Maryland’s latest revenue forecast adds $319.9 million to expected fiscal 2027 revenues, but underlying General Fund revenues are still projected to decline 0.9% as the State faces slow growth, federal employment losses, elevated inflation, and other economic risks.
The Maryland Board of Revenue Estimates (BRE) released its September update this week, raising the fiscal 2027 revenue forecast to $27.44 billion. BRE also issued its first fiscal 2028 forecast of $28.35 billion, representing 3.3% growth in ongoing General Fund revenues.
The stronger top-line estimate does not reflect a significantly stronger economic outlook. BRE said the revisions primarily reflect the fiscal 2026 closeout, revenue changes unrelated to the economy, and an economic forecast that remains largely unchanged.
Fiscal 2026 revenues finished well above expectations. Ongoing General Fund revenues grew by $1.9 billion, or 7.5%, over fiscal 2025, while total General Fund growth reached $2.3 billion, or 9.1%, after including a one-time $380 million transfer from the local income tax reserve account.
BRE attributed much of that strength to personal income and sales tax collections, including strong capital gains and consumer spending. Recent tax law changes also boosted collections, while several extraordinary one-time payments increased other revenues.
Personal income tax revenues increased 9% in fiscal 2026, including a second consecutive year of double-digit growth in nonwage income. Withholding collections grew 3.1% despite the ongoing labor market contraction, although collections slowed during the second half of the fiscal year.
BRE now expects the anticipated correction in capital gains revenue to occur one year later than previously forecast. Estimated payments remain strong, while equity markets have posted double-digit growth so far this calendar year.
The sales and use tax forecast is more mixed. BRE increased its core sales tax growth assumption from 1.5% to 2.1%. Still, a court ruling involving Potomac Edison will require a one-time $280 million refund and reduce ongoing General Fund revenues by a little more than $15 million annually.
BRE also lowered its revenue estimate for the IT and data services tax. Altogether, the fiscal 2027 sales and use tax forecast fell by nearly $197 million from the previous estimate.
Other revenues increased more than expected in fiscal 2026, largely because of higher interest income and miscellaneous revenues. BRE expects those revenues to fall in fiscal 2027 as estate tax collections decline and lottery distributions increase to support capital projects.
The revenue improvement comes as Maryland’s labor market continues to struggle. BRE described the downturn as an ongoing “job recession,” with employment still below January 2025 levels despite some improvement during calendar 2026.
Federal employment remains a significant drag. Federal civilian withholding collections fell 10.6% year over year in the first quarter of 2026 and 10.0% in the second quarter, while overall withholding growth also slowed.
BRE identified rising interest rates, elevated inflation, potential additional federal spending and employment reductions, and volatility in nonwage income as continuing risks. The Board expects below-trend withholding growth in fiscal 2027 before a return to more typical growth in fiscal 2028.
For counties, the stronger fiscal 2027 forecast improves the near-term revenue picture, but the underlying trends remain important. Counties rely heavily on the local income tax, so changes in wages, employment, and taxable income directly affect local revenues.
The latest forecast shows stronger collections overall, but much of the improvement reflects one-time revenues, capital gains, and other factors BRE does not expect to continue at the same pace. Withholding growth has already slowed, and federal employment losses remain a direct concern for jurisdictions with large numbers of federal workers.
Stay tuned to Conduit Street for more information.
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