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Md. sales tax collections revised down amid concerns about tepid recovery

ANNAPOLIS — A panel of fiscal experts has revised down estimates for sales tax collection in Maryland, citing concerns about a continued slow recovery in the state that is affecting consumer confidence.

The state Board of Revenue Estimates today approved new projections that reduce sales tax collections by $66 million in the current year and nearly $61 million for fiscal 2017. And while the figures are comparatively small within a $17 billion budget, officials urged continued caution when it comes to state finances.

On the whole, the panel projects the state will exceed current year revenue projections by $9.2 million, driven mostly by $35 million in additional corporate tax revenue and $25 million in additional lottery revenue.

But it was the reduced sales tax revenue that received the focus of state officials.

“This reduction reflects weak sales in the holiday season and during the month of January that translates to reduced revenue for the state,” said Comptroller Peter V.R. Franchot, a member of the board. “While we saw an increase in some revenue sources, they are not a result of significant economic activity generated in communities across our state.”

Franchot said Maryland’s “consumer-driven economy continues to be stagnant,” adding that most Marylanders do not feel that there is an economic recovery in the state.

“Without a doubt, this continues to be the slowest and most tepid economic recovery of our lifetimes,” Franchot said. “It is unrealistic for us to expect a return to pre-recession levels of economic growth. The mere fact that we’re still using the term recovery nearly seven years after the depths of the great recession demonstrates just how challenging and extraordinary these economic times remain.”

Andrew M. Schaufele, executive director of the board, said the overall economic outlook for Maryland remains unchanged and is expected to be lower and slower than other comparable periods in state history.

Schaufele said sales tax decreases were below what were already considered modest expectations.

At least $7 million is attributed to the January “Snowzilla” storm that paralyzed much of central Maryland with two feet of snow for much of a week.

More impactful was an anemic holiday sales season in which year-to-date sales tax receipts are up just 2.8 percent including an extra quarter of collections from the new Amazon facility in Baltimore, Schaufele said.

The March announcement comes a day before the Senate Budget and Finance Committee is expected to finalize recommendations on the budget for the year beginning July 1. Some of the underlying economic indicators reflected in the lower sales tax collections may influence those recommendations.

Maryland was slow to slip into the recession that gripped the country for most of the eight years under former Gov. Martin O’Malley. And as the economy has started to turn, Maryland’s recovery has been equally slow.

Previously, state officials have expressed concerns regarding a sluggish local economy, continued higher-than-normal unemployment, wage stagnation and a reduction in high-paying middle-class jobs that have been replaced with lower-paying positions.

State Budget Secretary David Brinkley said the projections and concerns about the economic future of the country highlight a need to address mandated spending in the state.

Gov. Larry Hogan has proposed legislation that would limit growth on nearly 90 areas of formula-driven spending mandates during times where projected spending outpaces revenue growth. The House of Delegates held a hearing on that bill Tuesday.

Brinkley said state budgets should remain lean.

“We must remain on course,” Brinkley said. “Mandated spending still outpaces expected revenue growth, and this is an issue the legislature needs to address. Even with a slight downturn the gap will widen, and that is not the direction we want to go.”

 

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