BOSTON — Economists and the state’s budget writers offered a grim outlook on a pandemic-battered economy Tuesday, with plummeting tax revenues and a recovery that may be slow.
During a livestreamed hearing on the fiscal 2021 state budget, economists, legislative leaders and others said the impact of COVID-19 will rival that of the Great Depression.
“In a matter of weeks, we went from a revenue picture that was somewhat stable to one that is expected to see dramatic shortfalls in the coming months,” said House Ways and Means Committee Chairman Aaron Michlewitz, D-Boston.
Despite the crisis, Michlewitz said the state should tread carefully as it plots how to restart the state’s economic engine.
“Any notion that we would need to reopen the economy before we get a handle on COVID-19 would be irresponsible and somewhat foolish,” he said. “Because as bad as the economic hardships we are facing are, it pales in comparison to the health crisis we are combating.”
Michael Goodman, an economist and director of the Public Policy Center at the University of Massachusetts Dartmouth, described the Massachusetts economy as being in a “self-induced coma” and warned of uncertainty as to when it will be revived.
“Ultimately, turning the lights back on and reopening the economy is going to require us to have a complete handle on where the virus is, how it is spread, who has it and who doesn’t,” Goodman said. “And things won’t go back to fully normal, in my opinion, until we have a viable vaccine and treatment.”
Goodman said the state’s reserves, at nearly $3.5 billion, will help plug revenue gaps but won’t be enough to absorb the hit to the economy.
“There’s no question that federal resources are going to be required if we’re going to ride this out in a way that minimizes human pain and suffering,” he said.
Under state law, the budget must be approved by June 30, but legislative leaders say an on-time spending package is in doubt.
Gov. Charlie Baker filed a preliminary $44.6 billion fiscal 2021 budget in January, months before the virus forced the state to shutter the economy.
Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, predicted the state budget to be hobbled by a $4.4 billion drop in tax revenues in the fiscal year that begins July 1, and even that could change depending on how long it takes to get people back to work.
Sales tax collections will take a projected $1.5 billion hit, she said, as consumers put off major purchases such as cars.
McAnneny said the state could receive a boost in tax collections from pent-up consumer demand, once the economy reopens, but it might not be sustained.
“After that, consumers’ personal financial conditions will dictate their spending habits,” she said. “So, the less confident they are in their financial well-being, the longer it will take to restore prepandemic levels of consumption.”
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites.