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Daily Tax Report: State

Massachusetts Pushes Forward Plan to Borrow Billions

May 6, 2020, 9:25 PM

The Massachusetts House has unanimously approved a bill (H. 4677) to allow the state treasurer to borrow money as needed—potentially up to $3.5 billion—to keep the state afloat until after the July 15 income tax deadline.

The Senate will take up the bill on Thursday and Senate leadership has already said lawmakers are in agreement to pass it.

The state would repay any loans in 2021, according to the bill. Baker’s office of Administration and Finance has estimated that the total fiscal year 2020 shortfall will range between $2 billion and $3.5 billion.

Neither lawmakers nor Gov. Charlie Baker (R) has proposed raising any taxes as a way to add to state coffers. Baker has said he opposes any increase in gas taxes, which had been proposed by lawmakers prior to the Covid-19 outbreak in the state as a way to raise funds for transportation improvements.

“We don’t support a gas tax, and if one were to come through we would veto it,” Baker told reporters March 6 after House lawmakers approved a gas tax hike.

Revenue Drop

Revenue collections for April were 52.2% less than, or $2.168 billion under, what the state had set as its official benchmark for April, the Department of Revenue announced May 5.

“The April revenue shortfall is attributable to multiple factors,” Commissioner Geoffrey Snyder said in a statement.

Delay Spending

The Massachusetts Taxpayers Foundation, an influential think tank in Boston, disagreed that borrowing would be the best way to fill the shortfall. The group wants the governor to revise down his $44.6 billion budget proposal filed in January, and to take other steps to curb spending, Eileen McAnneny, president of the foundation, said in an April 30 letter to legislative budget leaders and the administration.

McAnneny cautioned against raising the state gas tax or other taxes during a time of hardship for the public.

The group wants the state to delay implementing a $1.5 billion public school funding bill and to increase state pension payments less than planned. The school funding was to be paid out over seven years at about $350 million a year, beginning after the start of the new fiscal year July 1 2020.

The state pension fund is set to increase by $273 million in fiscal year 2021 compared to 2020 levels, to begin the process of fully funding the pension fund by 2036. The taxpayers foundation did not say how much of a decrease would be warranted.

To contact the reporter on this story: Adrianne Appel in Boston at aappel@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com

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