Lepore, Spilka, Dempsey, Announce Consensus Revenue Forecast of $27.072B for Fiscal Year 2018
Projected state tax revenue growth set at 3.9%
BOSTON – Secretary of Administration and Finance Kristen Lepore, Senate Ways and Means Chair Karen E. Spilka (D-Ashland), and House Ways and Means Chair Brian S. Dempsey (D-Haverhill) today announced a consensus revenue forecast for Fiscal Year 2018 (FY18) of $27.072 billion, representing 3.9% growth in state tax revenue over the current Fiscal Year 2017 (FY17) projected revenues of $26.056 billion. The consensus revenue forecast represents the basis on which the Baker-Polito Administration, the House, and the Senate will build their respective FY18 budget recommendations.
Pursuant to Section 5B of Chapter 29 of the General Laws, the three officials above convene every year to establish a joint revenue forecast by January 15th. In addition to meeting with each other, the Secretary and Chairs held a public hearing in December 2016 to receive testimony from the Department of Revenue, the State Treasurer’s Office, the Public Employment Retirement Administration Commission, and independent, local economists from area foundations and universities on tax revenue.
"The consensus revenue forecast provides modest growth for the Fiscal Year 2018 state budget in line with testimony we heard in December,” said Administration and Finance Secretary Kristen Lepore. "I appreciate the continued collaboration with the Ways and Means Chairs as we develop budgets that keep spending in line with revenue, while also funding important budget priorities and maintaining the Commonwealth's course for addressing long-term fiscal obligations."
“This conservative estimate reflects our cautious optimism about the Commonwealth’s economic position,” said Senate Committee on Ways and Means Chair Senator Karen E. Spilka (D-Ashland). “Throughout the fiscal year 2018 budget process, we will continue to carefully monitor revenue performance to build a fiscally responsible, balanced budget that invests in the health and prosperity of people and communities across the state.”
“This Consensus Revenue agreement reflects continued stable growth and is in line with current economic trends,” said Representative Brian S. Dempsey (D-Haverhill) Chair, House Committee on Ways and Means. “The decision to devote increased resources to maintain the current pension schedule demonstrates fiscal responsibility. This agreement allows us to begin the FY18 budget process and balances the investments of today with a commitment to meeting our long term future spending obligations.”
- The consensus revenue estimate for FY18 assumes that another income tax trigger will go into effect January 1, 2018, lowering the state’s personal income tax from 5.1% to 5.05%.
- Of the forecasted $27.072 billion in FY18 state tax revenues, an estimated $1.271 billion is projected to be generated by capital gains tax revenue.
- The agreement also includes the following statutorily required off-budget transfers that are mandated by current law:
- $2.395 billion transferred to the pension fund, a $196 million increase over the FY17 contribution, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
- $1.007 billion for the Massachusetts Bay Transportation Authority (MBTA)
- $841 million for the Massachusetts School Building Authority (SBA)
- $22.9 million for the Workforce Training Fund
After $4.368 billion in off-budget transfers, the Secretary and Committee Chairs agree that $22.704 billion will be the maximum amount of tax revenue available for the budget in FY18, absent statutory changes. All three bodies will base their respective budget recommendations on this projection.
Chapter 224 of the Acts of 2012 requires the Secretary and the House and Senate Committees on Ways and Means to jointly develop a potential gross state product (PGSP) growth benchmark for the ensuing calendar year. The PGSP growth benchmark is to be used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark.
The three bodies have reached an agreement on a PGSP figure for calendar year 2018 of 3.6%, which is identical to the PGSP figure that was adopted for calendar years 2016 and 2017. PGSP is a measure of the “full employment” output of the Commonwealth’s economy and reflects long-term trends in the economy rather than fluctuations due to the business cycle and, as a result, is likely to be fairly stable from year to year.