations. More
often than not they are wrong, but this annual rite of
passage always provides cover for more state spending,
usually an additional billion taxpayer dollars every year
added to the previous year's budget.
The adjustments come later, in revisions (cuts in the
budget) and more commonly, supplemental budgets when more
needs to be spent. Here are a few examples:
The State House News Service yesterday reported:
"House and Senate lawmakers have been reviewing
Baker's mid-year budget bill for weeks, but House
Ways and Means has not yet released its redraft of
the bill. Among the requests for funding in the
bill, Baker proposed $62 million for indigent
criminal defendants; $49 million for sheriffs; $29
million for the Department of Correction, partially
related to reforms at Bridgewater State Hospital;
$21 million for emergency shelter; $20 million for
snow removal; $15 million for human services
providers.
"Baker on Monday afternoon said he did not yet know
whether Tuesday's storm would require him to seek
additional spending authority beyond the $20 million
in the bill for the Department of Transportation to
deal with snow and ice removal."
On March 6 the State House News Service reported:
"The
prospects for House and Senate Democrats to reverse
even some of the mid-year budget cuts Gov. Charlie
Baker made in December are getting bleaker by the
month.
"After calling Baker's cuts "premature" last year,
House Speaker Robert DeLeo early last month said he
needed to see at least one more monthly revenue
report before deciding whether he would push to
restore some of the $98 million in funding trimmed
from the budget."
Then there is the "rainy day" stabilization fund, that's
allegedly built up for fiscal emergencies in economic
downturns. On March 2 the State House News Service
reported:
"The
Legislature in recent years has not been shy about
spending reserves to plug budget holes, and the MTF
report found lawmakers transferred or diverted a
"staggering" $2.2 billion from the stabilization
fund to pay operating expenses between the 2013 and
2015 fiscal years, years of economic growth."
All this starts with those gossamer "revenue estimates,"
the fig leaf for adding a billion dollars to state budget
spending every year. Often those "revenue estimates"
don't materialize. Inevitably, spending that exceeds
revenue ends with tax hikes.
In his online newsletter on Monday, Rep. Geoff Diehl
(R-Whitman) warned:
"State House
hearings have just started on the 2017-2018 fiscal
year. I am concerned that there is going to be a
major push for new tax increases such as a mileage
tax, new online taxes, new taxes on small businesses
and a local option gas tax. I am committed to
fighting for the taxpayers."
This was followed
today in the online newsletter from Rep. Shaunna O'Connell
(R-Taunton):
"On a different note, there is going to be a big
battle at the State House on raising taxes. I am
committed to holding the line against increases!"
In the CLT Update
of March 1 (Tax
hikes: "a death by a thousand cuts"?) I wrote:
"Rather than swiftly beheading taxpayers with one
fell swing, it appears that the Beacon Hill schemers
are plotting a taxpayers' death by a thousand cuts."
A decade ago — a mere ten
years ago
—
the state budget was $25.7 billion. On Beacon Hill
they are now talking of a budget for the next fiscal year
that for the first time will exceed $40 billion
—
a spending increase of over $14 billion in just ten
years.
According to the U.S. Bureau of Labor Statistics, there was
just 20.46% inflation over those past ten years
—
and a mere 1.1% of inflation over the past year.
State revenue year over year increases
— with or without tax hikes.
The problem we have is that spending increases faster than
revenues, based on false "expectations." When the pols
run out of money they come at us for more. Nothing has
happened to change my mind since I announced my own
"expectation" above, and my expectation is grounded
in painful experience.
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Chip Ford
Executive Director |
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State House News Service
Thursday, January 12, 2017
Beacon Hill budget leaders agree on projected
FY18 revenue growth
By Colin A. Young
State tax revenues will grow by 3.9 percent next
fiscal year, state budget managers predicted
Thursday, giving Gov. Charlie Baker and the
Legislature about $27 billion to help build the
state's fiscal year 2018 budget.
