The Commonwealth of Massachusetts Bond Financing Programs February 7, 2020 Commonwealth Credit Review
Replay Information Please note that a replay of the investor broadcast associated with the following slides is available. The replay can be accessed by following the link below and will remain available until February 7, 2021. http://munios.com/live/MACommonwealth The full slide deck for this call is found in the pages below. These slides as well as those of prior investor calls may also be accessed by visiting the Investor and Rating Agency Presentation Archive on the Commonwealth’s investor website at: www.massbondholder.com For audio, participants are asked to dial in using the following information: Dial-in: +1 (866) 791-7194 Passcode: 49354394 2 2
Disclaimer This presentation has been prepared by the Commonwealth of Massachusetts to provide summary information relative to the general obligation credit of the Commonwealth. The presentation is incomplete. The presentation is not part of the Commonwealth’s Information Statement (Information Statement) and is qualified in all respects by reference to the most recently updated Information Statement that has been filed with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) system. Investment decisions relating to Commonwealth general obligation bonds and notes should be based only upon the most recently updated Information Statement and the Official Statement of the Commonwealth relating to such bonds or notes. The provision of access to this presentation does not constitute an offer to sell or the solicitation of an offer to buy any bonds or notes that may be described or mentioned in the presentation. Commonwealth bonds and notes are sold only by means of an Official Statement and through registered broker-dealers. The information set forth herein includes information obtained from non-Commonwealth sources that are believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Commonwealth. All information and expressions of opinion herein are subject to change without notice. The Commonwealth undertakes no obligation to provide any additional information or to update any of the information or the conclusions contained herein or to correct any inaccuracies that may become apparent. This presentation contains certain forward-looking statements that are subject to a variety of risks and uncertainties that could cause actual results to differ from the projected results, including without limitation general economic and business conditions, conditions in the financial markets, the financial condition of the Commonwealth and various state agencies and authorities, receipt of federal grants, litigation, arbitration, force majeure events and various other factors that are beyond the control of the Commonwealth and its various agencies and authorities. Because of the inability to predict all factors that may affect future decisions, actions, events or financial circumstances, what actually happens may be different from what is set forth in such forward-looking statements. Forward-looking statements are indicated by use of such words as “may,” “will,” “should,” “intends,” “expects,” “believes,” “anticipates,” “estimates” and others. 3 3
TREASURER DEBORAH B. GOLDBERG 4 4
GOVERNOR CHARLES D. BAKER 5 5
Economic Overview Sue Perez Deputy Treasurer 6 6
Economic Update – Statistical Overview Massachusetts United States Population Estimated Percent Change, July 1, 2010 – July 1, 2018 5.1% 5.8% Personal Income, Consumer Prices Per Capita Peronal Income, 2019 Q3 $74,818 $56,832 Annual Percent Change in CPI-U, 2019 1.9% 1.8% Annual Percent Change in CPI-U (NSA) , November 2018- November 2019 2.1% 2.1% Employment Percent Change in Nonfarm Employment, December 2018 – December 2019 1.2% 1.4% 2019 Average Annual Unemployment Rate 2.9% 3.7% December 2019 Unemployment Rate 2.8% 3.5% Education 2017 Expenditure Per Pupil K-12, Public $16,592 $12,499 2018 Percent of Adults with at least a Bachelor's Degree 44.5% 32.6% Economic Base and Performance Percent Change in Annual Real Gross Domestic Product, 2018 Q3- 2019Q3 2.1% 2.4% Percent Change in International Exports, Nov 2018- Nov 2019 -2.0% -1.8% 10 Year Average Annual Change in GDP 2008-2018 2.1% 1.8% Source: UMASS Donohue Institute 7 7
Economic Update – Unemployment Monthly Unemployment Rate 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% Source: US Dept of Labor, Bureau Source: US Dept of Labor, Bureau MA US of Labor Statistics of Labor Statistics 8 8
