Maryland is not the only state experiencing revenue shortfalls this year, reports Governing:
Weak revenues are causing the highest number of state budget shortfalls since the Great Recession, and that trend is expected to weigh on lawmakers as they draw up their fiscal 2018 budgets in the coming months.
According to the National Association of State Budget Officers (NASBO), 25 states saw revenues come in lower than budgeted in fiscal 2016 and 24 are seeing those weak revenue conditions carry into fiscal 2017. NASBO found through its survey that 19 states reported net mid-year budget reductions in fiscal 2016, which is a historically very high number for a period outside of a recession. With 24 states reporting general fund revenues coming in below projections, more states are reporting shortfalls this year than have since fiscal 2010, when 36 states missed their targets.
According to Governing, mid-year budget cuts in 2016 totaled $2.8 billion. The revenue slowdown nationwide is attributed to slow income tax growth and a decline in corporate tax revenue – as it has here in Maryland. From the article:
States reached at least one positive recession-related milestone this year: They’re now saving more of their revenue in rainy day funds than they did before the recession hit in 2008. On average, states’ rainy day savings represent more than 5 percent of their spending, compared to 4.9 percent in 2008.
They might need that money in the coming years.
State revenues have significantly weakened, increasing just 1.8 percent to $781 billion in fiscal 2016, compared with the previous year’s growth of 5 percent. For fiscal 2017, states are projecting to make 3.6 percent more in revenue, to total $809 billion, but NASBO President-elect Michael Cohen said he expects that figure to come down.
He stopped short, however, of predicting a national downturn.
“Certainly a recession is coming sometime soon,” said Cohen, who is also California’s finance director. “But I think economists in all of the state offices would tell you that’s a really hard economic forecasting [task] of predicting when that’s going to happen.”