Virus controls state’s physical, fiscal health
No matter how many ways you slice and dice it, the state’s revenue picture for this fiscal year doesn’t get any brighter.
A legislative panel convened a hearing of economic experts this week to enlist their opinions on the state of the state’s financial situation.
They offered a range of revenue projections – almost all of which were less than $29.596 billion collected in fiscal 2020, and well below the $31.15 billion figure on which Gov. Charlie Baker based his fiscal 2021 spending plan.
Of course, the ongoing coronavirus pandemic has cast an unpredictable pall over all these calculations, a reality acknowledged by all in attendance.
“The trajectory of the pandemic, the timing of the development of vaccines and therapeutics, the measures governments have taken to control the pandemic and to mitigate its impacts, and the uncertainty surrounding potential action at the federal level have combined to create unprecedented challenges in revenue forecasting for the commonwealth,” Revenue Commissioner Geoffrey Snyder said. The state Department of Revenue estimates a tax haul in the range of $25.918 billion to $28.387 billion, based on projections from vendors and tax collections for the first three months of fiscal 2021.
That means budget writers must take into account a shortfall of as much as $5.2 billion below initial revenue expectations.
Given that the pandemic has closed nearly 25% of the state’s restaurants, the meals tax will take a considerable hit, which will likely erode even further as winter curtails outdoor dining. That’s a double whammy for communities utilizing the local meals-tax option.
In short, you need not be an accomplished economist to understand the obvious, which Jeffrey Thompson of the Federal Reserve Bank of Boston nonetheless pointed out: “If we can’t get the spread of the virus down, we cannot maintain much confidence that we can safely return to a full-throated economic activity.”
Rising rates of positive cases and the prospects of an imminent second major coronavirus wave will likely continue to cloud any revenue forecast.