New Revenue Estimates

Maryland’s Board of Revenue Estimates issued a report reducing revenues by $66 million in the current year (fiscal year 2010) and leaving the current estimate unchanged for fiscal year 2011.

Because the Governor Martin O’Malley provided a $273 million cushion in his proposed budget, the legislature can still pass a balanced budget without making deeper cuts.

The reasons behind the $66 million write-down of current year revenues are  lower-than-expected final payments in 2009 income taxes ($53 million down) and reduced sales tax and lottery revenues as a result of this year’s  winter storms ($49 million down).  

The Board added $36 million to the corporation tax estimate due to strong year-to-date performance.

The Board stated that the economic forecast remains essentially unchanged from their December report, so they had no reason to revise revenue estimates for fiscal year 2011.

Although the revenue prospects seem to have stabilized, estimated fiscal year 2011 revenues remain at roughly the same level as actual collections in fiscal year 2008. The Board’s report states that “… the revenue outlook remains bleak, and the risks to the forecast are still substantial.”

Comptroller Peter Franchot, chair of the Board of Revenue Estimates wrote,“Estimates for the remainder of the current fiscal year anticipate a decline in revenue of more than 5 percent, the worst revenue performance the State of Maryland has experienced in more than four decades.  As we move into Fiscal Year 2011, revenue is estimated to increase by only 3.6 percent, the 8th worst revenue performance in the State since 1969.  While today's report is relatively unchanged, the underlying assumptions for economic and revenue performance in the State of Maryland remain exceedingly grim. While many of the pundits are quick to declare that the worst is behind us - there are clear signs that point to ongoing trouble in the economy.”

Legislative budget committees have completed their hearings on agency budgets are set to begin their budget decision process on March 15.

There are two reasons why legislative budget committees may still recommend substantial budget cuts, even though they don’t need them to achieve a constitutionally-balanced budget.

First, the budget relies on $389 million from an assumed extension of enhanced federal Medicaid funding in the Recovery Act. This funding is not certain, and the legislature may seek to cut budgets to make up the difference.

Secondly, the budget relies on more than $900 million in one-time transfers.  Legislators may seek to cut budgets to bring appropriations more closely in line with ongoing revenues. 3/10/10

>> See the Revenue Report [PDF, 4pp.]

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