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.
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.