Maryland finished the fiscal 2021 budget year with a $2.5 billion surplus, according to the state’s top tax collector, a reflection of the outsized impact of federal pandemic assistance on the state finances.
News of the surplus comes one day before the state Board of Revenue Estimates meets. The panel will issue a revised revenue forecast for the current and coming fiscal years.
Comptroller Peter Franchot renewed his call for state aid to struggling Marylanders affected by the pandemic.
“Even with this great financial news, we still have a tale of two Marylands,” Franchot said. “In one Maryland, there are hundreds of thousands of residents facing dire circumstances. Those without a job see their unemployment benefits expiring. Renters are facing homelessness since rental relief funds are not being disbursed quickly enough and the eviction moratorium has been lifted. Parents returning to work are struggling to find and afford daycare. Small businesses who couldn’t access federal relief funds are struggling to rebuild.”
Federal stimulus drives much of the eye-popping increases. In others, growth looks bigger because of a three-month shutdown in fiscal 2020.
Republican Gov. Larry Hogan applauded the surplus as a sign of his fiscal stewardship.
“I was elected governor to rein in years of out-of-control spending in Annapolis, to eliminate the $5.1 billion structural deficit we inherited, and to turn around our state’s floundering economy,” Hogan said in a statement. “This historic surplus is further proof that we have done exactly that.”
Maryland is hardly alone in celebrating bulging coffers. California, Michigan, Georgia, Iowa, Connecticut and many other states have reported rosy financial pictures, largely for the same reasons as Maryland.
Maryland’s general fund revenue grew by almost 10% compared to the previous year. Franchot warned that figure “may be artificially inflated.” Revenue is up 11.3% when compared to fiscal 2019, the year before the COVID-19 pandemic.
Corporate income tax collections for fiscal 2020 were 39% higher than the previous year.
Andrew Schaufele, director of the state Bureau of Revenue Estimates, said businesses “have been able to increase revenue through federally enhanced consumer spending while simultaneously reducing their expenses.”
A significant part of the surplus comes from “better-than-expected results for tax year 2020.”
During that tax year, which straddles two fiscal years, roughly 14% of workers lost a job. About 6% remained unemployed at the end of the year.
Even so, state personal income tax collections grew by about 7.3%
Franchot said taxpayers with business income and capital gains “experienced robust income growth during 2020.”
Total sales tax revenue grew over the previous year by more than 10%.
Much of that growth, which goes directly to the state’s general fund, is attributed to federal stimulus as well as sales taxes on online sales as well as digital downloads. More than $423 million will go to the state’s Blueprint for Education fund.
“This new higher level seems likely to be sustained in the near term, perhaps in the long term, albeit likely with some bumps along the way,” said Schaufele, adding that a cautious approach is needed.
“These are unprecedented times with unprecedented fiscal and monetary policy responses and a deadly virus that is continuously evolving,” he said. “We have a consumer-dominated economy and consumers have been living by a new set of norms, and much like the virus, those norms are likely to change again.”