News from the State House

By Christine Rasmussen

You’ve paid income taxes, a 6.25% sales tax, excise taxes on motor vehicles, cigarettes, estate taxes on large inheritances etc. that each year are combined with other state tax receipts, federal government transfers and grants that are the basis for the funding of state government services that are distributed in the state budget that is developed during the first six months of the legislative session.

The state budget process, was finalized, after numerous meetings, arguments, and compromises, a Conference Committee with three members from the House and three Senate members, with their staff and assistance from state agencies, secured the votes to pass a Fiscal Year 2027, $63.4 billion state budget that was sent to the governor for her signature which occurred unceremoniously without any changes, on July 9th.

It marked the accumulating of a difficult budget process because of the uncertainty created by potential federal government sweeping cuts in funding that created an estimated $3.7 billion gap Impact of Federal Cuts on Massachusetts, threatening state programs for housing, public health, education, and transportation. However, the legislature countered these losses by utilizing a mix of state-generated revenues, the state Stabilization Fund, and Fair Share surtax dollars to shore up resources for the Massachusetts Bay Transportation Authority (MBTA), K-12 education, and local aid for cities and towns.

In addition, hanging over legislators’ heads were two ballot question, developed by the Initiative Petition process https://www.mass.gov/info-details/the-initiative-petition-process. The one that was causing sleepless nights for people with responsibility for municipal and state finances, would cut the state income tax rate over a period of years from 5 to 4 percent. household tax bills across the state but also blow a multibillion-dollar hole in state finances and force significant budget decisions on Beacon Hill, according to a recent Tufts University analysis. The report from the Center for State Policy Analysis estimates the measure would reduce the state income tax collections by 18.9% and total state tax revenue by about 10%, or roughly $5.1 billion a year by 2030. The report claims that revenue loss would more than offset gains surtax voters approved in 2022 on annual income above $1 million.

However, in one of the final steps to have the proposal appear on the November ballot, there was a challenge to the description of the question that explains the issue to voters on the ballot. The Supreme Judicial Court found that the Attorney General’s explanation of the scope of the measure erred by “incorrectly stating that the measure would not affect income from long-term capital gains” which it will. That decision was a huge relief to decision makers because it would have cut

Another ballot question is at the final stages of collecting signatures and if finalized will ask voters for a Law Relative to Limiting State Tax Collection Growth and Returning Surpluses to Taxpayers is still moving through the process to be on the ballot. If enacted, it could cut as much as $2 billion from the budget