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State revenues fall short of expectations

Comptroller Peter Franchot. (The Daily Record / Maximilian Franz)

Comptroller Peter Franchot. (The Daily Record / Maximilian Franz)

Maryland’s revenue picture for the previous year wasn’t quite as rosy as projected.

The state finished the budget year ending June 30 with $16.2 billion in revenue, with $196.5 million headed to the unassigned general fund, according to figures released Tuesday afternoon by the Office of the Comptroller.

But that closeout figure fell $250 million short of projections — a gap similar to underperforming revenue numbers in Virginia for the same period.

“These numbers reflect a continued slow and anemic economic recovery in our state with Marylanders struggling to keep pace,” Comptroller Peter V.R. Franchot said. “While a few more Marylanders have jobs, overall wages continue to fail to keep pace with the cost of living for too many families. The figures underscore a vulnerable and uncertain economy and the need to keep to a sensible fiscal course ahead. Consumers and small businesses need predictability as we move forward. I believe that any fund balance must be saved and not spent.”

Driving the lower-than-expected revenues was a lower net revenue from tax returns with payments owed to the state and returns with refunds. State fiscal analysts projected a 1 percent decrease compared to 2015; the actual decrease was 30 percent.  The comptroller’s office attributed the volatility in non-wage income, particularly capital gains taxes, which drove higher than anticipated revenues last year.

Withholding has also slowed despite employment increasing 1.8 percent, according the comptroller’s office.

Tuesday’s revenue numbers were not unexpected.

Gov. Larry Hogan four weeks ago said concerns about state revenues required him to withhold $80 million in spending fenced off by the General Assembly. The money, which came from an over-attainment in the state’s rainy day fund, was earmarked by the legislature for state aid for teacher pensions, renovation of aging schools, Medicaid reimbursements and the demolition of the Baltimore City Detention Center, among other things.

David Brinkley, Hogan’s budget secretary, noted at the time that Virginia also saw a similar underperformance in revenues and closed out the year $266.3 million below expectations despite collecting a record $18.3 billion in taxes.

Benjamin Orr, executive director of the Maryland Center on Economic Policy, a progressive state budget policy group, said the flat economy means the state needs to do more for low-wage and under-employed workers. He also called for lawmakers to close loopholes on corporate income taxes. In the past, the group has supported passage of combined reporting legislation for multi-state corporations.
“The lower than expected revenues mean the benefits of Maryland’s economic recovery aren’t being widely shared,” Orr said in a statement. “Although more Marylanders are working, too many people in our state still must struggle to make ends meet.
“Doing more for Maryland families will help the economy, such as requiring paid sick days, increasing the minimum wage, and expanding the Earned Income Tax Credit for low-wage workers not raising children,” he added. “Closing tax loopholes so corporations pay their fair share for the services we all benefit from is another important step toward making sure the state has revenue to invest in what helps communities thrive.