Interim Report Flags $3 Bil Gap in Last Year’s Budget
DOR Cautions State Still Collecting FY 2020 Revenue
7/24/20 2:26 PM
JULY 24, 2020.....Massachusetts tax collections in the fiscal year that ended June 30 are about $3 billion lower than what budget managers were expecting when they crafted the $43.3 billion state budget a year ago, according to preliminary data released Friday by the Department of Revenue.
Revenue officials said incomplete revenue collections for fiscal year 2020 so far total $27.276 billion, which is $2.417 billion or 8.1 percent less than fiscal year 2019 and $3.014 billion or 9.9 percent below the year-to-date benchmark.
But because the tax filing deadline was moved from April 15 to July 15 and DOR is still collecting fiscal 2020 taxes, the agency said the fiscal 2020 revenue total is expected to be updated over the next several weeks.
"Approximately 81 percent of the year-to-date shortfall is in non-withheld income tax, which is due in large part to the deferral of the deadlines for personal income tax returns and payments and the first two estimated payment installments to July 15, 2020," Revenue Commissioner Geoffrey Snyder said. "DOR will be releasing a full FY2020 revenue report in September because recently enacted legislation requires the Comptroller to record income tax payments received between July 1 and August 31 as FY20 revenue. We will continue to closely monitor these delayed FY20 revenue collections."
The first official estimate of the fiscal year 2020 budget gap came in DOR's preliminary report on June tax collections, which showed tax collections of $2.493 billion as of July 24, missing the monthly target by $761 million or 23.4 percent, and reflecting a $691 million, or 21.7 percent, decrease from last June.
Since the sudden evaporation of tax receipts began this spring as the state forced businesses to close, consumer spending habits changed dramatically and unemployment skyrocketed, the Baker administration did not revise revenue expectations for fiscal year 2020 -- which could have triggered the governor's authority to make unilateral spending reductions known as 9C cuts -- or announce other specific budget-balancing plans.
The timing of the COVID-19 outbreak made it difficult to slash spending given that it came relatively late in the fiscal year, according to budget analysts, but the state does have $3.5 billion stashed away in its rainy day fund that could be needed this year and beyond.
The state is also without a plan for the fiscal year 2021 budget, which typically would be in place by now. Instead, the state is running through July on a $5.25 billion interim budget and Baker this week filed another one-month spending bill that would keep the state afloat through August with an additional $5.51 billion.
That bill (H 4869) was sent to the House Ways and Means Committee on Wednesday. In lieu of a full-year budget, Beacon Hill appears prepared to adopt a series of temporary budgets, typically one month's worth of spending at a time, until lawmakers decide to propose, debate and pass a permanent budget.
A new round of federal relief funding that is expected to be unveiled and debated next week in Washington, D.C., is expected to provide some measure of clarity to state budget writers.
In January, the Baker administration and legislative budget managers agreed that the fiscal 2021 budget would be built on $31.151 billion in state tax revenue. Though they have not officially updated that expectation, there is widespread agreement that it will not be met.
"Certainly, such a revision or adjustment is expected after critical pieces of information become more clear in the coming months," Snyder told House lawmakers earlier this month.
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