Economic Data: Per Capita Personal Income Massachusetts Per Capita Income as a Percent of US Average 133% 132% 131% 130% 129% 128% 127% Source: US Department of Commerce, Bureau of Economic Analysis 9 9
Economic Update – Coincident Index 10 10 100.00 110.00 120.00 130.00 140.00 150.00 90.00 2010-01-01 2010-04-01 2010-07-01 Index is comprised of Non-farm payroll, Average hours worked (manufacturing), Unemployment Rate, and Salary disbursements deflated by 2010-10-01 2011-01-01 2011-04-01 2011-07-01 2011-10-01 2012-01-01 2012-04-01 2012-07-01 2012-10-01 2013-01-01 Coincident Economic Activity Index 2013-04-01 2013-07-01 2013-10-01 MA 2014-01-01 the consumer price index 2014-04-01 2014-07-01 CT 2014-10-01 2015-01-01 NY 2015-04-01 2015-07-01 2015-10-01 US 2016-01-01 2016-04-01 2016-07-01 2016-10-01 2017-01-01 2017-04-01 2017-07-01 2017-10-01 2018-01-01 of St. Louis Source: Federal Reserve Bank 2018-04-01 2018-07-01 2018-10-01 2019-01-01 2019-04-01 2019-07-01 2019-10-01
Department of Revenue Dr. Kazim P. Özyurt Chief Economist, Director, Office of Tax Policy & Analysis 11 11
Monthly year-over-year changes in collections: 12 12
FY20 Year-to-Date (Through December) Tax Collections Update December 2019 Tax Collection Summary (in $ millions) Preliminary as of January 22, 2020 Month of December FY20 YTD as of December 12/2019 v. 12/2019 YTD 12/2019 YTD 12/2019 YTD 12/2019 YTD 12/2019 YTD 12/2019 12/2019 v. 12/2019 v. 12/2019 Actual 12/2019 Actual 12/2018 12/2019 v. 12/2018 v. 12/2018 Actual vs Actual vs v. 12/2018 Actual 12/2018 $ 12/2018 % vs Benchmark $ vs Benchmark Baseline % YTD Actual YTD $ YTD % Benchmark $ Benchmark % YTD Baseline Collections Fav/(Unfav) Fav/(Unfav) Fav/(Unfav) % Fav/(Unfav) Change Collections Fav/(Unfav) Fav/(Unfav) Fav/(Unfav) Fav/(Unfav) % Change Income Income Withholding 1,263 (56) -4.2% (111) -8.0% -0.3% 6,664 228 +3.5% (33) -0.5% +4.5% Income Est. Payments 141 20 +16.3% 15 +11.5% +17.1% 924 53 +6.1% 69 +8.1% +6.9% Income Returns/Bills 35 (2) -4.9% (1) -2.5% -4.9% 351 15 +4.5% 25 +7.7% +4.9% Income Refunds Net (outflow) (7) 20 +75.2% 15 +69.1% +75.5% (258) 26 +9.1% (41) -19.1% +7.6% Subtotal Non-withheld Income 170 38 +29.3% 29 +20.4% +30.1% 1,017 94 +10.2% 53 +5.5% +10.7% Subtotal Income 1,433 (17) -1.2% (82) -5.4% +2.5% 7,682 322 +4.4% 20 +0.3% +5.3% Sales & Use Sales - Regular 415 21 +5.4% (11) -2.5% +3.0% 2,471 145 +6.2% (16) -0.6% +5.0% Sales - Meals 101 9 +9.3% 3 +3.3% +8.9% 667 30 +4.7% (4) -0.6% +4.7% Sales - Motor Vehicles 74 4 +5.4% (1) -1.9% +1.8% 446 9 +2.1% (8) -1.7% +2.1% Subtotal Sales & Use 590 34 +6.1% (9) -1.5% +3.8% 3,584 184 +5.4% (28) -0.8% +4.6% Corporate & Business - Total 388 20 +5.4% 53 +15.7% +7.8% 1,260 32 +2.6% 104 +9.0% +4.1% All Other 201 8 +4.4% (1) -0.4% +1.7% 1,409 85 +6.4% 137 +10.7% +2.1% Total Tax Collections 2,612 45 +1.7% (39) -1.5% +3.5% 13,934 623 +4.7% 233 +1.7% +4.7% Notes: (1) The figures above exclude Tax-Related Settlements & Judgments exceeding $10 million each. The certified total for these was $0.0 million in December 2019 and $12.5 million during FY20 YTD. (2) The December and year-to-date benchmarks reflect the full Fiscal Year 2020 benchmark of $30.099 billion. 13 13
FY20 Year-to-Date (Through December) Tax Collections Update • Fiscal 2020 tax collections through December Year-to-Date total: $13.934 billion +$623 million, or 4.7% from the same period in fiscal 2019 o $233 million above December Year-to Date benchmark o above benchmark performance in • income tax, • corporate & business tax collections, and • “All Other” taxes, incl. motor fuels, cigarettes, alcohol and deeds. partially offset by o slightly lower than expected • sales tax 14 14
FY20 Year-to-Date (Through December Tax Collections Update More specifically: • Withholding : $6.664B, +$228M, +3.5% actual, +4.5% baseline, and $33M or 0.5% below benchmark • Non-withholding: $1.017B, +$94M or 10.2% actual, 10.7% baseline, and $53M or +5.5% above benchmark • Sales & use tax collections: $3.584B, +$184M, +5.4% actual, +4.6% baseline, $28M or 0.8% below benchmark • Corporate and business tax collections: $1.26B, +$32M, +2.6% actual, +4.1% baseline; $104M or 9.0% over benchmark • All Other taxes: $1.409B, +$85M, +6.4% actual, +2.1% baseline; $137M or 10.7% above benchmark 15 15
Executive Office for Administration & Finance Michael Heffernan Catharine Hornby Secretary Undersecretary Mark Attia Bran Shim Assistant Secretary Finance Director 16 16
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