BOSTON (SHNS) – With state tax collections through September exceeding projections by $224 million or 2.5 percent, the Baker administration told legislative leaders Friday that it is not ready to adjust the revenue estimate that was used to build this year’s state budget.
Administration and Finance Secretary Michael Heffernan wrote a letter Friday to Gov. Charlie Baker, the House and Senate Ways and Means committees, and the Joint Committee on Revenue informing them that he did not plan to revise the fiscal year 2023 tax estimate of $39.618 billion.
If the fiscal year 2023 revenue estimate remains at $39.618 billion, it would represent a drop of almost 4 percent from the $41.105 billion that was hauled in during fiscal year 2022, a year in which state tax revenue surged so high compared to wage growth that it triggered a long-forgotten tax relief law.
“After consulting with the Department of Revenue on current and historical revenue trends, and after reviewing updated economic data, I believe the current tax revenue estimate is still warranted,” Heffernan wrote. “Collections through September were 2.5% above benchmark, reinforcing our confidence that the benchmark is a solid forecast on which to budget for the year. With most of the year still ahead of us, however, we lack sufficiently clear indicators of future growth to increase the benchmark.”
By law, the administration is required by Oct. 15 to prepare estimates of budgeted revenue for the current and upcoming fiscal years. The administration can and often does adjust the revenue estimate as the budget year goes along (recent years have seen an upgrade when the next year’s consensus revenue estimate is agreed to in late December or early January), but the Oct. 15 review is required regardless of whether adjustments are warranted.
In keeping with past practice, Heffernan said he would not provide a fiscal year 2024 revenue estimate at this time. The administration and House and Senate leaders typically team up to hold a hearing in early December to forecast the next year’s revenue, and Heffernan wrote that the fiscal 2024 forecast “will benefit from additional months of tax collection data, and from testimony based on updated economic forecasts at the consensus revenue hearing this winter.”
Through the first quarter, fiscal 2023 collections have totaled about $9.194 billion — $443 million or 5.1 percent ahead of fiscal 2022 collections over the same period of time and $224 million or 2.5 percent higher than DOR’s year-to-date benchmark. The administration and legislative leaders have severely underestimated tax collections over the past two years, when historically high receipts have produce big budget surpluses.
Lawmakers still haven’t agreed on plans to dispense with the fiscal 2022 surplus.