Gov. Charlie Baker's budget chief and the chairs
of the House and Senate Ways and Means
Committees announced on Thursday an agreement
over how much tax revenue that state expects to
collect in the next fiscal year that begins on
July 1. The estimate of $27.072 billion in tax
revenues for fiscal 2018 amounts to $1.02
billion more than the estimate used to finance
the current year's spending plan.
The estimate will serve as the basis for Baker's
budget, which is due on Jan. 25, and
budget-building exercises this spring and summer
in the House and Senate.
Despite the lowest unemployment rate in 15 years
and heightened consumer and business confidence,
state budget managers have had to scramble this
fiscal year and last to adjust as state tax
collections have not lived up to their initial
projections amid a slow-growing economy.
In announcing the agreed-upon revenue figure,
budget officials used words like "conservative,"
"cautious," "stable" and "modest" to describe
the forecast of the state revenue picture that,
if met, would easily out pace the current rate
of growth half way through fiscal 2017.
"This conservative estimate reflects our
cautious optimism about the Commonwealth's
economic position," Senate Ways and Means
Chairwoman Sen. Karen Spilka said in a
statement. "Throughout the fiscal year 2018
budget process, we will continue to carefully
monitor revenue performance to build a fiscally
responsible, balanced budget that invests in the
health and prosperity of people and communities
across the state."
Administration and Finance Secretary Kristen
Lepore said the "modest growth" provided in the
forecast is "in line with testimony we heard in
December" at the annual consensus revenue
hearing.
At that hearing, the Department of Revenue,
budget-tracking think tanks and Massachusetts
economists provided estimates of revenue growth
that came in as low as 2.65 percent and as high
as 5.2 percent. The consensus revenue figure
announced Thursday is closest to the 3.7 percent
growth estimate offered by Northeastern
University economist Alan Clayton-Matthews.
"This Consensus Revenue agreement reflects
continued stable growth and is in line with
current economic trends," Rep. Brian Dempsey,
House chairman of the Ways and Means Committee,
said in a statement.
The 3.9 percent growth figure, the budget
managers said, assumes the state income tax rate
will drop from 5.1 percent to 5.05 percent on
Jan. 1, 2018, which DOR has previously said
would result in an $83 million reduction in
state revenue. Recent economic growth was not
significant enough to statutorily trigger an
income tax cut on Jan. 1, 2017.
The Massachusetts Taxpayers Foundation on
Thursday projected Massachusetts will face a
structural deficit of more than $800 million in
fiscal 2018. The business-backed budget watchdog
group's projection was the most conservative of
those who offered testimony at December's
hearing - 2.65 percent revenue growth.
"The decisions made to close that deficit in the
coming months will influence whether or not the
state can avoid a 4th consecutive year of
midyear budget problems," MTF said in a bulletin
published late Thursday afternoon. "The
assumption of 3.9 percent tax revenue growth --
compared to 4.31 percent at this time last year
-- indicates a more conservative approach to
budgeting, but given that tax revenue has grown
by just 2.28 percent in FY 2016 and 2.34 percent
to date in FY 2017, it remains to be seen if
these budget assumptions are conservative
enough."
With half of fiscal 2017 in the books, state tax
collections have grown just 2.3 percent to date,
DOR announced last week.
Lepore, Dempsey and Spilka also agreed Thursday
on a transfer of just more than $1 billion to
the Massachusetts Bay Transportation Authority,
an $841 million transfer to the Massachusetts
School Building Authority, and $22.9 million to
the Workforce Training Fund.
There will also be a $2.395 billion transfer to
the state pension fund -- an increase of $196
million over the fiscal 2017 contribution --
which is expected to keep Massachusetts on track
to fully fund its pension liability by 2036.
"The decision to devote increased resources to
maintain the current pension schedule
demonstrates fiscal responsibility," Dempsey
said in the statement. "This agreement allows us
to begin the FY18 budget process and balances
the investments of today with a commitment to
meeting our long term future spending
obligations."
After a total of $4.368 in transfers, the
maximum amount of tax revenue available for the
fiscal 2018 budget will be $22.704 billion, the
officials agreed. The state budget, which totals
$39.2 billion this fiscal year, it supplemented
by federal revenues along with non-tax revenues
like fees.
