Annapolis, Md. (December 15, 2015) – The Board of Revenue Estimates met today to write up revenue projections $31.4 million for Fiscal Year 2016 and $60.1 million for Fiscal Year 2017. As chairman of the Board, Comptroller Peter Franchot, released the following statement:
“We are voting to write up our revenue projections $31.4 million for Fiscal Year 2016 and $60.1 million for Fiscal Year 2017.
“Coming on the heels of our action to write up expected revenues for the current and next fiscal year by $212.2 million in September, and on closing the books on Fiscal Year 2015 with a fund balance of $295 million, today’s action provides an opportunity for restrained optimism, and it certainly serves as positive news with respect to the state budget, just as the Governor and General Assembly prepare for the upcoming Legislative Session.
‘However, it’s important that today’s action be taken in the context of the broader economy – the real Maryland economy – not exclusively on what’s happening with the state budget, but what’s actually going on with the budgets of Maryland families and small businesses.
“While we are revising expectations for income tax receipts by nearly $34 million in Fiscal Year 2016 and $100 million in Fiscal Year 2017, we are, simultaneously, writing down withholding receipts by $64 million for the same two fiscal years.
“Rather than mere numbers being revised in one direction or another, this is a window into the economic realities facing Maryland families at the moment. In essence, non-wage income earners – generally associated with wealthier taxpayers – are doing better than our very modest prior expectations. But actual wage earners, predominantly Maryland’s middle class, are faring worse, with average wage growth standing at a disappointing rate of 2.4 percent, well below Maryland’s historical standards.
“That’s why it should be no surprise that in a consumer-driven economy, the lack of wages has led to weakness in retail sales, evidenced by the fact that expected sales and use tax receipts are being written-down by more than $75 million for Fiscal Years 2016 and 2017.
“So, while we can rightfully take some measure of relief that state revenues are headed in a positive direction, the empirical evidence buried in this report tells the same story I continue to hear anecdotally as I travel throughout the State: This economic recovery hasn’t felt like a recovery at all for far too many Maryland families and small businesses.
“With higher paid and higher skilled jobs from before the recession now being replaced with lower skilled and lower paid alternatives, the unemployment numbers aren’t telling the full story: workers are bringing home the same or less pay as their living costs are rising, leaving them with less disposable income to spend, and in our consumer-powered economy, that in turn means that far too many businesses – especially small, local businesses – are struggling to survive as consumers rein in discretionary spending.
“Without a doubt, this continues to be the slowest and most anemic economic recovery of our lifetimes, and it is unrealistic for us to expect a return to pre-recession levels of economic growth. The mere fact that we are still using the term “recovery” more than seven years after the depths of the Great Recession demonstrates just how challenging and extraordinary these economic times remain.
“Now is certainly not the time to take a victory lap over snippets of positive news with the state budget when there remains so many significant challenges facing Maryland families and small businesses. And it’s not a time to set unrealistic expectations based on top-line revenue figures without the context of the serious economic challenges that lie beneath the surface.
“These tepid levels of growth have become our “new normal” and we need to make policy decisions that reflect that reality, recognizing that the revenue numbers may be revised up, but the underlying challenges for consumers and small businesses remain, without any indication that we’ll be returning to Maryland’s historical levels of growth any time soon, if at all. That means being prudent when making spending decisions in the months ahead. It means avoiding an unsustainable accumulation of debt with the false expectation that revenues will rise fast enough to pay escalating payments. And it especially means avoiding any proposals that would take more money out of the pockets of consumers who are already reluctant to put money back into the Maryland economy.
“We have to establish a stable and predictable business climate where consumers have disposable income and the confidence to spend it, and where employers are comfortable to invest capital and create jobs. If we heed this report within the proper context, maintain a cautious mindset and focus squarely on our essential priorities that solve fiscal challenges without incurring unaffordable future obligations, we have an opportunity to re-instill confidence in the Maryland economy.”
View December 2015 Updated Revenue Estimates here
Media Contact: Andrew Friedson, (410) 260-7060 (office) 443-414-3083 (cell)