Maryland is not the only state experiencing its tax revenue growing more sluggishly than expected. According to a new study by the National Association of State Budget Officers (NASBO), “Spring 2017 Fiscal Survey of States,” fiscal year 2017 general fund revenues in 33 states were coming in below forecasted levels – the highest number of states since 2010, when 36 states had revenues fall short of projections. In comparison, in 2015, only seven states saw revenues come in short of expectations. (Fiscal years in all but four states end on June 30, like Maryland’s.)
From Route Fifty:
The survey refers to a number of factors that could be contributing to lackluster state revenues. One is that high earners could be shifting income into the year ahead, anticipating that federal tax cuts will be enacted under President Trump and the Republican-controlled Congress.
Other factors include: declines in oil and natural gas prices and coal production that have affected states with economies that depend on these commodities; greater amounts of economic activity falling outside of the sales tax base of many states; and low inflation.
The report finds that at least 23 states (including Maryland) have made mid-year budget cuts in fiscal 2017, totaling $4.9 billion.
States are preparing their fiscal 2018 budgets quite conservatively in response – factoring in not only slow revenue growth, but also limited budget flexibility and substantial uncertainty about decisions to be made at the federal level.
Budget proposals governors put forward for fiscal 2018 would increase general fund spending by just one percent compared to estimated levels for this year. That would mark the lowest nominal growth rate in spending since 2010, the NASBO report says.
Maryland’s fiscal 2018 budget, as passed by the General Assembly, increases general fund spending by only 0.5 percent.