The agreement also assumes $1.271 billion in
capital gain taxes, but the announcement did not
specify whether capital gains in excess of
roughly $1 billion would be deposited in the
state's stabilization fund, or again be diverted
for other budget purposes.
With less than two weeks until Baker is
scheduled to unveil his third budget as governor
and set in motion a budget process that will
last into the summer, Lepore said she is
prepared to work with Spilka and Dempsey to
"develop budgets that keep spending in line with
revenue, while also funding important budget
priorities and maintaining the Commonwealth's
course for addressing long-term fiscal
obligations."
Lepore, Dempsey and Spilka also agreed to a 3.6
percent rate of potential gross state product
growth for calendar year 2018, the same figure
that has been used the past two years to set up
a health care cost growth benchmark under the
2012 cost containment law.
Commonwealth of Massachusetts
Department of Revenue
March 3, 2017
February Revenue Collections Total $1.177
Billion
Monthly revenues $117M below monthly and $134M
below year-to-date benchmark
Massachusetts Department of Revenue Commissioner
Michael J. Heffernan today announced that
preliminary revenue collections for February
totaled $1.177 billion, which is $117 million or
9.1% below the benchmark. For the fiscal year to
date, revenues of $15.855 billion are below
benchmark by $134 million or 0.8%, and above
prior year by $305 million or 2.0%. February is
historically the lowest collection month of the
year.
“Revenues for the month of February were below
expectations,” said Commissioner Heffernan.
“While we maintain a cautious outlook, the
remaining four months of the fiscal year have
historically delivered nearly 40% of total
annual revenues. The March-through-June period
includes both the bulk of the individual income
tax filing season and important estimated
payments. This period will determine how closely
we trend to the full-year benchmark. We will be
monitoring trends closely.” ...
Note: February is a low month for both estimated
payments and payments with returns. As a result,
a moderate swing in dollars causes a large
percentage variance. Both categories will have
more significant flows in the March – June
timeframe.
[Full
Release]
State House News Service
Thursday, March 9, 2017
Lepore touts smaller structural deficit, despite
revenue struggles
By Colin A. Young
The annual budget hearing series began Thursday
amid uncertainty and rising costs with
Administration and Finance Secretary Kristen
Lepore pitching lawmakers on the
administration's plans to wrestle the budget
closer to structural balance, slow the rate of
growth in MassHealth spending and modernize
state tax policy.
Despite an economy that seems to be humming and
a newly updated employment rate of 3.2 percent,
state tax revenues have grown modestly, often
failing to meet the more optimistic estimates of
the administration and legislative leaders.
"Our revenues are in flux," Senate Ways and
Means Committee Chair Karen Spilka said.
"Unfortunately for right now, particularly after
the month of February, they are in the negative
and we recognize we have to be responsible
stewards of taxpayer dollars while preserving
the services and programs for the most
vulnerable residents in our state and ensure we
that invest in the commonwealth's future."
Eight months into fiscal 2017, state tax
collections are up 2 percent, according to the
Department of Revenue, but are trailing budget
benchmarks by $134 million. February collections
were off by $96 million compared to February
2016, and ran 9.1 percent, or $117 million,
below benchmark.
On the spending side, Gov. Charlie Baker filed a
$259 million bill in February, largely to boost
accounts underfunded in the $39.25 billion
budget.
With one eye on the current fiscal year, the
Joint Committee on Ways and Means focused its
attention Thursday on Gov. Charlie Baker's $40.5
billion budget for fiscal year 2018.
"For the coming fiscal year, modest tax growth,
rising fixed costs and uncertainty at the
federal level all make balancing a fiscally
responsible budget for the needs of the
commonwealth a challenging task," House Ways and
Means Committee Chairman Rep. Brian Dempsey
said.
In a 20-minute presentation Lepore gave an
overview of the administration's budget, a plan
that boosts state spending by about $1.655
billion and calls for reforms to the health
insurance market and tax policy changes aimed at
responding to modern commerce.
