A year ago, with the Massachusetts economy hit hard by the coronavirus pandemic, state lawmakers thought they would need to close a budget gap of $5 billion to $8 billion.
State Sen. Adam Hinds, D-Pittsfield, chairs the Senate revenue working group, and he was asked to shift that group’s work to focus on ways for the state to bring in additional tax dollars, he told The Eagle.
“Everything,” he said, was on the table so that the state could avoid spending cuts.
A year later, the House and Senate have passed budgets for fiscal years 2021 and 2022 that avoided significant revenue proposals. Better-than-expected tax collections, a withdrawal from the “rainy day” fund and a new round of federal assistance, lawmakers said, helped fill in the gaps.
Now, Hinds says the improving revenue picture has allowed the revenue working group to return to its original mission — lessening the focus on proposals for raising new revenue.
“It is interesting, because we had this period where we thought we were looking for additional revenue to cover a budget gap,” Hinds said. “Now, we’re back to the original goal, which is to ensure that the Massachusetts system is functional, modern and fair for all of us and … ensuring that we have the ability to pay for the future that we may want to create.”
The group has a draft report but no set date for finalizing its recommendations, although Hinds expects the work to be done “very soon, certainly this summer,” he said.
In 2019, some members of the revenue working group had suggested that its recommendations would be close to revenue-neutral, meaning that increases in revenue in some areas would be offset by decreases in others. Hinds said Tuesday, though, that revenue neutrality was not necessarily a goal for the group.
Some left-leaning observers have identified raising revenue as a priority for the Legislature in the coming years. While the nearly $5.3 billion the state is receiving from the federal American Rescue Plan Act can enable “transformative” changes, bringing in new revenue will be necessary to sustain those investments going forward, said Phineas Baxandall, a senior analyst and advocacy director for the Massachusetts Budget and Policy Center.
“It’s great that we have federal money to help us ramp up, but we need something sustainable,” Baxandall said. “The wrong way to interpret the current situation is to look at the big bucket of federal money and think that there’s less need for long-term revenue.”
Baxandall cited education and child care as areas where new revenue would help fund expanded investments that meet residents’ needs. The Student Opportunity Act, a landmark education reform bill passed in 2019, was estimated to increase annual school spending by $1.5 billion once it fully is funded. Making child care universally accessible, MassBudget has estimated, would cost the state $5 billion.
The revenue working group had been on track to release recommendations by the end of the 2019-2020 legislative session before the coronavirus pandemic hit Massachusetts in March 2020, when “like everything else in the world, we got sidetracked,” Hinds said.
During debate over the fiscal year 2021 budget, Hinds said that the revenue working group planned to release recommendations ahead of the 2022 budget. But, because of pandemic-related uncertainty and constant shifts in the state’s revenue picture, the group decided to wait until after the budget process to finalize recommendations, Hinds said.
“We wanted to kind of understand the trajectory of the pandemic and the state of our recovery before putting ideas on the table, so, it feels like we’re now reaching the point where we can usefully reconvene and finalize the work,” he said.
To fund the 2022 budget, the House and Senate proposed to make a withdrawal from the $3.5 billion stabilization, or rainy day, fund. While the House opted to draw up to $1.87 billion, the Senate proposed to take a maximum of $1.55 billion.
The Legislature had agreed to draw $1.7 billion from the fund for the fiscal year 2021 budget, but revenue collections far have outpaced projections, and it’s unclear how much, if any, the state will need to draw to cover budget expenses, House Ways and Means Chairman Aaron Michlewitz said in April.
Hinds doesn’t expect drawing from the rainy day fund to be necessary for future budgets because tax collections remain “strong, although maybe erratic,” he said.
“Having the [rainy day fund] money available to draw from has been critical, but I think all the data points to a much more stable and robust revenue picture, in no small part due to federal assistance,” Hinds said. “It strikes me that we will be able to cover that going forward.”
Meanwhile, left-leaning groups led by Raise Up Massachusetts are ramping up a push to pass the Fair Share Amendment, a ballot initiative that would levy an additional tax of 4 percentage points on the portion of annual income exceeding $1 million. By raising up to $2 billion a year for the state, the constitutional amendment would help fund public education and transportation, supporters say.
The Legislature voted 147-48 to advance the amendment in 2019, but the amendment must receive at least 50 percent approval once more in order to appear on the 2022 ballot. The Legislature will vote Wednesday, and it is widely expected to advance the amendment to the 2022 ballot.