The Necessity of Transparent Tax Revenue Reporting: MA Provides a Shining Example
Revenue collections, predicted revenue, and expenditures are among the most important data points states report. Without accurate predictions and regular reporting, the legislature and governor’s office may go over or under budget, potentially leaving citizens and policymakers in the dark about the fiscal health of the state.
For this reason, all states regularly report those numbers and update estimates based on trends, overall economic conditions, and expected changes as a result of new state policies. However, even among the New England states, the transparency and accessibility of such reporting varies greatly and, as a result, limits analysts’ ability to meaningfully compare state revenues and judge performance in real time.
For example, Massachusetts puts together a semi-monthly revenue report, while states like Vermont report on a one month lag. So as I’m publishing this blog, Massachusetts is about to release its mid-month revenue report for March, while Vermont just reported its January numbers.
These types of differences present a barrier to anyone seeking to understand and compare the fiscal health of different states at any given time.
Differences in Reporting
Consider a real life scenario where Massachusetts revenue numbers show a significant shortfall, both in year over year (YOY) collections and or based on the state’s estimates for the current fiscal year, it can be difficult to determine whether the lower-than-expected numbers are a Massachusetts-specific occurrence or the result of factors affecting states regionally or nationally until other states catch up with reporting.
Comparing older monthly revenue and YOY numbers for the year to date (YTD) can provide a general picture of trends to be sure, but economic conditions can often shift over the course of a month or two.
Other differences in how states report can also present a barrier, as regular revenue reports and estimates are subject to significant variance. Beyond the variance in when reports are released, states are not uniform in how they structure their estimates, whether current and historical data is easily downloadable or issued primarily as pdfs, and whether there is a central online location to access the most important information.
Connecticut’s reports, for example, do not benchmark by month like Massachusetts’ reports do – only issuing tri-annual consensus revenue estimates that are not extrapolated into specific projected monthly figures. As a result, each revenue statement provides the extent to which the state is on track to meet projections for the full fiscal year but does not determine whether the state met its goal for the month in question.
Separately, Vermont has a data and statistics website spearheaded by its Department of Taxes but does not provide dashboards for easy analysis like Massachusetts. Nor does it have longitudinal datasets or a spreadsheet for total revenues over time, as opposed to single sheets for particular types of revenue in a given year/month (e.g. income tax, property, etc.).
Some states, like Maine, only produce monthly pdfs for their revenue reporting, which makes it time consuming and difficult to craft a longitudinal dataset for comparison.
Many states also structure their reports by funds rather than just general tax and other revenue. New Hampshire, Vermont, and Connecticut report revenue specific to transportation funds and others, while Massachusetts simply reports all revenue together.
The Massachusetts Example
Compared to other states, especially New England states, Massachusetts does an exceptional job reporting revenue and making that data easily accessible to the public and timely. Bi-monthly statements, dashboards on the Comptroller’s financial records website (CTHRU) that compare several different data points longitudinally, downloadable data, and reports with monthly estimates make it easy for the public and government officials to keep up with the state’s fiscal status.
CTHRU is particularly impressive. Massachusetts is not the only New England state to provide a dashboard for analysis, but CTHRU is far and away the most comprehensive and easiest to use. A number of other states allow downloads of various datasets, but few offer interactive visuals that allow you to see how revenue streams have changed over time. Data on CTHRU goes back to 2006 and is updated frequently. The site is also a one-stop shop for several other datasets, including the budget, expenditures, payroll, and retirement benefits.
These tools are invaluable for policymakers and the public and are a prerequisite for action. Properly utilized they can allow states to be timely in changing policy, especially amidst a shifting revenue picture. If Massachusetts has room to grow, it is in this way, by being more timely and adaptive given the tools available.
Conclusion
The pandemic has shifted the tax revenue calculus for states, with unexpected changes in collections across several tax categories. These fluctuations highlight the need for greater transparency and consistency in reporting.
It’s important that the public and policymakers are informed and up to date, especially as states like Massachusetts reel from an unexpected downturn in revenue collections.
A more uniform system of monthly reporting could benefit states by making apples-to-apples comparisons easier for policymakers and by better informing the public about the fiscal health of their state.
Other Sources to Explore
Baystate Budget Blues: Declining Revenue Causes Concern
Pioneer Statement on Continuing Slide in Massachusetts’ Revenue
Pioneer Statement on Decline in State Revenues
Sunshine Week 2023: Shining Light on the Workings of Government
About the Author
Aidan Enright is Pioneer’s economic research associate, responsible for analyzing data and developing reports on the state’s business climate and economic opportunity. Prior to working at Pioneer, he worked as a tutor and mentor in a Providence city school and was an intern for a U.S. Senator and the RI Department of Administration. Aidan earned a Bachelor of Arts in Political Science and Economics with a concentration in U.S. national politics from the College of Wooster.
