- Executive Office for Administration and Finance
- Senate Ways & Means Committee
- House Ways & Means Committee
Media Contact for Heffernan, Rodrigues, Michlewitz, Announce Consensus Revenue Forecast of $31.151 B for Fiscal Year 2021
Patrick Marvin, Communications Director
Boston — Secretary of Administration and Finance Michael J. Heffernan, Senate Ways and Means Chair Michael J. Rodrigues and House Ways and Means Chair Aaron Michlewitz today announced a consensus revenue forecast for Fiscal Year 2021 (FY21) of $31.151 billion, representing 2.8% growth in state tax revenue over adjusted Fiscal Year 2020 (FY20) projected revenue of $30.289 billion.
The adjusted FY20 revenue collections estimate incorporates a $190 million upgrade of projected state tax revenues announced by Secretary Heffernan today, which is based upon current year-to-date revenues and economic data. Approximately $100 million is estimated to be from capital gains above the annual threshold and would be transferred to the Stabilization Fund, which now stands at more than $3.42 billion, and other off-budget funds.
The consensus revenue forecast is the basis on which the Baker-Polito Administration, the House, and the Senate will build their respective FY21 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 conferring with each other, the Secretary and Chairs held a public hearing in December 2019 to receive testimony from the Department of Revenue, the State Treasurer’s Office, the Public Employee Retirement Administration Commission, and independent, local economists from area foundations and universities on tax revenue.
“This consensus revenue forecast provides modest economic growth for FY21 in line with the expert testimony we received last month,” said Secretary of Administration and Finance Michael J. Heffernan. “I appreciate our continued partnership with the House and Senate Ways and Means leadership and staff members as we develop budget recommendations that maintain fiscal responsibility and discipline, while providing necessary funding for key programs and priorities throughout the Commonwealth.”
“The consensus revenue agreement reached for Fiscal Year 2021 reflects our collaborative effort to put forward a revenue projection consistent with the testimony we heard from the economic experts that testified last month,” said Senate Committee on Ways and Means Chair Michael J. Rodrigues (D-Westport). “As we move forward with the Fiscal Year 2021 budget process, we will continue to monitor tax collections and work to build a thoughtful and fiscally responsible budget that invests in our people and positions our Commonwealth for future success.”
“After an open and cooperative process I am pleased that we have reached a responsible and fiscally sustainable FY21 Consensus Revenue agreement. This modest forecast highlights the economic strength of the Commonwealth and sets the stage for the next budget process,” said House Committee on Ways and Means Chair Representative Aaron Michlewitz (D-Boston). “Thank you to Secretary Heffernan and Chair Rodrigues for the thoughtful collaboration in coming to this agreement.”
- The consensus revenue estimate incorporates the statutory reduction of the Part B individual income tax rate to 5% effective January 1, 2020, and the reinstitution of the charitable deduction effective January 1, 2021.
- Of the forecasted $31.151 billion in FY21 state tax revenues, an estimated $1.590 billion is projected to be capital gains tax revenue, of which $278 million will be transferred to the Stabilization Fund ($250 million) per statute and other long term liability funds, like the pension fund ($28 million).
- The agreement also includes the following statutorily required off-budget transfers that are mandated by current law:
- $3.115 billion transferred to the pension fund, a $273 million increase over the FY20 contribution, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
- $1.136 billion for the Massachusetts Bay Transportation Authority (MBTA)
- $976 million for the Massachusetts School Building Authority (SBA)
- $25 million for the Workforce Training Fund
After $5.252 billion in off-budget transfers, the Secretary and Committee Chairs agree that $25.621 billion will be the maximum amount of tax revenue available for the budget in FY21, absent statutory changes.
M.G.L. Chapter 29 Section 7H ½ 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 used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark.
The three bodies have reached an agreement that the PGSP figure for calendar year 2020 will remain 3.6%. 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 meant to be fairly stable from year to year.