The following is a press release from Senator Karen Spilka’s office
BOSTON – Massachusetts Secretary of Administration and Finance Michael J. Heffernan, Senate Ways and Means Chair Karen E. Spilka (D-Ashland), and House Ways and Means Chair Jeffrey Sánchez (D-Jamaica Plain) today announced a consensus revenue forecast for Fiscal Year 2019 (FY19) of $27.594 billion, representing 3.5 percent growth in state tax revenue over adjusted Fiscal Year 2018 (FY18) projected revenue of $26.661 billion.
The adjusted FY18 revenue collections estimate incorporates a $157 million upgrade of projected state tax revenues announced by Secretary Heffernan today, which is based upon current year-to-date revenues and economic data.
The consensus revenue forecast represents the basis on which the Baker-Polito Administration, the House, and the Senate will build their respective FY19 budget recommendations.
Pursuant to Section 5B of Chapter 29 of the General Laws, the three officials above convene every year to establish a joint revenue forecast by January 15.
In addition to meeting with each other, the Secretary and Chairs held a public hearing in December 2017 to receive testimony from the Department of Revenue, the State Treasurer’s Office, the Public Employment Retirement Administration Commission, and independent, local economists from area foundations and universities on tax revenue.
“The FY19 forecast reflects modest growth in the Commonwealth’s economy, consistent with testimony we have heard from economic experts, and incorporates a conservative view of year-to-date tax revenues,” said Administration and Finance Secretary Michael J. Heffernan. “Establishing a consensus revenue forecast is an important shared first step in the budget process, and I look forward to working with House and Senate Ways and Means in the coming months as we develop a fiscally responsible FY19 budget.”
“We must always be cautious when predicting revenue growth, especially given recent volatility and increased uncertainty for the coming year,” said Senate Committee on Ways and Means Chair Senator Karen E. Spilka, a Democrat who represents Framingham.
“This projection of modest growth reflects these uncertainties, along with a recent upswing in economic trends. Moving forward in the FY19 budget process, we will continue to monitor revenue as we work to build a balanced budget, mindful of our mission to provide critical services and programs for the Commonwealth’s most vulnerable,” said Sen. Spilka.
“Our Consensus Revenue agreement is in line with the testimony we received during December’s hearing, and reflects the cautious optimism and realities of current economic trends,” said House Committee on Ways and Means Chair Representative Jeffrey Sánchez (D-Jamaica Plain). “This is a number that balances the uncertainty at the federal level and elsewhere with the growth we are experiencing in Massachusetts. With this agreement in place, we can begin the FY19 budget process and build upon previous investments in programs that improve the lives of people throughout the Commonwealth.”
- The consensus revenue estimate for FY19 assumes that another income tax trigger will go into effect January 1, 2019, lowering the state’s personal income tax from 5.10% to 5.05%.
- Of the forecasted $27.594 billion in FY19 state tax revenues, an estimated $1.300 billion is projected to be generated by capital gains tax revenue, which assumes an $88 million transfer to the Stabilization Fund.
- The agreement also includes the following statutorily required off-budget transfers that are mandated by current law:
o $2.609 billion transferred to the pension fund, a $214 million increase over the FY18 contribution, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
o $1.032 billion for the Massachusetts Bay Transportation Authority (MBTA)
o $858.9 million for the Massachusetts School Building Authority
o $24.1 million for the Workforce Training Fund
After $4.612 billion in off-budget transfers, the Secretary and Committee Chairs agree that $22.982 billion will be the maximum amount of tax revenue available for the budget in FY19, absent statutory changes.
Chapter 224 of the Acts of 2012 requires the Secretary and the House and Senate Committees on Ways and Means to jointly develop a potential gross state product (PGSP) growth benchmark for the ensuing calendar year. The PGSP growth benchmark is to be used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark.
The three bodies have reached an agreement on a PGSP figure for calendar year 2019 of 3.6%, which is identical to the PGSP figure that was adopted for calendar years 2016 – 2018. PGSP is a measure of the “full employment” output of the Commonwealth’s economy and reflects long-term trends in the economy rather than fluctuations due to the business cycle and, as a result, is meant to be fairly stable from year to year.