Heffernan, Rodrigues, Michlewitz, Announce Consensus Revenue Forecast of $36.915 Billion for Fiscal Year 2023
Projected state tax revenue growth set at 2.7%
BOSTON — Secretary of Administration and Finance Michael J. Heffernan, Senate Ways and Means Chair Michael J. Rodrigues, and House Ways and Means Chair Aaron Michlewitz today announced a consensus revenue forecast for Fiscal Year 2023 (FY23) of $36.915 billion, representing 2.7% growth in state tax revenue over adjusted Fiscal Year 2022 (FY22) projected revenue of $35.948 billion.
The adjusted FY22 revenue collections estimate incorporates a $1.548 billion upgrade of projected state tax revenues announced by Secretary Heffernan today, which is based upon current year-to-date revenues and economic data.
The consensus revenue forecast is the basis on which the Baker-Polito Administration, the House, and the Senate will build their respective FY23 budget recommendations.
Pursuant to Section 5B of Chapter 29 of the General Laws, the three officials above convene every year to establish a joint revenue forecast by January 15th. In addition to conferring with each other, the Secretary and Chairs held a public hearing on December 21, 2021 to receive testimony from the Department of Revenue, the State Treasurer’s Office, and independent, local economists from area foundations and universities on tax revenue.
“The Fiscal Year 2023 consensus revenue forecast aligns with expert testimony delivered in December and acknowledges improved revenue trends in the current fiscal year,” said Secretary of Administration and Finance Michael J. Heffernan. “We thank our colleagues in the House and Senate Ways and Means Offices for their continued partnership as we begin to develop a budget that will maintain fiscal discipline while providing necessary funding to protect essential government services and support key priorities throughout the Commonwealth.”
“The consensus revenue agreement for Fiscal Year 2023 reflects our continued commitment to prioritizing the long-term fiscal health of our Commonwealth as we continue down the road of recovery from this COVID-19 pandemic,” said Senate Committee on Ways and Means Chair Michael J. Rodrigues (D-Westport). “Thanks to a steady trend of strong tax revenue growth to date, a robust and health rainy day fund, the availability of over $2 billion in American Rescue Plan State Fiscal Recovery funds and continued collaboration with our partners in the Administration and the House, we are well positioned to continue building an equitable recovery. To that end, this agreement lays down the foundation for an impactful Fiscal Year 2023 budget that values the needs of our communities and our most vulnerable populations hardest hit by the pandemic, while ensuring our state remains in sound fiscal health.”
“After some tumultuous budget cycles over the last several years, this consensus revenue agreement for Fiscal Year 2023 is a reasonable and appropriate forecast that will allow the Commonwealth to continue to provide the services our constituents deserve, while at the same time preserving our fiscal health. Despite the pandemic, our revenue intake continues to be better than anticipated, proving the continued resiliency of the Commonwealth’s economy,” said House Committee on Ways and Means Chair Representative Aaron Michlewitz (D-Boston). “I want to thank Chair Rodrigues and Secretary Heffernan for their continued partnership in these challenging times.”
Additional details:
- Of the forecasted $36.915 billion in FY23 state tax revenues, an estimated $2.277 billion is projected to be capital gains tax revenue, of which, per statute, $873 million will be transferred to the Stabilization Fund and other long term liability funds for pension and retiree health insurance costs
- The agreement also includes the following statutorily required off-budget transfers that are mandated by current law:
- $3.744 billion transferred to the pension fund, a $329 million increase over the FY22 contribution, which keeps the Commonwealth on schedule to fully fund its pension liability by 2036
- $1.325 billion for the Massachusetts Bay Transportation Authority (MBTA)
- $1.165 billion for the Massachusetts School Building Authority (MSBA)
- $25 million for the Workforce Training Fund
After $7.132 billion in off-budget transfers, the Secretary and Committee Chairs agree that $29.783 billion will be the maximum amount of tax revenue available for the budget in FY23, absent statutory changes.
M.G.L. Chapter 29 Section 7H ½ requires the Secretary and the House and Senate Committees on Ways and Means to jointly develop a potential gross state product (PGSP) growth benchmark for the ensuing calendar year. The PGSP growth benchmark is used by the Health Policy Commission to establish the Commonwealth’s health care cost growth benchmark. The three bodies have reached an agreement that the PGSP figure for calendar year 2022 will remain 3.6%. PGSP is a measure of the “full employment” output of the Commonwealth’s economy and reflects long-term trends in the economy rather than fluctuations due to the business cycle and, as a result, is meant to be fairly stable from year to year.
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