FY26 Consensus Revenue hearing liveblog

 ...will be starting here, though it appears to be the Senate adjourning right now...
I don't write down all the numbers, because I only get them orally

House Ways and Means Chair Aaron Michlewitz
"will be especially challenging"
"unprecedented on a federal and global stage"
$9.1B in rainy day fund
"will act with same deliberation and caution"

Senate Ways and Means Chair Michael J. Rodrigues 
"hard to believe how fast time flies"
"balanced budgets that have built up our rainy day reserves"
"a roadmap to a responsible and fiscally sound budget plan"
"historic tax relief"
"doubled down on the Commonwealth's education system"
"bet on our state's strengths, our state's people"
"challenges and fiscal...at the federal level"

Administration and Finance Secretary Matthew Gorzkowicz 
"continues to strengthen Massachusetts' position as the best place to live, work, and raise a family"
on Fair Share: "maximizing this resource that has outperformed our original estimates"
hey, maybe they'll use a real one this year?
below projections last year
"closely attuned to the challenging revenue picture"
improve the quality of life in Massachusetts

Commissioner Snyder from the Department of Revenue
FY24 above benchmark and above FY23
"significantly impacted by surtax revenue"
$2.29B from Fair Share, which were also over what was collected in FY23
w/o that, were below FY24 benchmark or FY23 collections
FY25 and FY26: face a number of areas of uncertainty
"potential impact on the President-elect's full suite of policy proposals"
presuming SALT cap will be extended without changes
international conflicts
Federal Reserve decisions
w/o Fair Share, FY 25 below projections and below in all collection sections
total collections as of mid-month higher than prior; will be published December 4
FY26 projecting Fair Share to continue to come in over $2B
1.4 and 3% higher than FY25, without Fair Share

Michlewitz: stabilized or even below FY24 on surtax in FY25? Is that what you're seeing?
Snyder: yes, because there is a timing issue on when we're receiving surtax
last year there was no incentive for anyone to pay; this year, "not so much"
Rodrigues: answered all questions in testimony
Ferrante: Fair Share, any work on workers leaving?
MassBudget of course showed that this was not happening
Snyder: cannot tell you with any degree of certainty if people have left the Commonwealth
best data from IRS and that lags by 18-24 months
anecdotal evidence? tax preparers not shy about telling us its part of the conversation with their clients
Ferrante: number of taxpayers from one year to the next
Snyder: know number and know number by quintile and those subject to surtax
"based on where we are, the numbers are as we would have expected, but what happens with the surtax...a significant number of those subject to the surtax are subject once, or maybe twice" as they just get over the line

Goldberg: starts by talking about the lottery
this is your annual reminder that the lottery is a terrible way to raise public revenue
asking for funding to start iLottery, to go live in the summer
don't anticipate revenue from this in FY26
stabilization fund
annual investor conference
annual allocation to the Commonwealth Transportation Fund
reminder of lost assets site
that isn't everything, but it hits the points that matter to me

Mass Taxpayers Foundation Doug Howgate
FY25: 2.8% revenue growth driven by income and corporate collections
not recommending adjusting the projection; 5.6% to date, doesn't warrant an adjustment
surtax side using preliminary DoR which are adjusting upward: $2.4B
would imply overage (again)
FY26: expect 3.1% not include surtax, driven by income and corporate side
projecting $2.6B in surtax; $1.75B recommended threshold
"moderate positive revenue growth" which is downright chipper for MTF
three elements:
third budget in using method to collect, track, and moderate Fair Share; bottom line "it has been a success"
has enabled money to be set aside for reserve due to underprojections
would recommend actual surtax projection rather than threshold; we know rather it goes up or down, it collects more than that, so cannot use benchmarks well
related: break out some level of estimate each month related to surtax 
no mechanism to adjust projections up or down of Fair Share; 20 months before fiscal year close
importance of changing spending pattern, growing 6%, last year 3.1%
think it's equally important to spend 3% or less
long term structural stability of budget, spending of one year have impacts on future years 
"we know that we're in for a 2 slash 4 year roller coaster ride with what's coming in" at the federal level
real talk about changes in federal/state relationship on things like Medicaid and others
spending decisions predicated on 3% spending, 3% revenue growth
"we can't replace federal spending dollar for dollar"
Michlewicz: more years we go through this the better understanding on Fair Share; how many years do we need to have a better understanding of predictability
Howgate: "it's not this year" so many impacts 
maybe it makes sense to use $2.4B "as a one year lag"
maybe a conservative approach to FY25 is to assume we'll be at the FY24 level 
Rodrigues: collection and spending of surtax is transparent...I don't think there's a question here
Gorzkowicz confirms numbers
within revenue projections for surtax, appropriate amount for spending? growth in spending including surtax or not?
Howgate: all in number (so greater spending on transportation and education)
don't have an appropriate number for surtax for spending
don't want to retrofit spending that has already been done; transparent process on spending going forward
Ferrante: a lot of uncertainty going into next year; what do you think is the greatest threat?
Howgate: state budget, getting down to fundamental changes to Medicaid program, 12-14B on revenue for state; have a seismic impact on budget
"don't think we have a unilateral ability to prevent changes"
"who knows what the next year holds"
Comerford: what should we do to prepare for what Washington might do? 
Howgate: wisdom of expanding existing programs, concern would be about losing what we have
ability to sustain and manage that
Comerford: with regard to Medicaid, would you foresee a fund developed to fend off any withdrawal of fund from the federal government?
Howgate: a very thoughtful critical question, let us think about that
"don't want to panic, we just want to prepare"

