Budget watchdogs warn economic impact of coronavirus will crush Massachusetts budgets for years
Budget watchdogs dashed hopes for a quick recovery from the economic havoc wrought — seemingly overnight — by the coronavirus pandemic, warning the devastation of plummeting tax revenues due to widespread unemployment could leave a red mark on state and local budgets for years to come and spur tough choices ahead for policymakers.
“Despite the initial hopeful claims of (Massachusetts Taxpayers Foundation) and others that both the economy and everyday life will recover on a faster track, current data, as well as recent history, suggest otherwise,” warned the grim report released Thursday by the Massachusetts Taxpayers Foundation.
The report comes about a week after the foundation downgraded its revenue forecast for the coming fiscal year to a projected loss of $6 billion in tax revenues — far more than its initial estimate of $4.4 billion.
It’s a gut punch the foundation estimates will take the state’s economy until at least 2025 to recover from, and that’s assuming tax revenues grow at a rate of 6% — more than they have in the past decade.
It took the state’s economy three years before tax revenues rebounded to their pre-recession levels after economic downturns in 2002 and 2009, making it reasonable it will take “at least as long” this time around, the MTF analysis states.
The paper warned, however, that “when the potential structural changes to key pillars of the economy are considered, it could take considerably longer for the state to recoup tax revenues lost from this pandemic.”
“Key sectors of the Massachusetts economy, including health care, higher education, tourism, and commercial real estate, will likely emerge from the pandemic fundamentally altered and those changes could further prolong the time it takes for the economy to bounce back,” the Thursday report said. “A complete and accurate picture of the state’s budgetary challenges may elude us for some time.”
Senate Ways and Means Chairman Michael Rodrigues said he agrees with the MTF analysis, noting there are still many unknowns.
“A resurgence of the virus would send even this projection into upheaval,” he said in a statement.
The Taxpayers Foundation said the “willingness of Congress and the administration to keep state and local governments functioning” will play a big role in determining how deep cuts to state services and funding go.
Massachusetts is in line to receive $2.6 billion in federal relief funding through the CARES Act, and House Democrats recently passed another round of spending that could send an additional $500 billion to state governments.
Municipal leaders already facing furloughs and layoffs are voicing concerns over what state budget uncertainties could mean for the local aid they rely on — particularly for schools.
Brockton Mayor Robert Sullivan said state aid accounts for more than half his budget. Municipalities won’t find out their state aid until next month, but Sullivan said even a 10% cut would have “long-lasting, catastrophic and detrimental impact.”
Lisa Kashinsky contributed to this report.
from Boston Herald https://ift.tt/3gy4kmF
Post a Comment