April tax plunge creates budget bind, Baker does not plan cuts
By State House News Service | May 4, 2016, 20:47 EST
STATE HOUSE — Despite sluggish tax collections for the state’s largest revenue month appearing to put the state’s budget in a squeeze, Gov. Charlie Baker has no plans to impose another round of emergency cuts to keep the state’s budget in balance with only two months until the end of the year, officials said Wednesday.
With the Baker administration counting on a revenue influx to balance this year’s budget, state officials reported Wednesday that tax collections in April, usually a big month for receipts, fell by 3 percent compared to April 2015.
The $92 million drop in collections left total state revenues $261 million below budget benchmarks that were raised by Baker’s team in January when the governor also announced midyear budget cuts. The April tax haul missed the monthly benchmark by $172 million.
“We are reviewing the April revenue numbers and underlying economic trends. We will manage through any shortfall to ensure the budget is balanced at the end of the fiscal year,” Administration and Finance Kristen Lepore said in a statement.
A senior budget office official told the News Service that the administration would not provide “specific remedies at this time,” but also said the governor had “no plans” to use his executive authority to make emergency budget cuts.
Massachusetts is coming off two consecutive years of strong job growth and economists recently reported that growth here is exceeding the growth rate nationally. But 10 months into the fiscal year, state revenues are up by just $383 million or 1.9 percent over last year.
In addition to raising questions about budget-balancing this fiscal year, the April numbers could also influence fiscal 2017 budget debate as deliberations move from the House to the Senate and may affect how much money is available, if any, to pay for unplanned spending that usually surfaces in June or July as the fiscal year changes over.
Corporate and business taxes for the month of April fell $28 million off pace, while income tax collections came in $141 million below projections. Sales and use taxes were also $24 million below the benchmark for April.
“April revenues reflect lower returns on investments during 2015 resulting in below benchmark performance for payments with returns and increased refunds this month,” Department of Revenue Commissioner Michael Heffernan said in a statement. “Our state economy remains healthy and strong with withholding collections showing continued growth in wages.”
Just four months ago, Administration and Finance Secretary Kristen Lepore put forward a plan to close what the administration had identified as a $320 million budget gap in the fiscal 2016 budget, including almost $50 million in emergency budget cuts. Much of that deficiency, according the administration, derived from a $205 million shortfall in budgeted non-tax revenue.
With revenues at the time trending $114 million above estimates, Lepore also revised the state’s revenue estimate upward by $140 million. Coupled with newly identified federal resources, the administration was counting on higher than projected revenues over the last six months of the year to cover the remaining budget gap.
The House last week approved a $39.5 billion budget for fiscal 2017, which begins on July 1, based on projected 4.3 percent revenue growth. The Senate will release and debate its version of next year’s budget later this month.
Senate Ways and Means Chairwoman Karen Spilka was not immediately available to discuss how the fiscal 2016 revenue picture might impact those deliberations.
— Written by Matt Murphy and Michael Norton
Copyright State House News Service