Fiscal Outlook for FY13 and Beyond

Last week, the House passed its version of the Fiscal Year 2013 budget. The Senate will deliberate the budget in the last full week of May.

The House based its predicted revenue numbers on one-time budget fixes in the amount of $140 million, rather than the Governor’s proposed long-term revenue increases through new taxes.  The House budget operated on the assumption of the following revenue solutions: 1) cancelling a “statutory carry-forward” into Fy14 (resulting in $109 million in revenue); and 2) “trust funds and other one time sources” not included in the Governor’s proposal (resulting in $31 million in revenue).

The House Committee on Ways and Means recommended a total of $32.295 billion for FY13 operating budget direct appropriations, estimating a tax revenue base of $21.950 billion ($940 million above the current year’s projected tax collections). This estimate may prove inaccurate; according to figures released by the Department of Revenue, tax collections for April fell $93 million short of the benchmark for that month. The state is currently running $180 million behind the target for the FY13 budget. These numbers do not, however, include $200 million in business tax payments already received but not considered in the April DOR  numbers.

A budget summary composed by the Massachusetts Taxpayers Foundation, with a break-down of budget spending by department area, can be found here:

At the 2012 legislative breakfast of the Suburban Coalition, Michael Widmer, President of the Massachusetts Taxpayers Foundation, indicated that while Massachusetts will bring in one billion dollars in new tax revenues in 2013, the fiscal reality is that Massachusetts will not be able to restore the cuts made due to the recession any time soon. In fact, because he anticipates major cuts in federal aid to the states, he predicts that we will be entering a new era in government support for public services due to the trickle-down effect of cuts in federal aid to the states; these cuts will be felt keenly on both the state and local levels. Localities are already finding their costs (particularly with the high cost of other post-employment benefits) to be unsustainable. In addition to his work monitoring the fiscal situation on the state level, Senator Brownsberger is currently studying solutions to the challenges presented to  municipalities by high-cost other post-employment benefits.

The Massachusetts Budget and Policy Center’s website provides a number of tools for analyzing budget data. Their most recent post analyzes the House’s budget proposal:

The fiscal outlook for this year’s budget is an improvement over previous years, but we are facing an uncertain fiscal future that will require increasingly difficult decisions and creative solutions when it comes to the state’s budget (particularly if Michael Widmer’s predictions prove true).

For further discussion of the economic assumptions in the FY13 state budget, please see Senator Brownsberger’s post:

Published by Anne Johnson Landry

Anne works as Committee Counsel and Policy Advisor to Senator Brownsberger.