The Board of Revenue Estimates (BRE) today unanimously approved revenue projections of $18.7 billion for FY 2021 and $19.7 billion for FY 2022.
The FY 2021 forecast reflects a $1.4 billion increase (and a $2.1 billion increase for FY 2022) from unofficial estimates that the Board heard at a special nonvoting session in May to better understand the State’s fiscal posture and review several revenue scenarios in the midst of the COVID-19 pandemic.
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.
As previously reported on Conduit Street, before the swift and unprecedented shock of the COVID-19 pandemic and shutdown measures to contain it wreaked havoc on the economy, the BRE in March set revenue projections for FY 2021 at $19.1 billion. Today’s official estimate shows a $672.6 million revenue decrease from the March estimate.
In an attempt to incorporate expectations of the pandemic, the BRE in May issued unofficial guidance that projected up to a $1.1 billion shortfall in FY 2020, a $2.1 billion gap for FY 2021, and a $2.6 billion hole for FY 2022 — all of which proved to be too conservative. The upper bound of the range provided in fiscal 2020 was $924.8 million below the 2020 Closeout Report.
As previously reported on Conduit Street, Maryland Comptroller Peter Franchot earlier this month announced that State General Fund revenues totaled $18.634 billion in FY 2020, an increase of 2.4% ($435.1 million) over FY 2019, and 0.5% ($102.2) million, below what the BRE projected last March.
General Fund revenues in FY 2020 totaled $18.634 billion, an increase of 2.4% ($435.1 million) over FY 2019, and 0.5% ($102.2 million) below the March estimate. Personal and corporate income tax revenue exceeded expectations, while sales and use tax revenue came in lower than expected.
“There are significant downside risks to this forecast,” said David Farkas, acting director of the Bureau of Revenue Estimates. “If there is a second-wave [of COVID-19 infections] or an inadequate federal response then we could be talking about a major write-down in December.”
According to Comptroller Franchot, federal stimulus funds — including direct payments to eligible Marylanders, the Paycheck Protection Program, and the now-expired program to provide an additional $600 in federal unemployment benefits — worked as they were intended by temporarily halting a catastrophic economic crash.
“The revenue figures we are reporting today highlight the tremendous success of the federal stimulus programs and underscores the need for a second round as we head into a winter of public health and economic uncertainty,” said Franchot.
Secretary Brinkley said that while the revenue projections are higher than the May guidance, they are substantially lower than the March estimates. “We still need to remain very vigilant, we’ve seen how volatile the virus can be, which translates directly to how our economy will fare over the next two or three fiscal years.”
The forecasts for the current fiscal year and the one that begins in July 2021 will provide budget writers and policymakers with the latest revenue projections and economic trends largely driven by the COVID-19 pandemic.
As previously reported on Conduit Street, MACo will prioritize county budget security, elections, broadband access, and public health support in the 2021 session.
MACo 2021 Legislative Initiative: Defend County Budget Security
The State and Counties together face an unprecedented public health and fiscal challenge, poised to strain every facet of the public sector. The plan to proceed will call for austerity and sacrifice, but the State must resist the lure of simply sending these fiscal problems down to local governments. County governments are not only the front lines for public health and safety during these challenging times, they also face their own revenue shortfalls from the drop in central funding sources.
Counties insist that any combination of budget realignment and revenue enhancement required to balance the State’s fiscal plan should be reached without undermining this balanced fiscal partnership and urge State policymakers to maintain the State’s strong commitment to school construction while also ensuring adequate, fair, and reasonable funding that upholds positive education outcomes for all of Maryland’s students.
Stay tuned to Conduit Street for more information.