FY21 Consensus Revenue hearing

Every December, the Joint Committee on Ways and Means holds a hearing with the Secretary of Administration and Finance to determine, basically, how much money they agree the state will have next year to spend on the budget. That is then what the Governor and each of the Chambers is supposed to use in creating their FY21 budget. 
"supposed to" because generally each of the Chambers then comes out with budgets that are more than the Governor's...but that's just my observation. 
Also, note that we've had budget surpluses for several years running, which does not do local aid lines a lot of good. 

Sen. Michael Rodrigues opens, noting that tax revenue exceeded expectations by $1.1B, 6.8% over actual FY18 collections.
cites "historic funding increase for our public schools" in FY20
speaks of fiscal uncertanity ahead
Rep. Aaron Michlewitz: while we had a $1.1B surplus this year, "we must remain thoughtful as we plan for the future"
doing this in public, bipartisan way, taking testimony from nongoverment experts "means we're doing this the best way"
national and international changes may mean state needs to respond
tax revenue above benchmarks through October
unemployment below the national average
Secretary Michael Heffernan "this kicks of consensus revenue"
thanks those testifying, calling it "integral to what we will be doing down the road"


first panel: Commissioner Harding, Dr. Kazim Ozyurt, Kevin Brown, all from Mass Department of Revenue
Harding: recap of FY19
notable development has been strong revenue growth in FY18 and FY19
"were preceeded by two years of disappointing revenue growth"
FY18 was mostly from corporate and business taxes and non-withheld income taxes
FY19 similarly
stock market performance and capital gains, important to note now
Standards and Poors rose more than 28%
"highly likely that the changes in non-withheld taxes" related to this growth
tax reform in 2017 may have let itself to the corporate income and personal income tax
strong MA economy: strong and supportive of revenue growth
gains in stock market, tax changes that may have accelerated growth, strong local economy lent itself to FY18 and FY19
first two are episodic rather than trends, however
"may not be repeated in the future"
"financial market performance is also unpredictable"
now in longest growth in US history but all such growth much come to an end
not expecting recession in FY20 or FY21
but being "realistic and prudent in our estimates"
$30.099B benchmark in FY20
potential upside in FY20 $75M to $245M
"less than half over" most years 2/3 of revenue comes December through June
not recommending revision for FY20 at this time
collections reflect growth of 5.4%
FY21: DOR forecasts in range $30.623B to $30.899B
growth of 1.5% to 2%
midrange of 2.3% over FY20 benchmark
I'm skipping some parts of how they got here
assumes decrease in income tax; have passed 4 of 5 triggers
will reduce income tax
that then assumes a part year revenue loss of $62M
full year impact for FY22 could be $300M
main drivers are income tax 57.5%, sales tax 22.9%, corporate and business taxes 11%, and other taxes 0.4%
November numbers to be released later today
$148M up this month
year to date $278M over benchmark but $160M is the estate tax

Q on marijuana revenue and online revenue from Rodrigues
Michlewitz Q on benchmarks and on "newer tax initiatives"
"I'll characterize the last year as a lot of education and collaboration" around the AirB&B and such
Friedman asks if low unemployment will impact corporate growth
(yes, it seems, in sum, though it is noted that it is a single indicator)

Treasurer Deborah Goldberg, Michael Sweeney (lottery)
rainy day fund now $2.85B
MSBA saved $135M present value through a refunding deal
retirement fund has "consistently outperformed benchmarks and its peers"
Goldberg urges people to read massmoney.com
turned over more than $125M to general fund and more than $3.5M to the rainy day fund
becoming less over time as "we are consistently returning more and more money to the original owners"
Lottery has topped $5B in revenues for fifth year in a row
combined draw sales down in first 4 months of year
cashless sales
competitors investing heavily in technology
Alcoholic Beverage Controls Commission: $4.9M in revenue, most from new licenses and renewals
anticipates collecting $5M in FY20 and projects the same in FY21
budget increase lead to 5 additional inspector investigators and faster processing time
"they don't have to wait as long as they used to have to wait to get an inspector in to sign off"
"look forward to working with all of you in order to continue to enhance operations"
Rodrigues asks about meeting with rating agencies
Goldberg concern from them still, noting that "we had a statutory obligation to not spend down in good times"
concern that the message from DC and Fed's reaction (in interest rates) "is not a reflection of reality of how world economies are going"
"a lot of weakness...a lot of people have a lot of credit"

Mass Taxpayers, Eileen McAnneny speaking
increase of $615M or 2% to $31.06B
$240M or 15% decline over 2020 estimates
"every tightening labor market"
forecasts "virtually no [job] growth" in FY21
assumes income tax rate reduction to 5%, loss of $64M in 2021
without that and capital gains reduction, would have seen revenue increase of 3.5%
don't recommend revision to forecast for FY20
sales tax only growing modestly makes us more dependent on more volatile revenue streams

Michael Goodman, Dept of Public Policy at UMass Dartmouth
remarks on broader economic context
"slow but positive growth"
"significant levels of policy and geopolitical uncertainty all of which represent significant risks to the downside"
demographic conditions: aging and slow growing labor force plus immigration limits
"artificial restrictions" of "the most relaible source of new labor at every level of the occupational spectrum"
saying that he left New Bedford 2 1/2 hours before getting to Boston "this is basically my day"
"seizing the opportunity presented by the underutlized capacity of regionals like Western and Southeastern Massachusetts will require more than simply long-awaited communter rail access to Boston, even though improved transit options are sorely needed in most areas of the state"
likewise, impact of international students are a major source of growth in education
"while at this point the measureable economic impact of counterproductive federal trade and immigration policies is relatively modest, their negative effects accumulate over time"

Alan Clayton-Matthews, Northeastern
fluctations in tax revenues over past several years makes projections difficult and uncertain

William Burke, Beacon Hill Institute
healthy near term outlook of US economy
"currently labor market in the United State remains strong"
"agrees that the US economy will continue to see economic growth
MA economy "remains solid"
projecting a revenue increase of 1.9% in FY20 and 3.8% in FY21
Rodrigues notes "we're all over the place in capital gains"

increase political unrest internationally; disagreement among panelists on what kind of economic impact that may have

education reform spending will help boost the labor force as more students complete high school
growing skills and education

Goodman "our biggest threat that we can see to the future trajector of the state economy is our capacity to grow"
"A major step in the right direction was making investment in K-12 education, particularly urban K-12 education, where I think we have the most wasted talent in the talent pipeline in public education. So if those dollars get to where they need to go and we get better outcomes, it will be better all around."