According to the budgetary whiz in charge of the Office of Administration and Finance, the $1.4 billion hole blown in the state’s consensus revenue estimate for the current fiscal year was a “previously understood exposure.”
April fool! A few more implosions like that and pretty soon you’re talking real money.
In fairness to A & F Sec. Matt Gorzkowicz, he’s not wrong. The January consensus estimate did note the likelihood that the two factors cited as causes of the revenue drop – declining capital gains collections and refunds of small business excise credits – could undermine the forecast. As the TV meteorologists might put it: if that rain/snow line shifts even a little bit, the dusting we’re forecasting could be 20 inches.
Which makes Gov. Maura Healey’s claim last Friday that the $1.4 billion oops was “not unexpected” and had been “accounted for” in her budget and tax-policy planning a bit of an eyebrow-raiser. Because here’s the dirty little secret policymakers at all levels don’t want you to know – they don’t really know what the hell is going on with the economy or what’s coming next.
Genius officials at the Federal Reserve were confident inflation would be mild and short-lived. No one around here expected the state’s quick revenue recovery from the pandemic collapse. Everything is at the mercy of outside forces.
Economic forecasting is like betting the Celtics to cover on your sports-wagering app: your most educated guess is no match for head-case players, sketchy refs and a coach who refuses to call a time out.
And there won’t be any pause to regroup and rethink on Beacon Hill. Browse through the consolidated amendments in the $56.2 billion House budget that passed unanimously last month and, per usual, there isn’t a shred of spending restraint to be found. Healey is intent on pushing forward with her tax-cut package, and there seems little appetite in the Legislature to block it.
Could this be akin to – as we once heard a newly-penniless father describe the experience of shelling out $75,000 for his daughter’s wedding – buying a fancy car and immediately driving it off a cliff?
Local policymakers knew the capital gains and pass-through entity tax collapse could hit hard if they both imploded at once, and they did. Now, “the big question is what else is out there?” says Massachusetts Taxpayers Foundation President Doug Howgate. “What’s happening with the national economy, the debt ceiling, the banking sector? Policy can look really good one day, then things change and it doesn’t look so good.”
If you hear someone expressing certainty about our economy, hold onto your wallet. One of our most important trading partners, Europe, has survived Russian aggression so far, but for how much longer? Even Canada, the biggest importer of Massachusetts goods, is headed towards recession.
Don’t act surprised when our economic future continues to be an entirely unpredictable roller coaster ride with some stomach-turning dips and bends. It is, after all, a “previously understood exposure.”