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The Beacon Hill Report - May 15, 2014

Date: May 14, 2014

Tax Revenues Below Expectations

As the state Senate prepares to take up a spending blue print to FY 2015, the state’s tax collections are $110 million below benchmarks for the month of April, usually the largest month of the year for revenue collections. April revenues were $ 130 million less than April 2013. The shortfall was attributed to substantially lower than expected payments accompanying income tax returns. Other states have experienced similar shortfalls as many taxpayers took capital gains at the end of 2012 to avoid federal tax increases in 2013. Capital gains tax revenues are notoriously inconsistent. Although the dynamic was anticipated, the actual impact of the 2012 phenomenon exceeded expectations. The Senate budget proposal is said to call for $36.5 billion in spending –a 5 percent increase over FY 2014 – without new taxes. The state continues to project that tax revenues for the fiscal year ending June 30 will exceed expectations while the rate of growth has slowed.

On the plus side, the state’s economy is expected to continue to grow faster than the national economy over the next six months.

Called Massachusetts’ Big Dig IT project by one observer, the Massachusetts health care exchange entered a new phase this past week in the development of a functioning website. Having already spent a significant portion of the $175 million federal grant to develop a “Rolls Royce of state exchanges”, the Connector’s ‘fix it’ team announced a new dual track program to get a state exchange up and running by November at a cost of $120 million.

Having had a functioning exchange website for many years prior to the implementation of federal health care reform and being regularly described as the model for the federal Affordable Care Act (ACA) program, Massachusetts still has failed miserably in adjusting from the state to the federal model. Tens of thousands of Massachusetts residents applied for and are receiving health insurance for the first six months of 2014 and possibly longer at no premium cost as a result of the processing of paper applications. The total cost of providing insurance and health care and of website development is not known at this time but $250 million is a low estimate.

NFIB is very concerned that the costs will be passed onto individuals and small businesses in the form of higher premiums. Insurance companies have had to adjust their computer systems first for a non-functioning website and now for dual track websites – the one being developed for MA and the federal website which constitutes Plan B in MA. Together with the state’s costs borne by taxpayers, the insurance company costs present a clear and present danger to small business owners and individuals. NFIB called on the federal government to assume the total cost of the disaster as they refused

Massachusetts’ request for a waiver from the federal law. Massachusetts had insured 98% of its population under its own health care reform program prior to the federal changes. Although small businesses certainly had issues with the cost of health insurance under state reforms and with the state’s failure to provide small businesses access to affordable health insurance options as promised, the changes forced on the state by the implementation of the federal law were unnecessary, heavy handed, and expensive. State manager’s ideological support for the program took precedent over the best interests of the people of Massachusetts.

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