Despite an uptick in revenues, Maryland’s lowest wage earners and small businesses bearing the economic impact of COVID-19.
The Board of Revenue Estimates (BRE) on Friday bumped up revenue projections for FY 2021 by 0.3 percent to $18.8 billion, representing a $64 million increase from the September estimates. The Board also revised the projection for FY 2022 to $19.8 billion, representing a 0.7 percent, or $143 million increase above the September 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.
“It is important to note that even though we are writing up our estimates today, the budget is negatively impacted by the COVID recession,” said Andrew Schaufele, the board’s executive secretary.
The increases in revenue projections are due to higher-than-expected sales tax revenue and higher capital gains from an unexpectedly strong stock market. According to the staff analysis, the multi-billion dollar federal stimulus program shifted Maryland consumers from spending money on untaxed services to taxable goods like appliances and outdoor-related items that helped keep families busy while staying close to home during the warmer weather.
“The write-up also reflects the strong bones of our state’s economy and our ability to weather tough times,” said Schaufele. “Furthermore, our data shows that just during the second quarter of 2020, when compared to the same time period in 2019, big businesses – measured by sales tax that represent our top 0.1 percent or just 61 businesses – are reporting an increase of 32 percent in sales.”
Meanwhile, receipts for small businesses, which make up 99.1 percent of Maryland’s businesses, are down by 11 percent on average. “This shows that big businesses are benefiting tremendously from the economic shutdown, while our smaller businesses are suffering,” Schaufele said. “In fact, also during this same time period, the State of Maryland lost 11,634 sales tax accounts.”
More than 1.1 million Marylanders have filed for unemployment since the onset of the pandemic, with the hospitality sector — which typically employs hundreds of thousands of Marylanders — hit particularly hard. In fact, the pandemic’s economic impact is largely income bifurcated – with lower-income jobs are bearing the brunt of this recession.
According to a statement from Maryland Comptroller Peter Franchot:
We have hundreds of thousands of Marylanders who are unemployed and as of today are facing evictions, hunger, lack of medical care, and the end of relief payments through no fault of their own. In addition, tens of thousands of small businesses have permanently closed and tens of thousands more are hanging on by a thread.
I join Governor Hogan, our Congressional Delegation, and leaders across our state in calling on Congress to pass a second stimulus before they adjourn for the year. But I also want the State of Maryland to step up and do the right thing in the form of a Maryland stimulus.
I have identified $1.5 billion in state reserves that could be spent immediately to prevent evictions, feed the hungry, provide medical care, and also support small businesses.
We are entering the worst three months in Maryland’s history because of the pandemic. The lives and livelihoods of our friends and neighbors are at stake. And with the vaccine just right around the corner, we must remain aggressive in doing all we can not only to contain the virus, but to safeguard the financial security of working families and small businesses.
That’s why we need a one-time Maryland stimulus plan to protect our citizens and our economy now. Tomorrow is too late and thousands of Marylanders across our state are looking to us – their leaders in state government – for action. We can’t let them down.”
Stay tuned to Conduit Street for more information.