Working against deeper budget deficit estimates, Massachusetts House and Senate leaders are negotiating a budget for the new fiscal year that will start Friday.

In a note to investors earlier this week, Secretary of Administration and Finance Kristen Lepore projected the commonwealth's latest tax-collection estimates in fiscal 2017 to run from $650 million to $950 million below Gov. Charlie Baker's January benchmark forecast of $25.8 billion in tax revenue.

"Although capital gains tax collections for fiscal 2017 have not been formally re-projected, a substantial reduction in such collections can be expected in accordance with this lower projection for overall tax collections," Lepore wrote in advance of Massachusetts' sale this week of nearly $900 million in general obligation bonds.

Massachusetts has kept adjusting its revenue shortfall estimates since saying earlier this month that the gap would be $320 million to $370 million.

S&P Global Ratings said late Tuesday that its negative outlook reflects the potential for lower general fund balances and the possibility that Massachusetts will override its formula for depositing certain capital gains taxes into its budget stabilization fund.

"We expect to have more clarity on fiscal year-end 2016 fund balances and future deposits, if any, into the budget stabilization fund after the fiscal 2017 budget is enacted," said S&P, which rates Massachusetts GOs AA-plus.

Fitch Ratings also assigns AA-plus, while its outlook is stable. Moody's Investors Service rates the commonwealth Aa1 and stable.

Lepore said the budget discussions could result in a "substantial reduction" in a projected transfer of $206 million to the stabilization, or rainy-day fund. Massachusetts, with about $1.25 billion, has one of the largest rainy-day balances.

Under state law, a committee of House and Senate negotiators works out a final budget proposal for the full legislature to consider. The House in April approved a $39.5 billion plan, while the Senate in May after adding some spending during floor debate, approved a fractionally higher $39.6 billion version.

Senate President Stanley Rosenberg, D-Amherst dodged questions about sticking points among budget negotiators. "You know I can't tell you that," he said. "All these conversations are private."

Baker, meeting with reporters, acknowledged the uncertainty of Great Britain's vote to leave the European Union, known as Brexit.

"We're making some assumptions for next year that are based on best guesses with the notion that Brexit falls into the category of an unknown at this point," he said.

Baker submitted a $5.3 billion temporary budget for July, should the legislature need it. If he and lawmakers sign a full-year budget by the end of that month, it would supersede the temporary plan.

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