State Budget Writers Monitoring 4-Month Tax Trend

The Local Government Advisory Commission met Tuesday, Nov. 14, 2023, and heard from Administration and Finance Secretary Matthew Gorzkowicz about state tax collections, which have come in below expectations for each of the last four months. [Screenshot]

Colin A. Young|SHNS

Massachusetts' tax revenue collections are $355 million behind where state government expected them be four months into fiscal year 2024 and while Administration and Finance Secretary Matthew Gorzkowicz said Tuesday he's not especially worried, a key lawmaker said less than an hour later that he is "very concerned" about the state's fiscal picture.

The Department of Revenue reported this month that October tax collections missed the benchmark set by the Healey administration by $186 million or 6.8 percent. Through the first four months of fiscal 2024, the $11.843 billion that DOR has collected is $276 million or 2.4 percent more than collections during the same period of fiscal 2023, but $355 million or 2.9 percent below the year-to-date benchmark.

"It's something that we're monitoring very carefully," Gorzkowicz told the Local Government Advisory Commission on Tuesday afternoon. "And while it's true that the state has missed its revenue collection benchmarks four months in a row, we continue to see growth year-over-year. In fact, for our first four months of the fiscal year total tax collections are up about 2.4 percent. For October, we saw 8.3 percent growth in a single month. So while our benchmarks are showing underperformance, the year-to-date growth is there."

The secretary said his team is working with DOR and "our various economists" to better understand what happened in October, particularly what led to a slowdown in sales and use taxes (missed benchmark by $43 million or 4.9 percent) and withholding taxes (missed benchmark by $133 million or 9.1 percent). But he told local officials that tax collections are but one piece of the puzzle and that the Executive Office of Administration and Finance "carefully looks at all the options it has available to them to make sure we can cover spending for the fiscal year."

"So no one's panicking at this point," Gorzkowicz said. "Three-hundred fifty million [dollars] below benchmark is something that we're monitoring carefully, and we'll keep you apprised of future collections."

Elsewhere in the State House on Tuesday afternoon, as the Senate began to debate its fiscal year 2023 close-out supplemental budget, recent tax collection figures were part of the back-and-forth between Minority Leader Bruce Tarr and Senate Ways and Means Chairman Michael Rodrigues.

Rodrigues, who has been the Senate's budget lead for nearly five years, said this is the first stretch during his time as Ways and Means chairman that tax collections have missed benchmark four months in a row. Coming up short by a cumulative $20 million after two months was not worrying, he said, but September and October's shortfalls raised his eyebrows.

He said the latest revenue numbers have been "quite disconcerting," even though the consensus revenue growth figure he, Gorzkowicz and House Ways and Means Chairman Aaron Michlewitz agreed to for fiscal year 2024 is a "very conservative" 1.6 percent increase.

"We are still falling short of that to date. So we are very concerned, which means that we are very, very careful," Rodrigues said as part of his detailing of the supplemental budget before the Senate.

Tarr, who asked Rodrigues about the latest revenue collection numbers and how they factored into the crafting of the Senate supp, said the latest from DOR "points to the need to focus very closely on expenditures moving forward because the robust amounts of revenue that we have been collecting do not seem to be materializing in the current fiscal year."

The Gloucester Republican said the situation is "certainly not one that is cause for panic, but one that is cause for concern."

Last week, when the House passed its own version of the fiscal 2023 close-out supp, Michlewitz called attention to the under-benchmark collections. He said the House "will need to be ever vigilant in guarding the fiscal wellbeing of the commonwealth going forward" as a result.

November is among the smaller months for revenue collection and generally produces roughly 6.5 percent of the state's annual tax revenue, DOR said. November revenue collections must be reported by DOR by Dec. 5, and the monthly benchmark is set at $2.527 billion.

The messaging about fiscal vigilance comes on the heels of two straight state budgets that drove substantial spending increases, at a time when the state has roughly $8 billion in it's main reserve account, and on the heels of tax collections that surged so high that taxpayers got about $3 billion in automatic rebates.

[Chris Lisinski contributed to this report.]