#2021-11 April 9, 2021

State Tax Collections Continue to Outpace Estimates in March

The state’s Department of Revenue (DOR) announced that it has collected more than $3 billion from Massachusetts residents, workers, and businesses in March, once again beating the Baker administration’s expectations.  The March collections put the Commonwealth more than $1.5 billion ahead of the same time last year.

March revenue collections totaled $3.061 billion, which is $402 million or more than 15 percent higher than what was collected in March 2020.  The amount is also $648 million or 26.8 percent more than what the Baker administration projected for collections last month.  Nine months into FY2021, Massachusetts state government has collected $22.588 billion in taxes, 7.2 percent more than it did during the same nine months of fiscal year 2020.

If collections for the next three months meet the DOR benchmarks, Massachusetts will have collected $30.539 billion in tax revenue in fiscal year 2021.  That is $1.45 billion more than the Administration’s most recent projections, $943 million more than what was collected during fiscal year 2020, and about $419 million more than the consensus revenue agreement being used for the FY2022 budget.  This could lead to a significant surplus at the end of FY2021 on June 30, which comes as state officials are deciding how to spend billions of dollars in federal aid coming as part of the American Rescue Plan. 

Governor, Lawmakers Discussing Replenishing Rainy-Day Fund

As we noted above, with state tax revenues continuing to outpace projections, Governor Charlie Baker recently expressed interest in replenishing the state’s “rainy-day” savings account this year.  When he was asked this week if he believes the state should drop plans to spend $1.6 billion from the stabilization fund in the fiscal 2022 budget, Baker said “we’ll see where we are” at the end of the current fiscal year.

The Baker administration has projected using $1.35 billion to $1.6 billion from the rainy-day fund as part of its $45.6 billion fiscal year 2022 budget, following a net reduction of about $978 million in the current fiscal year.  At the start of fiscal year 2021, the fund had a balance of about $3.5 billion.  House plans for the rainy-day fund could become clear when the House Ways and Means Committee releases its FY2022 budget, which is anticipated sometime next week.