Shor, Dempsey, Brewer Announce Consensus on Fiscal Year 2014 Revenue Forecast
BOSTON – Monday, January 14, 2013 – Secretary of Administration and Finance Glen Shor, Senator Stephen M. Brewer, chairman of the Senate Committee on Ways and Means and Representative Brian S. Dempsey, chairman of the House Committee on Ways and Means today announced consensus on the Fiscal Year 2014 tax revenue forecast.
The joint tax revenue number agreed to by Secretary Shor and the House and Senate Committees on Ways and Means is $22.334 billion for Fiscal Year 2014. Of this amount, $1.060 billion is assumed to be generated from taxes on capital gains. Approximately $37 million of that amount will be deposited into the Stabilization Fund and will not be available for budgetary purposes pursuant to the certification released by the Department of Revenue on December 28th, 2012, that established a fiscal year 2014 capital gains threshold of $1.023 billion.
The figure was arrived at after the parties received testimony at the December consensus revenue hearing, at which the Department of Revenue, economists, budget watchdog groups and other participants provided information regarding Massachusetts’ economy and fiscal outlook. Following the hearing, the Secretary and budget committee chairs worked together to produce a reasonable and informed forecast for next fiscal year’s revenues.
The Fiscal Year 2014 consensus tax revenue estimate does not assume any revenue from one-time tax settlements or judgments. The Fiscal Year 2012 budget amended state finance law to provide that any one-time settlement or judgment amounting to $10 million or more is to be deposited in the Stabilization Fund rather than used as miscellaneous revenue for the current fiscal year.
The consensus tax revenue estimate for Fiscal Year 2014 is in the middle of the range of tax revenue growth estimates projected by economists and others at the December hearing. The $22.334 billion estimate reflects actual growth of 3.9 percent above the revised tax revenue estimate of $21.496 billion for Fiscal Year 2013.
“The projected growth in tax revenues for Fiscal Year 2014 reflects an improving economy,” said Secretary Shor. "While this is good news and our estimate of modest growth in tax revenues will help, we will continue to have to make tough and thoughtful decisions necessary to balance our budget in Fiscal Year 2014 and set Massachusetts on a path towards long-term, sustainable growth."
“Recovery from the worst economic downturn since the Great Depression has been slow,” said Representative Dempsey. “But we are helping to further that goal through the careful and deliberate crafting of a balanced Fiscal Year 2014 budget. This consensus revenue estimate is one of the first steps in that important and complex process.”
"This figure is indicative of a very thoughtful and prudent estimate," said Senator Brewer. "Although an inexact science, the figures we are looking at reflect a modest growth. We will continue our commitment to cautious spending and fiscal conservancy as we move forward in planning to budget for Fiscal Year 2014."
An additional component of the consensus revenue process is the new requirement, beginning in January, 2013, that the consensus tax revenue forecast joint resolution include a benchmark for the estimated growth rate of Massachusetts potential gross state product, or PGSP. The recently enacted health care cost control legislation requires that the Secretary and the House and Senate Committees on Ways and Means include a PGSP growth benchmark for the ensuing calendar year, initially, for calendar year 2014. The PGSP growth benchmark is to be used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark.
The Administration, Senate and House, after hearing testimony on the topic from two of the organizations that presented at the December hearing, and consulting with outside vendors and other experts in this field, have reached an agreement on a PGSP figure for calendar year 2014 of 3.6%.
The three branches also reached agreement on statutorily required off-budget transfers that are mandated by current law:
- $799.6 million for the Massachusetts Bay Transportation Authority (MBTA)
- $703.6 million for the School Building Authority (SBA)
- $1.630 billion for the pension fund transfer, which represents full funding of the scheduled pension contribution for Fiscal Year 2014
- $21.6 million for the Workforce Training Fund, which was changed to a non-budgetary trust fund in the Fiscal Year 2012 General Appropriations Act (GAA)
The total amount of off-budget transfers is $3.155 billion. Therefore, after taking into account the $37 million of capital gains tax revenue that must be deposited in the Stabilization Fund, the Secretary and committees agree that $19.142 billion will be the maximum amount of tax revenue available for the GAA in Fiscal Year 2014, and they will base their respective budget recommendations on that number.