With just days left in the state’s fiscal year, Massachusetts is grappling with a $311 million tax revenue shortfall that will force a quick budget tightening across government and portends trouble for the spending plan being ironed out by the Legislature for the new fiscal year that begins in July.
The Department of Revenue announced Friday afternoon that tax revenue in May had fallen below expectations for the second month in a row, putting the state, which must have a balanced budget, in a bit of a pinch.
But officials in the administration of Governor Charlie Baker say they have no plans for layoffs, emergency cuts, or using the state’s rainy day fund, meant only for fiscal emergencies.
Still, tightening will be necessary. Even though $311 million is small in the sweep of a nearly $40 billion budget, the short time frame makes the hole difficult to fill.
“At this point in the year, it’s hard to close a gap,” said Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center. “But there are tools — freezing spending wherever possible, finding savings when the number of people qualifying for specific programs is below projections, and there’s also the possibility of using reserves, as a last resort.”
Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation, emphasized there isn’t an easy fix.
“Obviously, the fact that we have days left to the fiscal year and they are $311 million short means that addressing it is a Herculean task,” she said. “They have very few options at this point. Most of the state’s money has been spent.”
She said possibilities include paying some bills in the new fiscal year, which begins July 1.
McAnneny said two months doesn’t make a trend, but “it certainly should cause budget writers to pause.”
Both the House and Senate have passed versions of the budget for the new fiscal year based on earlier projections of how much money the state will bring in. Now, members of each branch are working to reconcile their differences before July.
Seth Gitell, a spokesman for Speaker Robert A. DeLeo, said the revenue numbers are of concern to DeLeo. “It’s something he’ll be looking at with a watchful eye as the fiscal year comes to a close,” Gitell said.
Yet the more immediate crunch is the one faced by the administration.
Baker’s budget chief, Kristen Lepore, released a statement saying that the gap “remains in a range that we can manage through,” though she did not specify what that might entail.
In a legal disclosure Massachusetts released last month, Lepore and Treasurer Deborah B. Goldberg said budget management measures include restricting last-minute spending, working to boost revenue collection, and payroll caps.
The administration and outside budget analysts say the below-expectation numbers are not necessarily a sign the state’s economy is weakening — two months of concerning data is insufficient to draw sweeping conclusions, they say.
Fluctuations in how much companies are paying in taxes based on ripples in the stock market are partly to blame, officials say.
“We continue to have confidence in the state’s economy as overall sales tax and income withholding revenues remain healthy,” Revenue Commissioner Michael J. Heffernan said in a statement. Massachusetts’ unemployment rate — 4.2 percent in April, according to the US Bureau of Labor Statistics — sits at pre-recession levels. And many sectors of the state’s economy are humming.
But the announcement of the less-than-expected revenue numbers comes as national worries grow about the potential of a slowdown, from weak job growth to the potential for global economic woes to hurt business in the United States. Also on Friday, the federal government released nationwide job numbers — the weakest in six years — which some analysts see as indicating the post-Great Recession recovery may be quickly losing steam.
During his successful 2014 campaign for governor, Baker described himself as “a guy who is pretty facile with math.” Specialists say those skills will be put to the test again in coming days.Joshua Miller can be reached at firstname.lastname@example.org. Follow him on Twitter @jm_bos. Click here to subscribe to his weekday e-mail update on politics.