Maryland Comptroller Peter Franchot today announced that the State of Maryland closed its books on fiscal 2021 with an unassigned balance of the State’s General Fund of $2.5 billion, representing more than five percent of its $48 billion operating budget for fiscal 2021.
The massive fund balance results from much larger-than-expected revenue growth, primarily driven by an influx of federal stimulus funding, as well as a significant uptick in personal and business income and consumer spending.
“The state’s surplus is a once-in-a-generation opportunity to invest in programs that lift all Marylanders and help stabilize housing and other critical expenses for our lower- and middle-income families,” Comptroller Franchot said. “In order to accomplish this, we should put most of the surplus in the state’s Rainy Day Fund and create a proper structure for addressing these urgent needs that our current systems are failing to do effectively. We must deliver this money quickly to those who need it most and not into the hands of fraudsters.”
According to a press release:
The ongoing general fund grew 9.9 percent over Fiscal Year 2020, a number that may be artificially inflated due to the “economic shutdown” for roughly three months in the spring of 2020. Perhaps a better comparison, Maryland’s general fund is up 11.3 percent over the pre-COVID Fiscal Year 2019 numbers.
A significant share of the additional balance is attributed to better-than-expected results for tax year 2020. Even in a year where 14 percent of employed Marylanders lost a job – and six percent remained unemployed at the end of the year – state personal income tax collections for tax year 2020 grew by roughly 7.3 percent. This indicates that taxpayers with business income and capital gains experienced robust income growth during 2020.
More recently, wage growth and sales tax collections outperformed expectations for the final six months of the fiscal year. It seems apparent that many Marylanders received bonuses and/or significant wage increases in early 2021. Those wage increases, coupled with bolstered savings levels derived from the height of the pandemic and stimulus efforts, are driving better than expected results for the sales tax.
Additionally, the corporate income tax delivered better than expected results. It seems likely that larger firms were well positioned to economically benefit during the pandemic — driving profits by capturing additional market share from weaker competitors, increased sales from federal stimulus, and cutting expenses.
As previously reported on Conduit Street, the Board of Revenue Estimates will hold a virtual meeting on Thursday afternoon to vote on revised general fund revenue estimates for fiscal years 2022 and 2023.
The forecasts for the current fiscal year and the one that begins in July 2022 will provide budget writers and policymakers with the latest revenue projections and economic trends, which provide a foundation for crafting the state budget.
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 help manage the State’s budget.
Stay tuned to Conduit Street for more information.