State tax collections this fiscal year could range anywhere from $25.9 billion to $29.8 billion, according to estimates offered Wednesday by economic experts that point to a likelihood that the state will see a year-over-year decline in tax receipts.
The estimates all fall below the $31.15 billion revenue estimate that the Ways and Means Committee chairs and Gov. Charlie Baker's budget office agreed to in January, before COVID-19 took hold in the United States, leading to widespread business closures and restrictions and a steep economic downturn.
Ten months later, with the state still operating under temporary budgets, chairmen Sen. Michael Rodrigues and Rep. Aaron Michlewitz and Administration and Finance Secretary Michael Heffernan convened a group of experts to offer their latest forecasts and help inform the eventual crafting of a spending plan for the remainder of fiscal 2021.
The projections received Wednesday also reflect a host of unpredictable factors that experts said will shape the state and national fiscal pictures, including the trajectory of the coronavirus pandemic and future federal government policies and actions.
The state Department of Revenue projected a tax haul in the range of $25.918 billion to $28.387 billion. Three other speakers offered estimates in the area of $29 billion, shy of the $29.596 billion collected in fiscal 2020.
"There's tremendous uncertainty in these forecasts," Revenue Commissioner Geoffery Snyder said. "The trajectory of the pandemic, the timing of the development of vaccines and therapeutics, the measures governments have taken to control the pandemic and to mitigate its impacts, and the uncertainty surrounding potential action at the federal level have combined to create unprecedented challenges in revenue forecasting for the commonwealth."
Reacting to Snyder's testimony, Rodrigues said, "I've never seen this large of a range before in forecasts."
The DOR forecasts are based on projections from economic vendors and tax collections for the first three months of fiscal 2021 -- $7.27 billion through September. The range Snyder offered would represent a drop of anywhere from 4.1 percent to 12.4 percent from fiscal 2020 collections, or $2.764 billion to $5.233 billion below initial fiscal 2021 estimates.
Like Snyder, others who testified stressed that the pandemic and efforts to control the virus will be major drivers of the economy's path going forward.
"If we can't get the spread of the virus down, we cannot maintain much confidence that we can safely return to a full-throated economic activity," said Jeffrey Thompson of the Federal Reserve Bank of Boston.
Mass. Taxpayers Foundation
Massachusetts Taxpayers Foundation President Eileen McAnneny said she expected economic recovery to be "up-and-down and perhaps spotty" until the pandemic is controlled. She projected tax revenues would land at $27.27 billion this fiscal year, $3.9 billion or 12.5 percent below the initial consensus estimate. While still a "sizeable" shortfall, McAnneny said, it's lower than the $6 billion figure her organization offered in June.
"For the first quarter of FY21, the Massachusetts' economy has been propped up by various forms of federal financial assistance," she said in written testimony. "As these sources of income are exhausted amidst growing uncertainty, the state's fiscal situation is expected to deteriorate."
MTF projected that "stalled employment growth" through the rest of the fiscal year would lead to a $1.27 billion or 8.8 percent decline in withholding income tax, and a $940 million or 12.7 percent decline in sales tax revenues.
Beacon Hill Institute
Testifying after both McAnneny and Snyder, David Tuerck of the Beacon Hill Institute described his forecast as "considerably more optimistic than our predecessors." He projected a tax haul of $29.214 billion in fiscal 2021, and $30.07 billion in fiscal 2022.
"We understand that whatever number is chosen could have political implications," he said. "We feel confident in our number. We think that it's as important not to underestimate the tax revenues as it is not to overestimate."
Tuerck noted that Massachusetts "does continue to have a relatively big problem in terms of its unemployment rate," which stood at 11.3 percent in August.
Center for State Policy Analysis
The Center for State Policy Analysis, at Tufts University's Tisch College, is anticipating about $29.6 billion in fiscal 2021 revenues, representing a drop of $1.6 billion below initial estimates. Evan Horowitz, the center's director, said his estimate is based on a predictive model that uses the national gross domestic product.
"If actual tax collections do match these estimates, as they have through September... it doesn't seem like the FY '21 budget will require dramatic actions on either side of the ledger, be it spending cuts or tax increases."
Horowitz said a $1.6 billion gap "could comfortably be filled" with money from the state's $3.5 billion stabilization fund.
He described the outlook for fiscal 2022 as "relatively bright" and said he did not "see any evidence of a substantial gap in FY '22 at this point."
"Obviously all the normal caveats apply -- it's a long way away, a lot of bad things can happen, but there's also a lot of upside potential, and I think of FY '22 as either near or certainly approaching the old levels of state tax revenue."
Alan Clayton-Matthews
Northeastern University Professor Alan Clayton-Matthews also presented budget-writers with a range of estimates, saying he projected this year's tax collections to end up somewhere between $29.324 billion and $29.834 billion.
Clayton-Matthews said federal stimulus initiatives so far have "lifted incomes, and that has both direct and indirect effects on tax revenues."
Mass. Budget and Policy Center
The Massachusetts Budget and Policy Center decided not to prepare a revenue estimate number for this hearing, said its president, Marie-Frances Rivera, citing "all the uncertainty and variables."
In April, MassBudget said that if patterns from prior recessions hold and there is some limited growth, fiscal 2021 collections could land between $5 billion and $5.7 billion shy of the estimates budget writers agreed to in January.
"We think that there's a budgetary crisis that's happening and we all have to be just fully aware and eyes-open about that," Rivera said Wednesday. "There's danger because all of the public goods that we're relying on to guide us through this public health economic crisis, whether it's health care, whether it's housing people, whether it's educating our young people, a lot of these are in jeopardy and the needs are growing."