Prof. Michael Goodman, UMass Dartmouth
incredible resilience in MA economy: "epitome of soft landing"
both state and federal labor markets have softened, but state in strong position
"still lingering close to historic lows in unemployment rate"
"primarily for reasons I consider to be healthy" reduction in voluntary quits and re-entry to labor market
recent labor force growth is very encouraging even if it does make it look like the unemployment rate is a little higher
1 in 4 chance of recession per forecasters, "which is extraordinarily low"
rate of inflation particularly for goods as moderated considerably
enter this "in pretty solid shape"
"have been some developments recently...none of us truly know" what will happen
"real question is what things are going to get done"
things within power of President without Congress: some things that expose MA to risk
first that comes to mind is more severe immigration enforcement
industries that are most impacted: agriculture, building, leisure and hospitality
heavily reliant on migration
"even tough talk discourages the foreign born" to send their children to school here, to report a crime and so forth
mass deportation would discourage even those with paperwork from participating in society
"also about next generation of innovators"
have traded on that advantage for many years, rely on international students who come and maybe stay
know what happened in 2016-2020
private higher ed heavily reliant on full-price paying international students
modeling tariffs as an excise tax: "those prices find their way to the end user and it ends up costing the end user more"
SALT puts some dollars in pockets of some of our residents, but shockingly large impact on revenue
not just talent that fuels innovation economy, but win competitive sources of funding like from NIH
RFK Jr "anti-science person" suggests move away from peer reviewed scientific proposals
there have been public commitments to find $3T from federal budget; incoming President has said that Medicare and Social Security won't be touched; Medicaid could be
could take up cap on reimbursements
"would be planning for how I wanted to tighten eligibility and manage expenses"
seems like a high-impact, low-probability 
climate action and climate change: not home to reserves of oil or natural gas
do have offshore wind; numerous projects in the pipeline; fed controls international waters
likely to see delay, could impact on decarbonization and price of energy
"solid if moderate" growth
potential intended and unintended federal policy changes
"the stakes are high, and I think it's going to be a very interesting year"
Michlewitz: thanks
Rodrigues: thanks
Ferrante: shock to labor system; should we be worried about a recession?
Goodman: not worried about moving from moderate expansion into recession
Worried about disruption about most severe immigration actions
agriculture, travel, tourism heavily dependent on that labor
"anytime you have staffing challenges, it's going to be more difficult"
"does it push us backwards? No, I don't believe so."
"I think there will be displacement and pain and it won't be felt evenly."

Evan Horowitz, Center for State Policy Analysis, Tufts
FY25, FY26, balance of risks, worrisome puzzle on Fair Share
think MA is likely to exceed benchmark for FY25
given strength of stock market and new seasonal tax collection
likely to end year with meaningful surplus
"too much uncertainty to start counting chickens" so not recommending revising projections
7% above this year's benchmark, an all in number for FY26
$2.4B in FY26
economic growth likely to slow somewhat
"expect significant volatility in coming months"
sweeping policy shifts would almost certainly put upward pressures on inflation
strong productivity growth; recession seems slim
suggest the $2.2B in Fair Share was offset by income tax loss estimate
suggest increase size of losses in other areas
vital to track offsets as they can't be offset with the gains, as Fair Share cannot be used for anything other than education and transportation

Prof. Allen Clayton Matthews, Northeastern
FY25 numbers which include surtax and capital gains: 6.4% growth over FY24
5.8% growth for FY25
"a sanguine economy"
not assuming anything in these numbers on impacts on the new administration
those are "likely to take awhile"
swings in interest rates: not that they are falling or low, but they aren't rising
"these aren't optimistic. I don't see anything" moving the economy off its course
(in response to a Q from Gorzkowicz) wouldn't expect interest rates to fall "certainly not sharply"
Ferrante: concern that economic growth may slow down as well as revenue
Matthews: simply the aging workforce, to the extent that immigration doesn't fill in that growth, we would expect a slowing
"a lot of this is just impacted by year over year averages"
"going back to normal slow growth in the future"

stay tuned for what they conclude!