State economists are telling taxpayers to keep an eye on the state budget — and the rainy-day fund — as tens of billions in federal aid and tax collections beyond expectations flow into Massachusetts.
A Tuesday memo from the Massachusetts Taxpayers Foundation points out that “much has changed” in the 10 weeks since Baker released his $45.9 billion fiscal 2022 budget.
Baker’s budget relies on drawing $1.6 billion from the state’s shrinking stabilization fund — a trend that emerged last year as the Legislature pushed off the passage of the FY 2021 budget for nearly seven months amid an uncertain financial picture as much of the state’s economy remained in lockdown throughout 2020.
Reliance on one-time funding sources like the rainy-day fund has irked economists. Marie-Frances Rivera, MassBudget president, at the time warned it sets the state up for a “short-sighted recovery.”
“The combination of action at the federal level, changing assumptions on the state’s Medicaid program and the public health and economic response to COVID-19 all have altered the fiscal landscape for budget writers,” according to the memo.
In addition to more than $8.1 billion in direct aid coming to Massachusetts, the state continues to outpace estimates on tax revenue collections. The state Department of Revenue reported more than $3 billion in tax revenue for March. That’s $402 million — 15.1% higher — than revenue collected the prior year during March and $648 million or 26.8% over the state’s benchmark.
With the House Committee on Ways and Means poised to release its budget next week, MTF says the “resource and spending implications for the FY 2022 budget … will need to be accounted for by both the House and Senate budgets.”
The House budget “should also provide flexibility in the use of one-time resources, like the Stabilization Fund,” economists wrote in the memo.
“One of the things we’ll definitely talk to the Legislature about — and we have talked a little bit about it at this point — is about replenishing the rainy day fund because it’s really important that Massachusetts continues to have, for the future period, a very robust rainy day fund. It really proved its mettle early on in the pandemic,” Baker said during an unrelated briefing at the Hynes Convention Center on Tuesday.
“By the time we get to the end of the year, we’ll see where we are,” the Republican governor continued. “A lot of us worked really hard over the last few years to triple the size of the rainy day fund so it would be there when it’s raining.”