Baker's third budget since taking office
represents 4.3 percent gross spending growth
over projected spending for the current fiscal
year, including a $997 million increase for
MassHealth, a $117 million increase in education
spending, a $29 million increase in debt service
and a $40 million increase in unrestricted local
aid, according to the administration.
Lepore hailed the Baker administration's
reduction in the use of one-time revenues as a
"remarkable achievement in just two years." The
last budget under Gov. Deval Patrick utilized
about $1.2 billion in temporary revenues and the
$95 million in one-time revenues in the fiscal
2018 budget plan represents a 90 percent
reduction in their use and "is essentially
structural balance," according to Lepore.
"This represents a 90 percent reduction of
non-recurring resources while managing through a
period of modest tax revenue growth,
implementing tax reductions, and meeting
long-term obligations," she said.
Dempsey, a Haverhill Democrat, said the
administration's reduction in non-recurring
revenues is "very significant and quite an
accomplishment to see less than $100 million
money used as one-time revenue."
The Democrat-controlled committee questioned
Lepore for about 30 minutes after her
presentation, a back-and-forth that was free of
partisan swipes or finger-pointing from either
side.
The fiscal 2018 spending plan, the first in
state history to exceed the $40 billion mark,
relies on a forecast of $27 billion in tax
collections next year and state officials are
counting on tax revenues to grow by 3.9 percent
next fiscal year in order to keep the budget in
balance.
Over the last few years the projections baked
into the foundation of the budget have not
materialized as expected, forcing the governor
and Legislature to frequently revise their
budgets.
In fiscal 2015 -- a budget signed by Gov. Deval
Patrick and turned over to Baker upon his
inauguration -- tax revenue grew by $1.35
billion or 5.8 percent over the previous year.
The fiscal 2015 budget was built around a
projection of 4.9 percent tax revenue growth.
Through February of that budget year, revenue
was up 4.4 percent.
The following year, fiscal 2016 and Baker's
first budget proposal, saw a $550 million or 2.2
percent increase in state tax revenues after
initial projections forecast 4.8 percent growth.
The current budget was originally built on the
assumption that the state would see tax revenues
climb 4.3 percent over fiscal year 2017. But
through eight months of the fiscal year,
revenues are up just 2 percent, though the
remaining months account for roughly 40 percent
of annual collections.
Earlier this week, Massachusetts Taxpayers
Foundation President Eileen McAnneny said the
state needs to "pay close attention" to
determine if the shortfall is an aberration or
the start of a trend.
"Last year, if you recall, the revenues were
doing very well for the first half of the fiscal
year," she said, "and then in February there was
a decline and kind of a bounce back in March, so
it wasn't really until April that people had a
good sense the revenues were declining or
significantly off the benchmark."
McAnneny said budget writers need to be
monitoring the pattern in revenue collections,
and "if we start to see this year mirror last,
then it does raise some questions about the
revenue projections and how they're calculated."
Baker said this week that he didn't think policy
leaders need to rethink how revenue growth
estimates were developed.
"Keep in mind that the revenue estimates for the
most part have been within a couple of
percentage points of where they needed to be. I
mean, it's a tight number all the way around and
on our first year, fiscal '15, those final four
months of the year came in significantly above
benchmark," Baker said.
The governor said that even though "the vast
majority of our working age population is
working," personal income is "just not growing."
"It's a tough economy out there," he said.
House Speaker Robert DeLeo also defended the
Legislature's budgeting practices, suggesting
lawmakers have not been "overly optimistic, but
quite frankly we're more on the conservative
side than anything else."
"So it wasn't a question of the figures that we
built into our budget were, we felt, an
astronomical risk," DeLeo said.
Baker said that the fact that revenues this
fiscal year are trailing estimates by less than
1 percent is a manageable problem, even if tax
receipts don't rebound over the final four
months of the year.
Thursday's hearing was the first in a series of
eight such hearings around the state this month.
The hearings mark the first step in the budget
process beyond the governor's proposal. The
House and Senate will each develop their own
budgets, adopting some of Baker's plans and
rejecting others while boosting planned spending
in some account and cutting others.
—Matt Murphy
contributed to this report.
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NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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