Maryland drops revenue estimates by almost $478M
Maryland officials said Thursday they are anticipating hundreds of millions of dollars less than previously expected in the next fiscal year, just as the governor and General Assembly are negotiating on a range of ambitious policies.
The state will collect $400.3 million less in the fiscal year that begins July 1 and about $77.4 million less in the current fiscal year compared to the most recent prior projections, the Maryland Board of Revenue Estimates said. Next year’s total state revenue will rise slightly to $24.7 billion, according to the revised projection.
The change follows a similar December announcement, when the board began lowering expectations because of slower economic growth. Recent years saw pandemic-related government stimulus leading to billions of dollars of surplus funds. Since then, a “sharp decline” in personal income tax payments and Maryland’s underperformance compared to the national economy have contributed to reduced revenue growth, the board said Thursday.
Comptroller Brooke Lierman said the trends “represent a flashing yellow light” as Maryland continues to rebound from the coronavirus pandemic and shift to a new type of economy.
“We are experiencing a new walking speed, if you will, for our economy and we have yet to fully define what that walking speed is,” Lierman said. “These changes are ongoing and they remain fluid.”
State lawmakers and Gov. Wes Moore have until the end of the annual 90-day legislative session, scheduled for April 10, to finish amending a $63 billion budget proposal that the new Democratic governor introduced in January. The full budget includes additional monies beyond what was projected by the board Thursday.
Moore’s first-ever budget plan called for using some of the state’s roughly $2 billion surplus on increased spending for transportation and for the state’s long-term education plan. At the same time, it included funding for ideas that Moore has said are his top priorities — like expanding tax credits for low-income families, additional tax cuts for veterans and starting what could become a major public service program for recent high school graduates.
It also called for keeping $2.5 billion in the rainy day fund and maintaining an $820 million surplus. If no other changes are made, the surplus would drop to $342 million in light of Thursday’s news, Budget Secretary Helene Grady said.
“We will continue to be selective, disciplined and intentional with our investment decisions,” Grady said during the Board of Revenue Estimates meeting. “Our constituents and taxpayers deserve no less.”
Senate President Bill Ferguson, a Baltimore Democrat, has cited cost as part of the reason why some of the governor’s bills likely will be amended in the coming weeks and that they might not all pass.
Moore, while acknowledging having an ambitious agenda, also has tried to manage expectations, starting weeks before he was sworn-in and was already getting what he called an unprecedented number of requests for state funding.
Reasons for caution, he said at the time, included a lack of new federal pandemic-related stimulus funds and a “murky” economic outlook that could include a recession.
The Board of Revenue Estimates also cited stagnant tax collections and a decrease in capital gains income when it lowered an original 2024 fiscal year revenue projection by $166.8 million in December.
Most of the additional drop announced Thursday was for projected personal income taxes, about $329 million less than estimated in December. The estimate for sales tax revenue also dropped $147 million over prior estimates while corporate tax estimates increased by almost $51 million.
The total revenue amount of $24.7 billion is still 4.3% more than the the current year of $23.7 billion — it’s just a smaller amount of growth than initially anticipated.
State Treasurer Dereck Davis said the news wasn’t good but also not entirely surprising. Budget officials have been anticipating this downturn and it will be up to the governor and General Assembly to be “socially responsible and fiscally prudent” as they budget, he said.
Grady, Moore’s top budget official, did not indicate whether the forecast would change the administration’s plans.
Ferguson has said he is “absolutely willing” to use new budgeting powers that would allow lawmakers to shift money around in the budget without the governor’s approval. Still, he and others have said they are looking forward to working with Moore’s administration and don’t have specific plans to use those powers.