Mass. Economic Roundtable Provides Fiscal Update

Mass. Economic Roundtable Provides Fiscal Update

3% State / Teacher COLA Remains Delayed With FY21 Budget

October 7, 2020: State officials held a special Economic Roundtable meeting today focused on the impact of the ongoing COVID-19 pandemic on the Massachusetts economy and tax revenues.

The forum was a joint meeting of the House and Senate Committees on Ways and Means, as well as the Executive Office of Administration and Finance. Secretary of Administration and Finance Michael Heffernan, Senate Ways and Means Chair Michael Rodrigues and House Ways and Means Chair Aaron Michlewitz hosted the virtual meeting.

Multiple state officials, including Treasurer Deb Goldberg, offered expert testimony on the current economic environment, as well as analysis in what may develop in the coming months as public health experts work to contain and defeat the COVID-19 virus. They were joined by a host of public and private sector economic experts and business leaders.

According to the Department of Revenue, state tax receipts for FY21 are anticipated to be down some 4%-12%. The wide range is highly dependent upon both the duration and severity of the pandemic. One unknown, but key factor, will be whether or not Massachusetts experiences another surge in COVID-19 infections that lead to further restrictions or closures. 

“There is a significant difference between a 4% drop in tax revenue and a 12% drop. That’s a range of some $2 to $8 billion. However, most experts seem to agree that state revenues will be down $4 to $6 billion,” said Mass Retirees Legislative Liaison Nancy McGovern, who attended the virtual meeting. “This creates a lot of difficulty for the Ways and Means Committees, as they work toward finalizing a State Budget for the remainder of FY21. Adding to the problem is the lack of assistance from the federal government.

“Our focus is to make sure the 3% State and Teacher COLA is included within the final budget and retroactive to July 1. While funded through the pension system and not subject to a direct appropriation from the state, authorization to pay the COLA is contained within the outside sections of the annual budget. We have engaged Governor Baker, as well as the legislative leadership to help secure the authorization needed.”

STATE PRIT FUND: 

TREASURER GOLDBERG REPORTS POSITIVE ASSET GAINS 

One bright spot in the otherwise somber meeting was the report from Treasurer Goldberg regarding the Commonwealth’s Pension Reserves Investment Trust (PRIT) Fund. Investing billions in pension assets for members of the state, teachers and local retirement systems, PRIT has weathered the ongoing economic storm exceptionally well.

“Economies and markets globally are severely impacted by the pandemic and widespread economic shutdowns. I want to assure stakeholders again that PRIM is fully operational and well-positioned to navigate this challenging market. The PRIT Fund continues to be healthy with no liquidity issues. We are fully able to meet our benefit obligations,” explained Goldberg. 

“In fact, I am pleased to report that despite a very difficult, volatile, and uncertain investment environment, the PRIT Fund net asset value grew by $1.5 billion (2.3% gross, 2.0% net of fees) in Fiscal Year 2020 to $75 billion. These gains are a result of a carefully constructed investment strategy that has consistently performed well in both up, and perhaps more importantly, down markets. While we have not yet received the Q1 numbers, markets were strong in the September quarter and we expect further positive returns.”

Since the pandemic struck in March, Treasurer Goldberg has worked to ensure that all pension payments to state and teacher retirees have been processed on time, without delay.

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