The Board of Revenue Estimates today held a virtual nonvoting meeting to review updated projections on the impact of the COVID-19 pandemic on Maryland’s economy. As previously reported on Conduit Street, the COVID-19 pandemic will likely have a devastating impact on state and local tax revenues.
Bureau of Revenue Estimates Director Andrew Schaufele delivered an adjusted revenue forecast for fiscal 2020 and fiscal 2021, unveiled the first estimates for fiscal 2022, and explained the economic indicators that are driving the prognosis.
Schaufele outlined two scenarios, both of which assume a vaccine exists by fall of 2021 and there is no second wave of the virus that causes an economic shutdown.
The more optimistic scenario (S2) is based upon Congress providing assistance to state and local governments and extending the Paycheck Protection Program to help small businesses keep employees on payroll, among other less severe economic assumptions. In that scenario, Maryland would face a $925 million shortfall for fiscal 2020, a $2.1 billion gap for fiscal 2021, and a $2.6 billion hole for fiscal 2022.
The more dire scenario (S4) would see a $1.1 billion reduction in fiscal 2020, a $2.6 billion deficit in fiscal 2022, and a nearly $4 billion decline in fiscal 2022.
“As Mr. Schaufele’s analysis amplifies, what we are experiencing is a snapshot of an economic nightmare,” Maryland Comptroller Peter Franchot said. “These revenue figures – along with the number of unemployed Marylanders and businesses on the verge of closing their doors permanently – are unprecedented in their scope and magnitude.”
As previously reported on Conduit Street, before the crisis, the Board of Revenue Estimates set revenue projections for FY 2021 at $19.1 billion – a 1.9% increase over the previous estimate for fiscal FY 2020 revenues.
Prior to the pandemic, the Department of Legislative Services projected a structural deficit of $626 million in fiscal 2022. This structural deficit increases each year of the forecast, reaching $1.5 billion by fiscal 2025.
The updated revenue projections are designed to serve as fiscal guidance to the Governor and General Assembly, and were not voted on by the Board of Revenue Estimates. The three-member panel, which includes Comptroller Peter Franchot, State Treasurer Nancy Kopp, and Secretary of Budget and Management David Brinkley, is responsible for estimating state revenues to assist with managing the State’s budget.
The Board typically meets three times a year — in March, September, and December — but the severe economic impacts brought on by the pandemic prompted this additional session to better understand the budget reductions that will be necessary to close the revenue shortfall.
Schaufele tomorrow will brief MACo’s Budget and Finance Officers Affiliate on the latest revenue forecast.