Massachusetts tax forecast too optimistic: watchdog

BOSTON (Reuters) - Massachusetts' tax forecasts are overly optimistic, and the state should trim its revenue estimates by at least $600 million, a fiscal watchdog said on Thursday.

Michael Widmer, president of the nonpartisan Massachusetts Taxpayers Foundation, who testified at a legislative hearing, also warned of another $200 million to $300 million shortfall in Medicaid.

In July, Massachusetts began its current fiscal year with a forecast for nearly $19 billion in revenues.

"We're talking about hundreds of millions dollars (of lost revenue) this year versus billions last year," Widmer said.

Massachusetts only has $500 million left in its rainy day fund, down from $2.3 billion last year, according to Treasurer Timothy Cahill.

Earlier this week, Democratic Governor Deval Patrick said his staff has begun identifying emergency cuts in the current budget after the September tax revenues underperformed by $243 million.

Tax collections for the first quarter of the fiscal year totaled $4.3 billion -- about 10 percent below a year-ago, according to the Department of Revenue.

(Reporting by Kevin McNicholas in Boston; additional reporting by Tom Ryan in New York; Editing by Leslie Adler)