Revenue gap grows to $311 million, Mass. tax agency says

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BOSTON — After another lackluster month of collections, tax receipts are now running $311 million behind budget benchmarks with just one month left in the fiscal year, leaving Massachusetts Gov. Charlie Baker with an immediate budget problem.

May tax collections were up just 1.8 percent over May 2015 and fell $50 million below the budget forecast for the month, according to a statement issued Friday by the state Department of Revenue.

After April tax receipts declined, Baker’s budget team ordered a halt to non-essential spending and ruled out the use of reserve funds as a means of shoring up the state’s finances. The budget for the current fiscal year was predicated on tax revenue growth of 4.8 percent.

Administration budget officials reiterated on Friday that they have no plans to turn to layoffs, emergency cuts or the use of reserves to balance the budget.

“We have been planning for the May revenue collections by treating it as a risk based on experience of the current filing season. The overall below-benchmark amount remains in a range that we can manage through,” Kristen Lepore, the secretary of administration and finance, said Friday in a statement.

Legislative leaders are in the final stages of assembling a roughly $39.5 billion budget for next fiscal year starting on July 1, which is predicated on a 4.3 percent gain in tax revenue.

Income-tax collections in May fell $101 million below expectations, while withholding collections ran $53 million short, according to revenue department figures. Total tax collections hit $1.868 billion last month, up $34 million over May 2015.

Revenue officials attributed much of the 1.8 percent revenue gain to $112 million collected over the past two months in connection with a tax amnesty program designed to get scofflaws to pay what they owe by dropping penalties.

Tax receipts over the first 11 months of fiscal 2016 rose 1.9 percent to $22.6 billion. While that’s 2.6 percent more than was collected in the previous fiscal year through May, it remains  almost 1.4 percent less than had been expected.

But tax officials say one factor that has depressed collections this year, the dramatic seesawing in securities markets, appears to have abated.

“It appears that most of the adjustments being made to estimated payments due to the volatile stock market have leveled off at this point,” Michael Heffernan, the state’s revenue commissioner, said in a statement. “We continue to have confidence in the state’s economy as overall sales tax and income withholding revenues remain healthy.”

In January, the Baker administration raised its estimate of expected tax collections for fiscal 2016.

Written by Michael P. Norton and Matt Murphy