The economy will get a little better before it gets a lot worse, according to experts briefing Beacon Hill leaders Wednesday on how to pilot state spending for the coming year.
Economists from inside and outside state government expected state revenues to do well through the remainder of this fiscal year before dropping off over the course of 2019 and 2020.
"We're expecting the economy to slow down a little bit heading into fiscal year 2020. Just because of uncertainty over trade policy, interest rates and slowdown of employment growth, etc.," Beacon Hill Institute economist William Burke told budget writers from the House, Senate and Baker Administration.
Burke said he expected current tax revenue to come in strong, 6.6 percent above last year's. But longer term projections aren't good: Burke said that growth could slow in fiscal year 2020 to only 2.4 percent.
Beacon Hill lawmakers, along with Gov. Charlie Baker's budget advisers, gather advice from outside experts annually to determine what's called the consensus revenue estimate, the forecast for how much revenue the state will take in. This figure, expected to be around $41.5 billion for fiscal year 2020, will guide each chamber as they build the state's spending plan and decide what priorities to fund. With education and transportation demands rising, and health care costs continuing to squeeze the state and municipal budgets, an accurate revenue estimate is pivotal to how the state is managed.
Baker's revenue commissioner Christopher Harding was even more pessimistic in his forecast, predicting 2.2 percent growth for 2020 and warning lawmakers to prepare for another recession "when the decline will start and how hard the fall will be."
"Based on the analysis and inputs from our sources, we are not projecting a recession to begin during FY20," said Harding. "We are however being realistic in our expectations for growth, and we will be monitoring both revenues and the economic environment carefully," Harding said.
Harding's warning was in line with the forecast from Burke that the strong economy and one-time events like the federal tax overhaul will strengthen state coffers with over six percent growth before leading to a drop off to just over two percent growth, in part because of the federal government's tariff policies.
"For the Massachusetts economy, it's going to hurt us specifically because we're a pretty big exporter and obviously we're starting to see steel prices rise and whatnot from tariffs. So we're expecting that to hurt the economy a bit," Burke said.
Material from the State House News Service was used in this report.
