Massachusetts could face a $5 billion budget hole; Baker administration takes tax hikes off the table for now
The Senate and House chairmen of their respective chambers’ budget committees, Michael J. Rodrigues and Aaron Michlewitz, prepared to host a virtual roundtable with experts to determine how dire Massachusetts’ financial picture is.
“There’s a budgetary crisis happening,” said Marie-Frances Rivera, president of … Massachusetts Budget and Policy Center.
The Massachusetts Budget and Policy Center decided not to prepare a revenue estimate number for this hearing, said its president, Marie-Frances Rivera, citing “all the uncertainty and variables.” In April, MassBudget said that if patterns from prior recessions hold and there is some limited growth, fiscal 2021 collections could land between $5 billion and $5.7 billion shy of the estimates budget writers agreed to in January.
“We think that there’s a budgetary crisis that’s happening and we all have to be just fully aware and eyes-open about that,” Rivera said Wednesday. “There’s danger because all of the public goods that we’re relying on to guide us through this public health economic crisis, whether it’s health care, whether it’s housing people, whether it’s educating our young people, a lot of these are in jeopardy and the needs are growing.”
According to the News Service, Massachusetts Budget and Policy Center, a state finance think tank, says its time for lawmakers to consider other ways to fill budget gaps, other than borrowing money.
They include tapping into the state’s $3.5 billion reserves and adopting “new policies to increase revenue.”
Translation: raising taxes.
The original unemployment system was limited in various ways and covered only about half of the actual American workforce, according to Phineas Baxandall, a social insurance expert at the Mass. Budget and Policy Center. The expansion Congress passed during the shutdown made payments last longer, made them much more generous, and allowed more workers to qualify, including part-time workers, independent contractors, and the self-employed.
“The Commonwealth should pair limited use of borrowing and withdrawals from the Rainy Day Fund with new policies to increase revenue, thus avoiding budget cuts which would deepen and prolong the recession,” says the report, which came out today. It specifically argues against relying mostly on borrowing to plug holes in the budget, and cites a 2015 study by the Congressional Budget Office looking at the Great Recession, which found that “for every additional dollar of revenue raised from taxes (which are used to support public spending during a recession), economy activity drops by less than a dollar.”
In other words, MassBudget contends, raising taxes in the last economic downturn proved to have a net positive impact on the economy. Of course, that idea is sure to meet resistance from the state’s wealthier residents who will likely shoulder the burden of those taxes, and it will be up to lawmakers to decide both who will benefit from the recovery from the pandemic, and who will have to pay for it.
In a report published Tuesday, the left-leaning Massachusetts Budget and Policy Center argues that policymakers can maintain state spending on public services and programs despite the devastating financial impacts of the COVID-19 pandemic if they limit deficit financing, tap into the state’s $3.5 billion reserves and adopt “new policies to increase revenue.”
“Collecting additional progressive taxes to protect Massachusetts public spending against cuts will advance economic recovery by ensuring that more funds will be spent now on goods and services in Massachusetts. This is a clear lesson from the Great Recession,” Phineas Baxandall, MassBudget’s senior policy analyst who wrote the report, said. “A 2015 study by the Congressional Budget Office examining the Great Recession found taxes have a net positive impact on the economy when they are used to support public spending during a recession. For every additional dollar of revenue raised from these taxes, economy activity drops by less than a dollar.”
Hardship is widespread, but Black, Latinx, indigenous and immigrant families have been particularly hard hit, with the crisis exacerbating long-standing inequities in health care, education, employment, and housing that stem largely from structural racism. Our community partners have shared countless stories about the persistent trauma facing kids and families in their communities. We must act now.
The country and commonwealth that I love and care for support people who are going hungry, losing their homes and jobs. Federal policymakers must act, by ensuring that all those who need it get direct cash and other supports to meet their basic needs. Additional federal aid is a clear-cut solution to keep people safe and get our economy back on track.
