New Maryland Revenue Estimates Released; Comptroller Urges Caution as Economy Remains Fragile

From the Maryland Comptroller’s office:

The Maryland Board of Revenue Estimates (BRE) today released the updated revenue estimates for fiscal year 2013 and the first official estimates for fiscal year 2014. The board submitted a revised estimate of general fund revenues for fiscal year 2013 of $14.908 billion and an estimate of $15.317 billion for fiscal year 2014. The fiscal year 2013 estimate represents an increase of $180 million over the March estimate, upon which the fiscal year 2013 budget was based.

Comptroller Peter Franchot, chairman of the BRE, issued the following statement regarding the latest estimates:

“While I am pleased that we are writing up the fiscal year 2013 estimates by $180 million, it is very important to put these numbers in their proper context. This change is due primarily to the increase in income tax collections from the latest round of tax increases. These general fund revenue estimates call for growth of only 4.6% for fiscal year 2013—including the impact of the most recent round of tax increases–and only 2.7% for fiscal year 2014. Adjusted for these tax increases, revenues are projected to grow only 3.1%.

These estimates represent a snapshot of a Maryland economy that remains fundamentally fragile, and a national recovery that is anemic at best.

I recognize that we’re in an overheated election-year environment right now, where economic data is routinely misused for political purposes, but the facts are what they are. I sincerely believe that we will not be able to address our economic challenges in a sensible and non-partisan manner if we can’t even be honest about the problem. I am not suggesting that we are about to head into another recession but I do believe there are red flags out there and we need to be cautious when planning future spending.

The latest round of tax increases has helped the income tax collections tick up, but baseline growth remains exceedingly low. Furthermore, our sales tax collections show historically low growth for this point of the economic cycle. This is not a surprise to those of us who spend our days breaking down state and national economic data. Maryland’s unemployment rate of seven percent remains historically high by our standards and our rate of private sector job growth remains firmly mired in the bottom tier among states. Furthermore, it is also vital that we keep in mind Maryland families are working harder than ever yet are taking home less money. Maryland now ranks 47th in average weekly earnings growth and 43rd in average hourly earnings growth, and we actually experienced declines in both categories this year.

Finally, while the national election has taken the spotlight off the issue, still unresolved is whether a budget compromise will be reached or whether automatic cuts in federal spending will take place early next year.

Maryland is uniquely positioned to suffer from the success or failure of the budget negotiations, whatever the case may be, due to our proximity to Washington and our extraordinary economic dependence on the federal government. Maryland ranks third out of 50 states and the District in percent of employees that either work directly for the government or for professional and business services that contract with the government.

Drastic cutbacks by the federal government will send a shockwave through our economy.

All of this, combined with the fact that families are paying more, out of pocket, for everything from gasoline and groceries to health care, presents compelling evidence that far too many Maryland consumers and small businesses are struggling just to make it, and that there are still considerable downside risks in our immediate economic future.

Accordingly, I believe it would be exceedingly premature, if not reckless, for our state leaders to make revenue and spending decisions with the assumption that we’re on the road to full economic recovery.

It is in that spirit that I will continue to urge the governor and the General Assembly to exercise appropriate restraint when it comes to new spending. And I will encourage agencies throughout state government to tighten their belts even further and deliver better taxpayer services at a lower cost.”