Federal relief funds and higher-than-expected tax revenues lead to a $1.2 billion revenue write-up for fiscal 2023.
With a worrying eye toward the future, the Maryland Board of Revenue Estimates voted today to boost state revenue projections for the current fiscal year to $23.7 billion, representing a $1.2 billion increase from the March estimates. The adjustment reflects continued economic growth stemming from federal stimulus aid, leading to larger individual and corporate income tax receipts and higher-than-expected sales tax collections.
Additionally, the Board, which consists of Comptroller Peter Franchot, Treasurer Dereck Davis, and Budget Secretary David Brinkley, set the first official revenue forecast for fiscal 2024 at $25.3 billion.
By far, the most significant increase in income tax revenue stems from non-wage income and capital gains, which have far outpaced previous expectations. However, an economic downturn could cause these revenue streams to decrease as interest rates climb and the stock market wobbles.
Earlier this month, Comptroller Franchot announced the State of Maryland closed its books on fiscal 2022 with a revenue surplus of $2 billion in its general fund, the second straight year that the State’s coffers have seen a massive unanticipated influx of revenues in the year-end report.
“The fact that Maryland’s economy is still growing despite unforeseen factors over the past two years is a testament to the sound, long-term fiscal decisions made by this board, the Governor, and the General Assembly,” said Franchot after Bureau of Revenue Estimates Executive Secretary Robert Rehrmann delivered the official forecast.
But the Comptroller also warned that the past few years of rosy revenue estimates, driven by pandemic dollars, are likely done, with higher interest rates, rising inflation, and a volatile political climate — both at home and abroad — all contributing to current and future economic troubles.
According to a statement from Comptroller Franchot:
However, amidst all these good vibes and another uptick in revenues, let me be very clear …
The party’s over.
A close look at this well-crafted report shows that the past few years of jaw-dropping revenue surpluses are firmly in the rear view. Moving forward, we must temper our expectations for Maryland’s long-term fiscal growth and use today’s data to make smart choices to ensure we remain healthy in the long term.
We cannot be lulled into believing that another revenue hike means our fiscal trajectory is immune to the laws of economic gravity. History shows that extended periods of economic expansion are followed by fiscal contraction. In effect, what goes up must come down.
Make no mistake, today’s report is good news overall for the state’s bottom line and underscores the strong bones of our state’s economy, as well as our ability to weather tough times. It shows that higher skilled job sectors, like those in technology and science industries, are thriving. However, many Maryland families continue to face challenging financial times due to the economic instability created by the pandemic.
Stay tuned to Conduit Street for more information.
Conduit Street Podcast: Crystal Ball on the State’s Budget Surplus and Process