When Massachusetts pushes back its tax filing deadline to July 15 to coincide with the new federal Tax Day, the state's coffers could face a shortfall of over $3 billion in delayed revenue. To plug that gap, Gov. Charlie Baker is asking the Legislature to approve borrowing to make ends meet in the lean months, but there's no guarantee Democratic lawmakers will go along with the plan.
"The COVID-19 pandemic is a public health emergency that is causing a public finance emergency in Massachusetts," said a new analysis of the state's fiscal outlook by the Massachusetts Taxpayers Foundation published Monday.
Extending the time people have to file taxes is understandable, according to the report, "however, doing so further complicates the state’s short-term finances."
The analysis found that $3.6 billion of the estimated $30.3 billion the state expected to collect on or before the traditional April 15 deadline will be delayed, forcing lawmakers and the governor to either slash spending during a public health crisis, drain all of the $3.5 billion 'rainy day fund' or leverage the state's credit to borrow its way out of the hole for the time being.
Baker has filed legislation to let the state borrow off of it's expected future revenue streams, a common practice that's never been used to plug a budget hole this gaping. Legislative leaders say the proposal is under consideration and plan to host a virtual hearing with economists to determine the best course of action.
The MTF's report said the shift in revenue from May to July "could drain the general cash pool by May 2020," and that "the change will push a considerable amount of tax revenue from fiscal 2020 to fiscal year 2021, which begins July 1, and leave fiscal 2020 without the revenue necessary to support the enacted spending appropriations."
