Pictured above: Attending the Bureau of Revenue Estimates meeting are, from left: David R. Brinkley, Secretary, Maryland Department of Budget and Management, Maryland Treasurer Nancy Kopp, Maryland Comptroller Peter Franchot and Andrew Schaufele, Director, Bureau of Revenue Estimates. Photo courtesy of Maryland Comptroller’s Office.
Annapolis, MD – The Board of Revenue Estimates met March 9 to write down revenue estimates for Fiscal Years 2016 and 2017 by $51.4 million. Comptroller Peter Franchot, as Chairman of the Board, released the following statement:
“This reduction in estimates reflects very weak sales during the holiday shopping season and the month of January and translates to reduced revenue for the State. What’s happening in Maryland mirrors what’s happening in the nation as a whole. Consumers hope the economy is improving but they’re being cautious.
“Sales tax collections weren’t where we would like them to be. Our consumer-driven economy continues to be stagnant and that is reflected by the fact that our sales tax is projected to grow 2.3 percent this year. This underlines the reality that economic activity throughout the state remains flat. We continue to see lackluster growth in wages and minimal growth in high-paying jobs.
“It is no surprise that in a consumer-driven economy, a lack of wages has led to weaknesses in retail sales, evidenced by the fact that expected sales and use tax receipts are being written down by $66 million for FY 16 and $60.6 million for FY 2017. This means that consumers are continuing to rein in their discretionary spending.
“The sales tax sluggishness was offset by some one-time additions: higher corporate income tax collections due to some dispute resolutions, higher lottery ticket sales driven up by a large Powerball jackpot, and higher estate tax revenue because more wealthy individuals passed away than in a typical year. These drove a minor net positive for FY 16 of $9.2 million. The sales tax carried forward into FY 17 (-$60.6 million) had a combined write-down impact of $51.4 million.
“Without a doubt, this continues to be the slowest and most tepid economic recovery of our lifetimes. Our unemployment rate remains historically high by Maryland standards. In the national economy, we’re seeing positive signs right now, but we can’t take for granted that it’s a definitive trend.
“Clearly, we shouldn’t make spending plans that include revenues we know have a strong chance of never showing up. And we shouldn’t make wishful assumptions that sales tax revenues will increase. There’s a Maryland tradition of being prudently conservative with revenue assumptions. The same matters that concerned Maryland families and small businesses last year still concern them. To act responsibly, we must assume those concerns are going to stick around for a while.
“I believe the most prudent path is to accept these economic conditions as our ‘new normal.’ State government should help build an economy predicated on a robust private sector, not overly reliant on federal funds. The federal government remains a major asset, but with national politics where they are, over-reliance on it is risky. A sustained economic recovery relies on family-supporting jobs. Creating and keeping those jobs means we have to restore consumer confidence to spend, and business confidence to expand and hire.
“Treasurer Nancy Kopp, Budget Secretary David Brinkley and I continue the tradition of working collaboratively to ensure that Maryland budgeting and planning are based on sound data. I want to thank the Revenue Monitoring Committee for their continued exceptional work on behalf of the taxpayers of the State of Maryland.
“We must be smart in how we spend taxpayer dollars — invest in the things we need and wait on things we just want. We need to be careful borrowing money so we avoid unnecessary debt. If we stay alert, set sensible spending priorities, and respect the people’s concerns, Maryland will end up stronger than ever.”