COVID-19 crisis estimated to impact Massachusetts state finances

Center for State Policy Analysis at Tufts University’s Tisch College projects declining state revenue due to epidemic crisis
The Massachusetts state house with a golden dome and a flag of the state of Massachusetts on a flag pole in front.
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MEDFORD/SOMERVILLE, Mass. (March 31, 2020)-When the US economy flounders, so do state tax revenues. And given the dramatic economic slowdown caused by COVID-19, tax revenues are poised to plummet.

In a new policy brief titled “Estimating the shortfall in Massachusetts tax revenues,” the Center for State Policy Analysis (cSPA) at Tufts University’s Jonathan M. Tisch College of Civic Life provides detailed, non-partisan estimates of the potential revenue shortfall, both for the remainder of this fiscal year (FY 2020), and also the fiscal year beginning July 1, 2020 (FY 2021).

The report is available here.

Key findings:

  • Over the next 15 months, Massachusetts could face a tax revenue shortfall between $500 million and $1.5 billion.
  • The decline in tax revenue will be immediate, beginning in March and resulting in a $300 million to $500 million shortfall before the end of this fiscal year (June 30).
  • Even as revenues decline, emergency spending on urgent health needs and essential economic supports is likely to increase, further straining the state budget.
  • Federal infusions should help address this fiscal challenge. That includes heightened support for MassHealth along with other, more expansive aid to states and cities.
  • Massachusetts could also draw on the state’s “rainy day” fund, provided such withdrawals are calibrated to ensure adequate reserves across multiple years, including in scenarios where the economic decline proves especially severe.

“Providing timely, non-partisan analysis of current legislative issues is our core mission,” said Evan Horowitz, executive director of cSPA. “In the midst of a public health and economic crisis, it’s especially vital that lawmakers have the information they need to set sound priorities and prepare for a variety of scenarios.”

In the coming months, cSPA plans to release:

  • An analysis of the Transportation Climate Initiative, which would establish a regional cap-and-trade system for gasoline; and
  • Research on the projected impact of the fall 2020 ballot questions, potentially including right to repair, nursing home reimbursement rates, expanded sales of beer and wine in food stores and ranked-choice voting.
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