Comptroller Franchot: “We Must be Careful Not to Interpret These Modestly Encouraging Numbers as a License to Authorize Excessive Spending or to Incur Excessive Debt”

From the Office of the Comptroller of Maryland:

Annapolis, Md. (September 21, 2015) – The Board of Revenue Estimates met today to write up revenue estimates for Fiscal Years 2016 and 2017 by $212.2 million. Comptroller Peter Franchot, as chairman of the Board, released the following statement:

“This action, coming just weeks after we closed the books on Fiscal Year 2015 with a fund balance of $295 million, provides reason for restrained optimism. As do recent occurrences within the broader Maryland economy, ranging from a pattern of modest growth in private sector wages to the reduction in the State of Maryland’s official rate of unemployment.

I would suggest that we keep these numbers in their proper perspective, and I believe that my colleagues, and those who are entrusted with fiscal policy decisions on behalf of the State of Maryland, should avoid falling into the trap of unrealistic expectations.

Our state continues to trail the nation in key economic indicators. Personal income in Maryland is growing at a rate of 4 percent, compared to 4.4 percent nationally. At 4.4 percent, private sector wage growth for the year remains substantially below the national rate of 5.4 percent. Finally, our year-to-date employment growth of 1.7 percent, even if this figure ultimately stands the test of time, lags considerably behind the national average of 2.2 percent.

Sluggish growth and challenging economic conditions mean far too many Marylanders are taking home the same or less pay at a time when their living costs are rising and they have less disposable income to spend. Which means that in this consumer-powered economy, far too many businesses – and in particular, small and locally-owned businesses that are the backbone of the Maryland economy – are struggling to survive at a time when consumers are reining in their discretionary spending. Make no mistake, this remains the slowest and most tentative economic recovery of our lifetimes, and I think that it would be imprudent to expect a return to pre-recessionary patterns of economic expansion.

Instead, I believe that we should accept these conditions as the “new normal” and I would encourage my fellow state leaders to adopt this approach when making spending and fiscal policy decisions in the months ahead.

More than anything else, we must establish a business climate that is characterized by stability and predictability, one in which employers feel comfortable investing capital and creating jobs. We must avoid decisions that take more money out of the pockets of consumers who are already reluctant to put money back into the Maryland economy.

Finally, we must be careful not to interpret these modestly encouraging numbers as a license to authorize excessive spending or to incur excessive debt. Rather, I would suggest that we maintain a cautious mindset and focus on those truly essential investment priorities, such as the overdue replenishment of our state’s historically underfunded pension system, which would reflect our State’s commitment to keeping its word to its teachers, law enforcement officers and all of our outstanding public employees.”