BOSTON – The state's "rainy day" fund has eclipsed the $2.6 billion mark, according to the Baker administration, growing by more than $1 billion in less than five years fueled by growth in tax collections on capital gains income.
Revenue Commissioner Christopher Harding wrote a letter to state Comptroller Andrew Maylor on Tuesday certifying that capital gains revenues for the fiscal year through May totaled more than $1.8 billion, resulting in a transfer of $636 million to the stabilization fund.
The transfer is made automatically, under state law, based on capital gains revenues collected in excess of $1.2 billion. About $64 million of the money being transferred will be split and used to pay down the state's pension and other post-retirement benefit obligations.
"This is very good news for Massachusetts taxpayers," Administration and Finance Secretary Mike Heffernan said in a statement, explaining that it would give "further protection against any future downturn in the economy."
The capital gains revenues reported by Harding to the comptroller's office does not account for any additional tax money from investment income that might be collected in June, which could result in a further deposit into reserves.
Through May, tax revenues for the fiscal year were running $952 million ahead of estimates used to the build the state budget, creating anticipation for an end-of-year surplus that Gov. Charlie Baker and the Legislature will have to decide how to spend.
The automatic deposit into reserves reduces that potential revenue surplus for the moment to $316 million.
The balance in the "rainy day" fund, which has grown amidst the state's economic expansion, is now up 135 percent since Baker took office in January 2015, according to the administration. The governor and Legislature have historically used the fund to preserve state services during time of economic slowdowns, and in fiscal 2015 and fiscal 2016 the automatic deposit of excess capital gains revenues was suspended.
There were no excess capital gains revenues in 2017, and in fiscal 2018 a $514 million deposit was made of capital gains taxes in excess of $1.17 billion.
The stabilization fund hit its previous high with a $2.33 billion balance in fiscal 2007, when the state budget was about $25.2 billion. The fiscal 2019 budget signed by Gov. Baker last July authorized about $41.2 billion in spending.