Declining state revenues fuel calls for fiscal restraint | News

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BOSTON — The state’s revenue collections have fallen below benchmarks for several months in a row as fiscal watchdogs call on Beacon Hill to tighten its financial belt.

The latest data shows January revenue collections totaled $3.5 billion, $268 million below what the state collected during the same month a year ago, and short of the state’s projections by $263 million. Year-to-date revenue is $21.4 billion, or $212 million less that year-to-date revenue, according to the state Department of Revenue.

The Pioneer Institute, a Boston-based think tank, said the declining revenues demand that the state government “tighten its belt and live within its means” by reducing fiscal 2025 spending “to account for this new fiscal reality.”

“The state not only has a revenue problem, it has a spending problem,” the group said in a blog post. “The days of fiscal surpluses, unprecedented increases in year-over-year spending, and flowing federal aid have come to an end.”

The Massachusetts Fiscal Alliance, a conservative pro-business group, blamed the revenue shortfalls on Gov. Maura Healey’s policies and her support for the new 4% “millionaires tax,” which it argues is driving away the state’s top earners.

“The governor’s response is inadequate,” MassFiscal spokesman Paul Craney said. “State House leaders cannot simply ignore what is driving this trend, they must confront the fact that their income surtax has not only made Massachusetts among the least economically competitive states in the country, but it is also driving out tax revenues.”

Craney said Healey should abandon her push for approval of legislation that would allow communities to increase their local meals and hotel taxes to generate more money.

“If Governor Healey wants to reverse this course, she needs to rein in spending and consider broad-based tax cuts,” he said. “Until then, the income surtax will continue to drive taxpayers elsewhere and state revenues will continue to decline.”

Healey, a Democrat, has acknowledged the declining tax revenues but argues that the fundamentals underpinning the state’s economy remain strong. Despite that, her preliminary $58 billion budget plan for the next fiscal year calls for increasing spending by 2.9% – or about $2.1 billion – over this year’s budget.

“We need to manage our spending and make smart strategic choices,” the first-term Democrat said in remarks on Wednesday. “That’s what our budget recommendation for this year does.”

Healey’s plan comes after she wielded her executive powers last month to slash $375 million from the current fiscal year budget to close a gap between spending and revenues. Healey administration officials signaled this week they aren’t planning to make additional budget adjustments based on January’s lackluster revenues.

But legislative budget writers, who are considering Healey’s budget proposal, warned that if revenue collections continue to slide downward, the state may need to cut even more spending from the current fiscal year’s budget.

“If this worrying trend continues over the second half of this fiscal year, it will require additional adjustments and solutions to bring our current budget into balance,” Senate Ways and Means Chairman Michael Rodrigues, D-Westport, said in remarks during a budget hearing on Wednesday.

The state’s Republican Party has also chimed into the debate, saying the revenue shortfall “directly stems from the shortcomings of failed policies which not only strain the budget but also contribute to the exodus of residents from Massachusetts.”

“The lack of incentive for wealth to remain in Massachusetts, due to its high taxation, has prompted far too many residents to relocate out of state,” MassGOP Chairwoman Amy Carnevale said in a statement. “Coupled with the ongoing migrant crisis, this situation threatens to steer us toward an economic disaster.”

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.

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