State Revenue Estimates Still Leave Budget Gap

By Sarah Birnbaum

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Jan. 19, 2011

BOSTON — Massachusetts budget-builders agree they will have $20.5 billion to work with for the coming fiscal year. This so-called “consensus revenue estimate” is the best estimate of how much the state will collect in taxes and other revenue in 2012, so state leaders will work off this figure as they craft the state budget over the next several months.  

The figure is about $740 million dollars over the revised estimate for the current fiscal year, which represents an increase of about 4%. Economists say the growth will be driven largely by rising income tax receipts, because Massachusetts is expected to add more jobs in 2012, and personal income and salaries are also expected to go up.

But revenue forecasting isn’t an exact science. For example, this fiscal year, the original consensus revenue estimate was about $19.1 billion — a figure that ended up being $700 million too conservative. 

On the other hand, the year before, the estimate was too optimistic.  Tax collections came in about $600 million below expectations, triggering rounds of painful midyear budget cuts.
 
Patrick’s budget chief, Jay Gonzalez,  says the forecasting errors of the past couple of years were an aberration because of the unusually volatile state of the economy. "All the economists missed the depth of the recession and so we like every other state in the country were adjusting our revenue estimates down throughout the recession because we didn’t get it exactly right at the time," Gonzalez said.
 
Gonzalez says feels good about this year's estimate  — but the state still faces still faces a budget shortfall of $1.5 – 2 billion dollars.  Officials are predicting cuts in everything from education and local aid to health care and human services when Patrick presents his budget proposal to the legislature at the end of the month.

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