With Massachusetts in the final month of the fiscal year, state budget officials are looking at a balance sheet that shows tax revenues coming in $2.253 billion short of expectations for the year, an 8.3% drop that might have to be covered with reserves or federal bailouts.
The Department of Revenue on Wednesday released its May revenue report that showed tax collections of $1.74 billion missing the monthly target by $320 million and reflecting a $262 million, or 13.1%, decrease from last May.
Over the first 11 months of the fiscal year, the state has now collected $24.78 billion of the $30.29 billion in taxes budgeted for the fiscal year with just one month left until fiscal 2021 begins on July 1. The 6.5% decline from the fiscal 2019 has been largely caused by the economic shutdowns put in place to cope with the spread of COVID-19.
Other factors contributing to steep fall in tax revenues over the past two months include decisions to postpone the personal income tax filing deadline to July 15 and extend payment deadlines for regular sales, meals and other taxes until June 20.
Every category of taxes was down in May, except withholding and estimated income taxes. Regular sales taxes were down 12.2% from last year, and meals taxes were down 60.7%, with restaurants limited to take-out and delivery service.
"Shortfalls in income return payments, sales and use tax, corporate and business taxes, and 'all other' taxes were partly offset by surplus in withholding, which was impacted by withholding on unemployment insurance benefits," DOR Commissioner Geoffrey Snyder said in a statement. "COVID-19 and the associated return filing and payment deadline extensions have significantly affected May revenues, and we will continue to closely monitor revenue collections for the remainder of the fiscal year."
Legislative leaders and the administration have yet to chart a course for how they plan to budget through the pandemic. The timing of the COVID-19 outbreak made it difficult to slash spending so late in the fiscal year, according to budget analysts, but the state does have $3.5 billion in a "rainy day" fund that could be needed this year and beyond.
States like Massachusetts are also waiting to see if Congress comes through with another relief package.