Remember, the idea here is that they're hearing testimony whish will inform the Executive branch, House Ways and Means, Senate Ways and Means in agreeing on a revenue projection.
The major players here are Senate Ways and Means Chair Michael J. Rodrigues, House Ways and Means Chair Aaron Michlewitz and Secretary of Administration and Finance Matthew J. Gorzkowicz.
Rodrigues opens by introducing his colleagues...and my video went down
posting as we go
okay, rejoining Michlewitz now speaking
Work requirements forcing tens of thousands off MassHealth
notes drawing down rainy day fund is one time relief
"proud that we are able to meet the final goal and deliver record setting aid to our school communities" speaking of SOA
not the time for reckless ballot questions benefiting high end earners
Gorzkowicz: navigating a challenging federal landscape
roundtable earlier in the year
had accounted for a slow growth number
"we still face challenges and ambiguity"
impacts of OB3, not planned for FY26
protect core state priorities: state services, SOA, free lunch, community college
0.1% over benchmark is where FY25 closed
Department of Revenue Commissioner Snyder:
forecast FY27: 1.2 and 3.1% higher than FY26
slow growth characterized by modest gains
tax collection on many factors: resiliency of MA economy, impact on federal cuts in research grants, employment in education, medical, biotech; changes to tariff policy; Federal Reserve monetary policy
OB3 impact: about 30 provisions net negative impact
29 are corporate and business related
increase from 10K to 40K in cap on state and local tax
estimating $664M revenue loss in FY26
FY27: $282M revenue loss estimated; smaller as some provisions are retroactive and some timing factors
surtax: expect better than benchmark in FY26 but decreases in FY27
For FY 26 $528M $793M
for FY 27, estimating 10.6% and 1.3% lower than FY26
now diving into specific revenue streams...he quips "did I give you enough numbers?"
slow growth Massachusetts economy and a sluggish labor market
Rodrigues asks about the projected drop in surtax and capital gains
Snyder: end of third year of significant run in our financial markets
Michlewitz: $3B for FY26 in total, a bit lower than that for FY27
starting to take a step back? have we peaked?
Snyder: I can't really say that we've peaked in surtax
benchmark was set "on purpose significantly lower" than what the projection was
"pretty close...and it even exceeded that" in past years
all factors need to be firing for things to continuing to work that way
Michlewitz: ballot question that could lower income tax to 4%: estimate on what impact that would have on our budget
"really costly" $4.8 to $4.2B
"significantly high number"
Treasurer Deb Goldberg:
slight delay as she talks to a baby
rainy day fund: federal matchings and debt service
management is a key factor in our credit rating
must have a clear plan for funds and how those funds will be replaced once used
look forward to recommendations of task force, expected in a few weeks
and then depressing lottery things
portfolio performs in strong and weak markets
back and forth about the lottery
Question on how it is funding child care: was done by Legislature
translation of FindMassMoney?
Mass Taxpayers Foundation, Doug Howgate, President:
FY26 $41.2B is the non-surtax benchmark
$41.1B is revised benchmark from MTF
expect to see sink in capital gains, while most others are flat
$2.7B expected for surtax; benchmark $2.4B for surtax
don't recommend revision of benchmark
2.2% expected FY27 in non-surtax
$2.8B expected for FY27 for surtax
"slow growth with risk built in"
highlight:
tax changes from OB3
mind towards competitiveness in location
health care: under stress
enrollment impacts from OB3
Give MassHealth tools to live within a sustainable appropriation
keeping federal dollars in Massachusetts
don't think good use of stabilization fund for long-term federal policy changes
Michlewitz: don't know if there is formula or a trigger point on using the rainy day fund
MTF: keep in mind differential in resources
federal income taxes are six to seven times higher than state income taxes
scope of resources available, fundamentally different things
one factor that I would suggest to keep in mind: if more vocal states pay for it on their own and reduce the pressure on D.C., "I think a united front on SNAP on things like that" is helpful
except that "pressure" is "people who are going hungry"
he says several times "easy for me to say"
where are we if there is a twelve or eighteen month recession
"what's the 'and then what?'"
ballot questions "tend to tackle big picture questions without the amendment process"
yep
Gorzkowicz: what are some of the things you keep your eye on?
MTF: given the current climate down in D.C., "who knows what's going to happen? Who knows?"
Slow growth in MA economy
beyond that "it's immigration" buoys the full spectrum of the state's economy
two things that I worry about
this administration wants to keep Wall Street happy, so can't say capital gains won't grow
Gorzkowicz: have worked to build up reserves
MTF: annual budget growth has been pretty high
"on a permanent basis, we're not going to be" able to sustain 6% annual growth
Comerford: decoupling from federal tax provisions, pros and cons?
MTF: conforming from a business perspective is a good thing; toggling on and off is not a good thing
find a way to maintain conformity
"this stuff is complicated" we need to understand where we're picking up changes, where we aren't picking up changes
Miranda: want to go further on this immigration headwind
hospital fired women pre-emptively
do we know economically of this federal onslaught?
MTF: we don't; going back pre-pandemic, you can break out internal migration and immigration
some indicators will be lagging
school enrollment will be very interesting
some of the data will have to wait for
"Slow and sluggish growth right now: it could be worse!"
Miranda mentions Black women who have lost their jobs federally
MTF have not quantified that
Comerford: how do we find blood from a stone? given federal
MTF: twice a year determination of MassHealth
the state working with community partners to make sure that we aren't at the same level as the nation at large
working requirements (200,000 people "if we don't have our act together") learn from experiences of other states; paperwork requirements
Evan Horowitz, Center for State Policy Analysis at Tufts University
likely to exceed benchmark for FY26 $45.1B, largely due to strong performance of stock market
projecting 8% above benchmark for FY27
suspect others are underestimating inflation
"I am presenting my best guess on where numbers were land"
That's all in, including surtax
expect millionaires tax to generate $3B for both years
4 1/2% increase in year over year revenue (given their new estimate on FY26)
expect higher inflation "we get more dollars, but every dollar is less useful"
concerned about volatility risk; more dependance on capital gains (wealthier people get more of their income from capital gains); Fair Share arrived at run of stock market
"unexpected bounty of Millionaires' tax"
swing will be "both substantial and difficult to track" due to how revenue comes in and what it is based on
April then a precarious month
'26 ballot questions are unusually impactful to the budget
rent control: impact is large and
tis hearing is "ad-hoc and fragile" set up
Michael Goodman missed!
Rep Moran asks why projections are higher
suggests comparing to prior years; model has performed well
inflation is the main driver: revenue is economic growth + inflation
Gorzkowicz: asks for a breakdown on the projection
Q: rent control is opt in
Would have impact on those communities, would see impact on property values
Alan Clayton-Matthews, Northeastern University
suggests following tables and charts in his testimony
...and he seems to be projecting some declines...?
"decomposition of growth"=Working age population + change in labor force participation rate + rate of productivity growth
remainder of this fiscal year and next, working population projected to fall
assuming a fall in net annual migration
labor force participation is projected to fall as working population ages
rate of productivity still projected to grow, which is different than the U.S.
economic growth is now due to productivity growth alone
Gorzkowicz: asks about Federal Reserve Board
ACM: "just a useful source of data to project corporate tax revenue"
Gorzkowicz: opine on health care?
ACM: lower cost ways to provide health care than we do
future is going to be a sicker, older population that will require greater inputs from the health care sector
and adjourned
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