Consensus Revenue: By the Numbers

I did a post yesterday on the upcoming Massachusetts State budget, and a major portion of that post dealt with the “estimated revenue” that plays a central role in the formation of the spending blueprint for the Commonwealth. My post had estimates from the Massachusetts Taxpayers Foundation and the Massachusetts Budget and Policy Center. The Legislature and the Administration each year take input in open session from some of these budget experts (including the Massachusetts Taxpayers Foundation)and devise what is known as the “consensus revenue number”, an estimate of revenue that will be used by all three branches in the formulation of the state budget. The legislative chairs of Ways and Means, as well as the Secretary of Administration and Finance, work together to develop that number.

With all of the news activity yesterday’s announcement of that number was somewhat lost in the shuffle. But it is one of the critical legs holding up the budget, and everyone, including the locals, needs to pay attention.

It looks like Mike Widmer was just about right on the nose, as yesterday’s announcement showed an increase of 3.9% over the revised FY 2013 revenue estimate. From the Secretary of A&F.

The consensus tax revenue estimate for Fiscal Year 2014 is in the middle of the range of tax revenue growth estimates projected by economists and others at the December hearing. The $22.334 billion estimate reflects actual growth of 3.9 percent above the revised tax revenue estimate of $21.496 billion for Fiscal Year 2013.

“The projected growth in tax revenues for Fiscal Year 2014 reflects an improving economy,” said Secretary Shor. “While this is good news and our estimate of modest growth in tax revenues will help, we will continue to have to make tough and thoughtful decisions necessary to balance our budget in Fiscal Year 2014 and set Massachusetts on a path towards long-term, sustainable growth.”

Widmer had pegged revenue growth at $835 million, while consensus came in at $838 million. For our purposes it is identical. As I said in my post yesterday this is a number that bears close scrutiny, as the Administration had to lower its revenue estimates this year (FY13) by $500 million.

The revenue number also has what we know as “carve-outs”, which are portions of the revenue stream not subject to appropriation, but simply sent to the respective recipients as a matter of law. An example would be the Massachusetts School Building Authority, which receives a piece of the state sales tax. Those carve outs were listed in the A&F Press Release.

The three branches also reached agreement on statutorily required off-budget transfers that are mandated by current law:

$799.6 million for the Massachusetts Bay Transportation Authority (MBTA)

$703.6 million for the School Building Authority (SBA)

$1.630 billion for the pension fund transfer, which represents full funding of the scheduled pension contribution for Fiscal Year 2014

$21.6 million for the Workforce Training Fund, which was changed to a non-budgetary trust fund in the Fiscal Year 2012 General Appropriations Act (GAA)

The total amount of off-budget transfers is $3.155 billion. Therefore, after taking into account the $37 million of capital gains tax revenue that must be deposited in the Stabilization Fund, the Secretary and committees agree that $19.142 billion will be the maximum amount of tax revenue available for the GAA in Fiscal Year 2014, and they will base their respective budget recommendations on that number.

So after all is said and done the budget writers may include $19.142 billion for all other state expenses beyond the listed carve outs. The Governor will be first out of the box, and will talk about the budget, and his transportation package, this week in his State of the State address.

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