3/24/20 5:50 PM
MARCH 24, 2020.....The last time Gov. Charlie Baker resorted to using his emergency powers to slash spending from the state budget, it was late in 2016 and the Republican governor sparked a feud with legislative Democrats by making the decision to slash $98 million from the five-month old budget.
House Speaker Robert DeLeo, in December when the decision was made, called the move "premature," but over time Baker's cuts were allowed to stand as revenue collections remained sluggish.
Since then, Baker and Beacon Hill lawmakers have been more likely to squabble over how to spend surpluses than to be worrying about emergency budget cuts to keep ahead of plunging revenues.
That could change soon, although the virus crisis is hitting late in the state's fiscal year so spending cuts, even if pursued, would likely lead to limited savings.
The coronavirus has turned the state's economy - and by extension the government's finances - on a dime. Once ahead of revenue targets through February by $176 million, state budget writers are now bracing for what the Massachusetts Taxpayers Foundation has said could be a $300 million to $500 million shortfall that will materialize in a short span over the last quarter of the fiscal year.
Legislative leaders and Administration and Finance Secretary Michael Heffernan are in near daily discussions trying to get a handle on the financial impact the coronavirus outbreak will have on both this fiscal year and next.
Heffernan has not yet discussed the possibility of emergency cuts, also known at 9c cuts, with legislative leaders so far, according to multiple sources familiar with those talks. Officials in the House and Senate believe that the administration is waiting to see both March revenue figures, as well as the outcome of negotiations in Congress over a $2 trillion stimulus package.
"The fed package is going to tell a lot about where we will be headed," one senior House official texted.
Heffernan was not available for an interview on Tuesday, but his office pointed to comments Baker made last week when he pointed to the health of the state's $3.5 billion "rainy day" fund.
"I don't think anybody's made a decision at this point with respect to how that might get deployed or when it might get used, but I certainly think all of us are well aware of the fact that the economy is going to take a big hit, tax revenue is going to take a big hit, and that we have a whole bunch of services we need to continue to provide to people," Baker said last Wednesday.
Another issue weighing on state finance officials is how to handle the April 15 tax filing deadline.
Though the federal government has postponed the filing deadline until July 15, some estimates presented to legislators by the administration have suggested that aligning the state tax filing deadline with the new Internal Revenue Service calendar will shift between $2 billion and more than $3.5 billion in personal and corporate income taxes into next fiscal year.
Such a delay in collections could create cash-flow problems for the state, legislative officials said.
"We're having a conversation about that as well," Baker said Monday when asked about moving tax day.
Amy Pitter, a former commissioner of the Department of Revenue and the president of Massachusetts Society of the Certified Public Accountants, said the state should push back the tax filing deadline immediately.
"The silence from Massachusetts has been deafening," Pitter said in an interview, pointing to the fact that 21 states have already postponed their tax filing deadlines, including 17 that have pushed back to July 15.
Tax accountants, like the rest of the workforce, are adjusting to a remote work life, which had made the processing of taxes less efficient. "The pressure on our members is intense. It's always intense this time of year, but I would say, and I can say it confidently, they can't get it done," Pitter said.
Pitter said that tax software requires federal returns to be completed before state returns, which could create "chaos" if Massachusetts chooses a date much earlier than the federal government. A June 30 state deadline could work, she said.
"If Massachusetts picks May, it would be a disaster. If they picked June 30, and we've heard that rumbling, from where I sit it feels like 6-30 would be so much better than the possibility of no extension or a May date. People would be mad, but not as mad," Pitter said.
The former revenue commissioner also said many filers will continue to file their taxes over the coming months even if the deadline is pushed into July, and she believes any cash flow problems could be "papered over" with revenue anticipation bonds or other financial tools.
Asked if short-term borrowing might be an option, a spokeswoman for Treasurer Deb Goldberg said, "We will continue to work with A & F and determine jointly all options that are available to us.”
Eileen McAnneny, the president of the Massachusetts Taxpayers Foundation, said she knew little about how the Baker administration planned to get through the remainder of the fiscal year, but acknowledged that cutting spending likely would be a limited option given the time of the year.
"It is late in the year so it's unknown how much they could get," McAnneny said. "But everything should be up for consideration. These are pretty unprecedented times. The dropoff in economic activity has been pretty rapid so we don't have the time we normally would to adjust."
Goldman Sachs has predicted that nationally economic activity could shrink by 24 percent in just the second quarter alone.
McAnneny also said it's important to remember that revenue is just "one side of the ledger." "A lot of agencies might be incurring new expenses, even if it's just to get people up and running remotely."
"I do think being cautious and gathering as much information as possible is the prudent course at this point," she said.
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