The Comptroller’s Office spoke on State revenue projections and local income tax distributions before county budget and finance directors on Monday, January 6, 2014. As counties begin budget preparations, these figures will help set county revenue projections for fiscal year 2015.
Andrew Schaufele, Director of the Bureau of Revenue and Estimates, said they are being cautiously optimistic with revenue projections. Increases in capital gains have driven state income tax revenues and the most recent local income tax distributions in some areas. The Comptroller’s Office has anticipated these increases in state revenue will continue. However, increases in capital gains tend to be more polarized and in some jurisdictions, may be realized by taxpayers only one-time, which creates great uncertainty for future local income tax distributions.
In the December 2013 revenue projections, the Comptroller’s Office is projecting 2.3% revenue growth for fiscal 2014 and 5.1% for fiscal 2015. The document distributed by the Comptroller’s Office provides an overview of General and Budget Restoration Fund Revenues, as well as specific economic indicators such as GDP growth, wage growth, and housing starts.
In his comments, Mr. Schaufele mentioned that $100 million in General Fund revenue was placed into the Local Income Tax Reserve Fund due to the State not allocating sufficient funds for tax year 2012. These annual “true ups” are a normal occurrence each year.
Mr. Schaufele also spoke of a report his office recently completed on “the impacts of recent changes to the local reserve account and the impacts of altering interest paid on tax deficiencies and refunds.” Findings, among others, indicate that “recent legislative actions affecting the Local Reserve Account have created unfunded liabilities within the State’s balance sheets,” and “for every one percentage point decrease in the interest rate on refunds and tax deficiencies, total net state and local income tax revenues will decrease by approximately $10.6 million per fiscal year.”
The Maryland Association of County Budget and Finance Officers, an affiliate of the Maryland Association of Counties (MACo), meets every January with the Comptroller’s Office to discuss state revenue projections and local income tax distributions.