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State economy expected to improve in FY22

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CommonWealth Magazine, December 2020

The economy is expected to improve in the fiscal year beginning in July, raising the amount of tax revenues the state can expect to receive, economists said. But the fiscal outlook remains uncertain, with lingering questions about the timing of COVID-19 vaccine distribution and whether more federal stimulus money will be forthcoming. Unemployment is expected to remain above pre-pandemic levels.

Secretary of Administration and Finance Michael Heffernan summed up the sentiment of state officials succinctly in his opening remarks at a Tuesday hearing beginning the process of reaching a consensus revenue estimated for fiscal 2022. “Happy holidays, here’s to the new year. We hope there’s a vaccine. We hope there’s federal money,” he said.

With the ink barely dry on the delayed fiscal 2021 budget, Heffernan joined the House and Senate Ways and Means Committees to hold the annual consensus revenue hearing for fiscal 2022, which starts July 1, 2021. The hearing marks the first step in the state budget process, where state budget writers hear from economists and begin to develop an agreement on how much tax money they will have to base the next year’s state budget on.

Department of Revenue Commissioner Geoffrey Snyder estimated that tax revenue for Fiscal 2022 will be between $27.828 billion and $30.610 billion, or anywhere from a 1 percent decline to an 8.8 percent gain compared to the current fiscal year.

The potential for significant growth next year does not represent a booming economy, but rather recovery from the current year, in which tax revenues are expected to drop by $1 billion or $2 billion compared to the prior year due to the pandemic and related business shutdowns.

Several outside experts provided tax revenue estimates for next year that fell within the range of or slightly higher than the Department of Revenue estimate. The business-backed Massachusetts Taxpayers Foundation and the conservative-leaning Beacon Hill Institute both project tax revenues of around $29.7 billion, although the MTF analysis includes a federal stimulus package while the BHI one does not. The Tufts University-affiliated Center for State Policy Analysis and Northeastern University professor Alan Clayton-Matthews projected a more generous $31.9 billion and $31.5 billion, respectively, both of which include a limited amount of additional federal aid.

Continue reading at CommonWealth Magazine.

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