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Our members are the local governments of Massachusetts and their elected and appointed leadership.
At the annual “consensus” revenue hearing on Dec. 12, the governor’s budget chief and the chairs of the Legislature’s budget-writing committees heard from economists and other fiscal experts that state tax collections can be expected to grow by $600 million to $800 million next year (about 3-4 percent).
The projections delivered at the hearing will be used to develop a tax forecast for next year that will be incorporated into the governor’s fiscal 2013 budget recommendation, due by Jan. 25, and in the recommendations of the House and Senate Ways and Means committees, expected in April and May, respectively.
Revenue Commissioner Amy Pitter led off the hearing, telling panelists that the outlook for fiscal 2012 is being updated to add $53 million in tax collections, bringing the total forecast for the year to nearly $21.1 billion. The outlook was last updated in October, when it was raised by $395 million to $21 billion and deemed to be sufficient to cover total state expenditures of an estimated $33.7 billion this year.
For fiscal 2013, Pitter said, tax collections are forecasted to grow between $560 million and $683 million over the current year, or about 3 percent. She said the forecast reflects the slow economy and noted that federal government fiscal policy decisions and the debt and banking crisis in Europe are creating uncertainty.
Pitter also noted that, under current state law, the personal income tax rate was expected to drop from 5.3 percent to 5.25 percent on Jan. 1, as the state has met all of the fiscal benchmarks to trigger the rate cut. The lower rate is expected to reduce income tax collections by roughly $54 million in fiscal 2012 and $114 million next year. [The revenue department’s forecasts take into account this anticipated revenue loss.]
A Massachusetts Taxpayers Foundation forecast shows state tax collections growing by $822 million (3.9 percent) next year, to $22 billion, foundation President Michael Widmer told panelists.
“The small growth in tax revenues will put great strains on the fiscal 2013 budget, with increases in non-discretionary spending outpacing the additional revenues available,” he said.
State Treasurer Steven Grossman told the panel that the fiscal 2012 forecast for Lottery profits used to fund municipal aid payments could be increased by $11 million, to $905 million, and that the amount could grow to $909 million next year. In written remarks, the treasurer attributed the projected growth in fiscal 2013 to a full year of a new multi-state game and new instant game tickets and other products.
Grossman also asked for an increase in the Lottery advertising budget from $2 million, the lowest in the nation, to $5 million in order to generate at least another $7 million in profits.
In addition to the governor’s budget secretary, Jay Gonzalez, the revenue hearing was chaired by Sen. Stephen Brewer, chair of the Senate Ways and Means Committee, and Rep. Brian Dempsey, chair of the House Ways and Means Committee.
Brewer warned that developing a budget for fiscal 2013 would pose some new and serious challenges, and that it is difficult to foresee a state budget without cuts. Gonzalez said that the increasing cost of safety net programs would make fiscal 2013 another challenging year.
At the November meeting of the Local Government Advisory Commission with Lt. Gov. Tim Murray and Secretary Gonzalez, municipal officials asked that the governor include in his fiscal 2013 budget bill an increase in municipal aid that includes the $65 million in supplemental municipal aid that was distributed in October as well as an amount tied to the percentage that state tax revenues are expected to grow. Since fiscal 2008, municipal aid has been cut by more than $400 million, about one third.