The federal government must step in to assist those in need during pandemic, not play political games (Letters)
The Republican and MassLive, September 21, 2020
With 11.3% unemployment, MA has one of the highest rates in the nation. Almost 1 in 12 Massachusetts adults with children say they can’t afford enough food for their kids, and 1 in 7 renters are behind on rent, according to a new report from the Center on Budget and Policy Priorities. Hardship is widespread, but Black, Latinx, Indigenous, and immigrant families have been particularly hard hit, with the crisis exacerbating long-standing inequities in health care, education, employment, and housing that stem largely from structural racism. Our community partners have shared countless stories about the persistent trauma facing kids and families in their communities. We must act now.
“It’s undeniable that this recession and public health crisis is hitting low-income communities and communities of color the hardest, and state budget cuts threaten to make things even worse. Without action, damaging budget cuts to schools and colleges, hospitals, safety net programs, and other public services will worsen the economic pain, send us deeper into a recession, and intensify racial inequities,” Marie-Frances Rivera, president of the Massachusetts Budget and Policy Center said in a Raise Up press release. “By asking the well-off to pay a little more with these three proven policies, Massachusetts can generate the revenue needed to prevent devastating budget cuts and instead invest in a robust and just recovery for all.”
Phineas Baxandall, a senior analyst at the left-leaning Massachusetts Budget and Policy Center, argued that agreeing to scale back the system would only set the state up to fall short at protecting its residents from future economic harm.
“To me, one of the real lessons from the last months is how the unemployment system has saved the Massachusetts economy from freefall,” Baxandall said. “It has saved us from a chain reaction in which layoffs erase consumer demand and even workers with jobs cease spending because they’re just a pink slip away from destitution.”
Not everyone is celebrating. “The income tax is one of the few revenue sources that asks high-income people to pay in-line with their larger bank rolls,” said Phineas Baxandall, senior analyst at the Massachusetts Budget and Policy Center. “Repeated cuts to the income tax rate are a big reason that Massachusetts’ tax system is upside-down. Those with higher incomes end up paying a smaller share of their income, on average, than moderate- and low-income taxpayers pay.”
WBUR, August 21, 2020
“Property taxes are stable so long as property values are stable,” Baxandall, from the Mass. Budget and Policy Center, said. And while a 4% decline in revenue might be a lot less than the hit other cities are expected to take, “the money has to come from somewhere,” he said.
“If we have to furlough teachers, first responders, cancel repair budgets, that’s money which would be circulating in the community,” Baxandall said. “It’s going to be painful.”
Commonwealth Magazine, August 14, 2020
Now is the time to take the reins to determine our own destiny. All of us can call on the federal government to provide our people and state governments with financial supports, just as it did in the Great Recession. The Legislature has options: it can use our state’s multi-billion-dollar Rainy-Day Fund, take advantage of borrowing, or raise taxes by asking those who have benefited most from our economy to pay their fair share. By raising taxes on unearned income like dividends and capital gains, for instance, Massachusetts can ensure a fair and equitable recovery for black, brown, and other communities who have historically been left on the margins. We all should have the resources we need to participate in our recovery — that is equity.
Government budgets are a statement of our collective priorities. Reducing inequality should be part of the economic calculus of how states and localities balance their budgets. This pandemic has shown how little cushion many of our communities of color and low-income people have to weather the economic slowdown. Without adequate revenue from the federal government and our wealthy neighbors and corporations, we can’t make the investments we need for a strong and equitable recovery.
WBUR, August 10, 2020
Bypassing Congress on Saturday, President Trump issued a set of executive orders and memoranda to deliver emergency pandemic aid. The actions are ambiguous and raise a lot of questions. We break down what they mean for Massachusetts with Marie-Frances Rivera, President at the Massachusetts Budget and Policy Center.
We also hear from Michael Capuano, former Massachusetts Congressman and now the public affairs director for Foley and Lardner, and from WBUR legal analyst Nancy Gertner. She’s a retired federal judge and a senior lecturer at Harvard Law School.
“Baker and legislative leaders have agreed to maintain level spending for local aid and Chapter 70 funding this fiscal year, but that doesn’t protect against cuts to other agencies and programs.
‘If there are cuts to public programs it would be the worst thing for deepening our recession, because this is money that wouldn’t be spent in state,” said Phineas Baxandall, a senior policy analyst with the Massachusetts Budget and Policy Center. “We need commitments to protect those programs.'”