Improved economy raises Md. revenue

But Hogan administration won’t reverse cuts, despite $80 million windfall

State officials say the government will have $80 million more to spend than originally projected this year thanks to an improving economy, but the Hogan administration has no plans to reverse budget cuts.

The Board of Revenue Estimates revised its forecast Monday for the current fiscal year, saying people’s incomes rose more than expected and would generate extra tax revenue for Maryland this year and next. Next year, the pool of extra cash is expected to be even bigger: $130 million.

But officials repeatedly urged caution in using the higher-than-expected revenue for more state spending.

The sums are small compared to the state’s nearly $16 billion spending plan. Gov. Larry Hogan, a Republican, and Comptroller Peter Franchot, a Democrat, each said the state should continue to curb spending now and in the future.

Franchot said the news warranted “restrained optimism” about the state’s economy. He added, “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 prerecessionary patterns of economic expansion.”

In a statement, Hogan said, “While there’s no question that we are now headed in the right direction, we must continue to budget cautiously and keep spending under control.”

Hogan called this year for a 2 percent across-the-board cut at state agencies to trim costs and tussled with the legislature over changing long-term spending plans.

In the end, Hogan withheld $68 million the Democrat-controlled legislature had designated for schools and cut $121 million from state agencies.

The new state estimate does not take into account what would happen to the state’s finances if congressional lawmakers are unable to avert a federal government shutdown next week.

Andrew M. Schaufele, executive secretary to the board, said that while the 2013 shutdown had an impact on the state’s finances, “it’s not completely destructive.”

State Treasurer Nancy K. Kopp said the gridlock in Washington over government funding “is a serious concern” for Maryland because so many contractors rely on government work. A shutdown causes a ripple effect as contractors pull back on plans to deal with the uncertainty.

Hogan’s budget secretary identified the potential federal shutdown as one of two major threats to the state’s economy. David R. Brinkley said the shutdown and slow growth in developing countries could together cause trouble to Maryland’s balance sheets and businesses.

Brinkley said the administration had no plans to reverse agency cuts announced this summer.

“We’re still trying to play defensive medicine,” Brinkley said.