State tax collections will need to grow by less than 1 percent in fiscal 2020 to hit the benchmark lawmakers included in the $43.1 billion budget that Governor Charlie Baker is reviewing.
The Department of Revenue on Monday reported that final fiscal 2019 tax collections totaled $29.69 billion, only $200 million less than the upwardly revised $29.89 billion estimate that lawmakers used in the fiscal 2020 budget they approved last week.
Tax receipts of $3.18 billion in June were up by only 1.5 percent over June 2018 collections, but capped a fiscal year during which collections rose nearly 7 percent and eclipsed budget benchmarks by $1.1 billion.
Capital gains taxes drove up non-withheld income tax revenues by $387 million over benchmark, according to Revenue Commissioner Christopher Harding, while corporate taxes soared $566 million over benchmark last fiscal year and estate tax collections beat benchmark by $151 million. Harding described all three revenue categories as volatile revenue sources that broke in a “positive direction” in the fiscal year that ended June 30.
The year-end numbers mean lawmakers and Baker will have a sizeable fiscal 2019 surplus to dispense with, although a good chunk of the over-benchmark revenues are linked to capital gains collections and will be diverted, by law, into the state rainy day fund.
The Department of Revenue certified $2.06 billion in fiscal 2019 capital gains collections, which generates an $848 million transfer to the stabilization fund.
For a second week, Baker’s top budget official on Monday turned down the opportunity to weigh in on the Democrat-controlled Legislature’s approval of a substantial hike in state spending as part of the fiscal year 2020 budget the administration is reviewing.
The $43.1 billion budget passed by the House and Senate last Monday boosted spending by about $317 million more than either the House or Senate budget plans. The bottom line is about $400 million more than Baker sought in January and the budget would raise state spending by $1.6 billion or 4 percent.
“We’re still reviewing the budget. We have 10 days to do so and we’re working hard. When we’ve done our work, we’ll have everybody in and talk about it,” Michael Heffernan, a former Citigroup and Salomon Brothers executive who previously served as state revenue commissioner, said after leaving a meeting with the governor and legislative leaders Monday.
Asked if he had any thoughts at all on the revenue markup, Heffernan said: “No comments until we’re finsihed doing all of our work.”
Baker has until Friday to sign the fiscal 2020 budget, and announce spending vetoes and amendments.