State revenues may finally be on the rise

ANNAPOLIS — State revenues may be on the rise after plummeting over the last two years, according to the Maryland Department of Legislative Services.

Although still lagging, revenues over the last month have started to move in the right direction.

In October, revenues were down 7.2 percent from the same period last year, an improvement from September, when they were down 9.2 percent from the previous year.

This gives budget analysts a rare chance for optimism.

“It’s hard to say if that’s good news,” said John Rohrer, a Maryland fiscal and policy analyst at the Department of Legislative Services, during a Spending Affordability Committee meeting Tuesday.

By this coming summer, the end of the current fiscal year, revenues are projected to be 4.5 percent below the previous fiscal year.

“So we’re making progress,” said Warren Deschenaux, Maryland’s top budget analyst.

Stronger state revenues could mean Maryland will not have to make more cuts to the fiscal 2010 budget after $300 million in scheduled reductions are announced by the Board of Public Works later this month.

“We’re hopeful that things are looking up,” said Rohrer, though he acknowledged the state has a long way to go.

Revenues have shrunk by 4 percent in each of the past two fiscal years, further widening the gap between money collected and money spent that had already emerged when revenues “collapsed” in 2008, Rohrer said.

But the state’s budget gap is at $2 billion, despite efforts to constrain spending.

Now the state faces serious challenges as it prepares to draft the fiscal 2011 budget in the upcoming legislative session.

“The bottom line is there’s not going to be a lot of room for original thinking in the next capital budget. …. It’s truly a zero sum situation,” said Deschenaux.

The cuts made to the state’s budget since 2007 were not applied equally.

For instance, spending dropped by about $200 million on capital projects and roughly $170 million on state agencies, while K-12 education grew by almost $1 billion.

Nearly 60 percent of the money for K-12 education went to fund the Thornton school reform plan, which was originally passed in 2002 to equalize educational opportunities across jurisdictions.

Local governments also have taken a substantial hit, but can expect to get a portion of the $10.5 million generated through a tax amnesty program that encourages the payment of delinquent taxes, according to the Department of Legislative Services.

“That’s probably more than twice what we were forecasting,” Deschenaux said. “So that’s a small positive thing in a largely negative world.”

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