Published on Friday, 06 December 2019 09:27
Each year before proposing and agreeing upon a budget, the two chambers of the Legislature and the Governor's office agree on the amount of money they will plan to spend that coming year. To begin this process for fiscal year 2021, the Joint Committee on Ways and Means together with the Office of Administration and Finance held a consensus revenue hearing, at which they heard invited testimony regarding the current and next fiscal year's outlook for the Massachusetts economy and the revenue it will bring to the state.
In his testimony opening the hearing, Commissioner Harding of the Massachusetts Department of Revenue noted what would be repeated a number of times: we are in the longest period of economic growth in history, which must, at some point, come to an end. The growth in revenue over FY18 and FY19 specifically in Massachusetts were, in his view, due to growth in the stock market, tax changes at the federal level, and a strong state economy; he cautioned that the first two of those items are episodic and not to be counted upon. The midpoint of the Department's projections are for 2.3% growth in actual tax collections.
Treasurer Deborah Goldberg noted that the state's rainy day fund now is $2.85 billion. After reviewing her office's responsibilities in the lottery, alcohol licensure, found money, and MSBA, she also related her concern that the Fed's response on interest rates does not reflect the reality of world economies.
The Mass Taxpayers Foundation President Eileen McAnneny submitted testimony anticipating growth more reflective of the slower years of FY16 and FY17, projecting growth of 2.5% for FY21. The tightening of the labor market, in part due to the aging Massachusetts work force, seems likely to be reflected in revenue for the state.
Professor Michael Goodman of the UMass Dartmouth Department of Public Policy who opened by speaking of the state's "slow but positive growth" but also noted "significant levels of policy and geopolitical uncertainty all of which represent significant risks to the downside." Reiterating the Department of Revenue's concern on the shrinking labor force, he spoke of the tightening of immigration restrictions as a contributor to that, as well as of concern in the state's higher education sector, due to the loss of students from other countries.
Northeastern University Professor Alan Clayton-Matthews concurred on the fluctuations of the past few years resulting in uncertainty in projections.
William Burke of the Beacon Hill Institute said that the state's economy remains solid, but cautioned that growth would be modest, submitting 0.8% as his projection.
Both Goodman and Clayton-Matthews noted the importance of the passage of the Student Opportunity Act. Goodman said, "A major step in the right direction was making investment in K-12 education, particularly urban K-12 education, where I think we have the most wasted talent in the talent pipeline in public education. So if those dollars get to where they need to go and we get better outcomes, it will be better all around."