STATE FINANCES are treading water, and there’s growing fear on Beacon Hill that voters could soon yank Massachusetts below the surface.

The annual fiscal check-up that state budget-writers convened Tuesday featured the same calls for caution and warnings about a volatile environment that have dominated conversations for the past year-plus. But this time around, the 2026 election also emerged as a point of concern.

That’s because influential business groups are pushing a pair of ballot questions that would trim the state’s income tax rate by one-fifth and make it much more likely for the state to owe refunds to taxpayers.

If the proposals earn a spot on the ballot and secure enough support from voters, they could carve billions of dollars out of the revenue foundations on which lawmakers have built their quickly growing spending plans.

House budget chief Aaron Michlewitz went out of his way at Tuesday’s hearing to lament the potential impacts, warning that they could compound the already-potent stress of federal funding cuts and a wobbly economy.

“Given these realities and the funding priorities that Massachusetts needs to realize in order to continue to be a top-tier state, now is not the time for irresponsible ballot questions,” Michlewitz said during his opening remarks. “These questions would only benefit high-end earners and would require either dramatic spending cuts or other tax increases in order to maintain the Commonwealth’s fiscal stability.”

Michlewitz did not explicitly identify which of the dozen prospective questions are giving him agita, but he almost certainly was referencing the two backed by the Massachusetts High Technology Council, the Pioneer Institute, and the Massachusetts Competitive Partnership, which together launched a group called the Massachusetts Opportunity Alliance.

One of the coalition’s questions would gradually reduce the state’s income tax rate from 5 percent to 4 percent, and the other would overhaul the voter-approved cap on allowable state tax collections, forcing more frequent returns of tax dollars.

Proponents say the measures could reduce the burden on Bay Staters, who face a notoriously steep cost of living.

“People who leave Massachusetts cite high costs, and taxes are the top of that list,” Mass. High-Tech Council president Chris Anderson said last month.

But tax relief always requires a tradeoff by the state.

Kazim Ozyurt, the chief economist in the Department of Revenue, said Tuesday that cutting the income tax rate by a percentage point would be “really costly,” forecasting it could trim $4.2 billion to $4.8 billion in annual revenue once fully implemented.

The impacts could hit immediately, too. The measure would lower the rate over a three-year period starting in tax year 2027 — just a few weeks after the election and halfway through a state budget cycle.

Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, estimated the state could face a loss of $800 million to $1 billion in tax revenue in fiscal year 2027 if the measure passes.

Horowitz told lawmakers cutting the income tax rate to 4 percent could have “a bigger effect than even a prolonged recession.”

With campaign season already underway, Michlewitz’s comments quickly drew a rebuke from Republican gubernatorial candidate Mike Kennealy.

“The only thing ‘irresponsible’ here is Beacon Hill’s addiction to overspending,” said Kennealy, who worked as housing and economic development secretary for former governor Charlie Baker.

It’s not just the tax-related proposals that could upend government finances. Horowitz argued that a ballot question seeking to cap rent increases at no more than inflation in many apartments across the state “could really shake the real estate market and upend local tax systems.”

“The potential impact on municipal finance of the rent control ballot question is large and underappreciated as yet,” he said.

Even without accounting for massive mid-cycle changes to state tax policy, economic experts on Tuesday described the Massachusetts fiscal outlook as unsteady. The words “slow” and “sluggish” were deployed multiple times each in describing the state’s economy, and several speakers pointed out that job growth over the past two years is essentially flat.

Still, some speakers counterbalanced that with a glass-half-full outlook.

“I think of when we were here back in April, and there were a lot of concerns that we were going to have to downgrade revenues in [fiscal year] ‘26 by billions of dollars,” said Massachusetts Taxpayers Foundation president Doug Howgate. “Slow and sluggish growth — right now, it could be worse.”

Revenue Commissioner Geoffrey Snyder forecast that state tax collections this fiscal year will land anywhere from $155 million below the “benchmark” forecast to $563 million above the benchmark. In fiscal 2027, which starts July 1, Snyder projected tax collections will grow 1.2 percent to 3.1 percent over the current year.

Some of that growth is tempered by the effects of the federal reconciliation megalaw, whose combined tax code changes are set to cost Massachusetts $664 million in fiscal 2026 and another $282 million in fiscal 2027, according to Snyder.

Robust collections from the voter-approved surtax on wealthy earners have managed to soften a lot of strain in recent years, but Snyder warned the boom might soon begin to ebb.

The revenue department expects another massive surplus of unallocated surtax revenue by the end of this fiscal year. Next year, Snyder cautioned, surtax collections will fall off from the updated fiscal 2026 forecast, with a slight decline or a more than 10 percent plunge both possible.

He pitched the more pessimistic outlook as a level-headed approach after a stretch of robust market performance, which drove up capital gains that make up an outsize share of surtax revenue.

“We’re going to need everything to be firing the right way to see [that performance] again in ‘27,” Snyder said.

Tuesday’s hearing, jointly led by the two Ways and Means Committee chairs and Administration and Finance Secretary Matthew Gorzkowicz, represents a routine step toward development of the next state budget. The trio will use information shared to develop a “consensus revenue” forecast for fiscal 2027 in the coming weeks, and then Gov. Maura Healey must file her spending proposal for that cycle by January 28, 2026.

State leaders in the past couple of years have already scrounged under most of the metaphorical couch cushions to find spare change, including by diverting funds intended to mitigate the impact of casinos.

They’ve largely resisted calls from activists to dip into the record $8.6 billion in the state’s long-term savings account, a maneuver that Howgate cautioned would not be “a good use” of the reserves.

“It’s a tool that’s best used for temporary shocks that we don’t see coming, that we think we need to stabilize in a short period of time and then get to the other side,” he said of the rainy-day fund. “It is not an effective tool to backfill permanent federal policy changes [or] to prop up levels of overall spending that aren’t supported by ongoing revenues. Doing so is simply going to create a bigger budget challenge, whether it’s in ‘27 or ‘28 or going forward.”