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Posted on February 16, 2024
By Sam LarsonAIM Government Affairs
January marked the seventh consecutive month in which state revenues have unperformed expectations. The Massachusetts Department of Revenue reported collecting $3.594 billion last month – $268 million, or 6.9 percent, less than in January 2023 and $263 million, or 6.8 percent, less than the administration’s revised monthly benchmark of $3.858 billion.
With tax revenues running $769 million behind projections after December, the Healey administration reduced the year-end revenue estimate by $1 billion. Reducing the revenue estimate was meant to address the existing $769 million shortfall while also providing some breathing room for the second half of the budget year.
The Governor cut $375 million in spending and tapped $625 million in non-tax revenues to account for the $1 billion revenue downgrade. However, after January the state still is trending downward.
January is the start of a crucial six-month period for the state’s fiscal picture. Collections are not split evenly across the 12 months and the second half of the fiscal year (January through June) typically produces about 60 percent of the state’s annual tax revenue, officials have said. The second half of the budget year also tends to be more volatile for tax collections.
A variety of factors such as the Federal Reserve’s decisions on interest rates could push revenues up or down in the second half of the year. The good news is that leaders in both the House and Senate have committed not to raise taxes this year and do not believe they will need to tap state’s Rainy-Day fund, which currently has $8.2 billion. However, the post-COVID years of abundant revenue appear to be coming to an end.
