Spending cuts, tax hikes on the table as coronavirus takes estimated $3-5 billion bite from revenues

From spending cuts to tax hikes, “every option” is on the table for lawmakers struggling to plug a gaping budget hole with tax revenues predicted to nose dive between $2.76 billion and $5.23 billion this year amid the coronavirus pandemic.

“Even under the rosiest of projections, we still have some real difficult decisions to make in relation to trying to balance our books for FY 21,” House Ways and Means Chairman Aaron Michlewitz said.

“Every option is really on the table at the moment,” Michlewitz, a North End Democrat, added.

Gov. Charlie Baker has repeatedly said he would not support raising taxes amid a pandemic that has wrought the worst economic fallout in recorded history. Baker’s budget chief, Administration  and Finance Secretary Michael Heffernan doubled down on that on Wednesday, telling reporters, “from what we can see, we won’t need to raise taxes.” The shortfall prediction comes from the Department of Revenue.

Raising progressive taxes like a wealth tax has gained popularity among left-leaning organizations recently.

“Cuts will not address the growing needs or help us prime our economy for a robust and just recovery. Only new, progressive revenue can do those things,” Marie-Francis Rivera of the left-leaning Massachusetts Budget and Police center said.

Last month, a group of more than 150 Massachusetts organizations sent a letter to lawmakers urging similar revenue-raising measures.

The state could draw on its $3.5 billion Rainy Day Fund to balance the budget or make spending cuts.

While Massachusetts is “clearly in a rainy day,” State Treasurer Deb Goldberg warned drawing too much from the state’s savings account could lead to a downgrading by crediting agencies

“We don’t know how long the rainy day will last,” she said, noting agencies first “want to see the state has used all available, public finance tools, including cutting discretionary.”

Uncertainties with federal aid make it hard to pin down exactly how big the state’s budget hole is, Eileen McAnneny of the Massachusetts Taxpayers Foundation said.

Should another federal relief package not materialize, McAnneny said “the revenue shortfall will grow massively.”

Senate Ways and Means Chairman Michael Rodrigues described “glaring federal dysfunction” by the feds and said it was up to the state to “close an anticipated budget shortfall without federal assistance for at least the foreseeable future.”

Tufts Center for State Policy Analysis, however, offered a more optimistic picture, predicting revenue will come in $1.6 billion below the January benchmark.

Executive Director Evan Horowitz encouraged lawmakers to rely on the state’s rainy day fund to balance the FY 21 budget and “avoid painful cuts.”  Concerns about budget woes in FY 22 are “overstated,” he said.