Experts have told Massachusetts state budget writers to expect modest growth in tax collections next year as the state’s economy and employment continue to grow. If the forecasts are correct it should mean enough funding for legislative priorities such as local aid and education without need for tax increases.
A panel of experts representing state government, think tanks and Beacon Hill watchdogs have told members of the legislature’s Joint Committee on Ways and Means that state tax collections will grow anywhere from 4.1 percent to 7 percent next year. The committee conducts an annual hearing on revenue estimates as a first step to writing a new state budget.
The Massachusetts Department of Revenue expects tax collections to grow by up to 5.2 percent in fiscal 2015. The Beacon Hill Institute is forecasting a surge in revenue growth of more than 7 percent. The Massachusetts Taxpayers Foundation estimates state tax revenue will grow by 4.7 percent.
Foundation president Michael Widmer said his group predicts Massachusetts will add 53,000 jobs and have $1 billion in new tax collections for the state to spend.
" It is at least a positive direction the state is taking in terms of increasing jobs and increasing tax revenues."
Widmer said the rate of growth is slower than in previous economic recoveries. Massachusetts bounced back from the Great Recession sooner and at a faster pace than the nation as a whole, but now the state has fallen back to the pack. Twenty-nine states now have lower unemployment rates than Massachusetts.
State Representative Stephen Kulik of Worthington, Vice Chairman of the Joint Committee on Ways and Means said actual tax collections for this fiscal year are running ahead of the 3 percent growth rate that was used to prepare the $34 billion fiscal 2014 state budget.
"These estimates we're hearing about are going in the right direction, trending the way our experience is playing out now in FY'14."
The tax growth estimates from the various experts inform the House and Senate chairs of the Ways and Means Committees who along with the Patrick administration’s chief budget writer will agree on a consensus revenue estimate that will be used to build the next state budget at each step of what is typically a six-month process
If the tax revenue growth is modest as forecast it will not provide enough money to fund any new programs since much of it would go to non-discretionary spending such as pensions, debt and Medicaid, according to Widmer.
Kulik believes legislators will provide higher funding to the University of Massachusetts so that tuition and fees can be frozen for a second consecutive year.
"I think that will be one of our legislative priorities as we work on the budget for FY'15."
Cities and towns are likely to lobby for an increase in local aid, noting that non-education payments from the state have been essentially flat for several budget cycles.