Statement of Comptroller Peter Franchot Regarding Updated Revenue Estimates

ANNAPOLIS, Md. (December 11, 2013) – The Board of Revenue Estimates met today to write up revenue estimates for fiscal years 2014 and 2015 by $41.9 million. Comptroller Peter Franchot, as chairman of the Board, released the following statement.

“I’m pleased that this report writes up our expected revenues for fiscal year 2014 and 2015 by a combined $41.9 million, largely due to rising capital gains. I’m glad that, unlike in so many of our past meetings, there is some cause for long-term fiscal and economic optimism within this report.

With the stock market continuing its sustained rise, we’ve seen a noticeable uptick in capital gains receipts and those gains positively impact the personal finances of Maryland families – not just investors of means, but also working families who benefit from rising retirement accounts and college savings plans. This serves as both a reflection and a catalyst for a gradually, albeit slowly, improving economy. After all, when the market experiences prolonged gains, families tend to be more confident with their day-to-day spending habits.

Beyond the positive performance of the stock market, the effects of sequestration appear to have been less than had been feared initially, likely thanks to our leadership in cyber-security, particularly at Fort Meade.

While it’s important to avoid the temptation to misinterpret these encouraging signs out of context, we can appreciate the broader economic picture. Most encouraging, perhaps, is the fact that most of the impediments to economic growth – especially those that were self-inflicted and politically-induced – appear to be behind us.

Recent news out of Capitol Hill indicates progress towards a deal on the federal budget and the debt ceiling. We sincerely hope that our colleagues in Washington will put the nation’s long-term fiscal challenges above their short-term political gains, in order to provide the stability and confidence needed for our economy to grow.

But, as we know, that’s no guarantee, given their poor track record recently in achieving consensus around a deal. So we continue to closely monitor those developments.

Our near-term economic challenges, quite frankly, don’t only depend on compromise in the US Capitol. We still have underlying economic challenges here in Maryland.

Unemployment is still historically high, particularly for Maryland’s standards. Average hourly earnings in Maryland are exactly even with where they were in the depths of the worst economic recession in our lifetime. Maryland ranks 46th in private average hourly and weekly earnings growth during that time.

Based on those figures, it shouldn’t be surprising that we’re writing down sales and use tax by more than $40 million, which is a window into what Maryland families and small businesses are experiencing on a daily basis – from diminished consumer confidence to a weak job market to stagnant wages.

The bottom line is that more than five years after the cataclysmic events of 2008, we’re still experiencing the effects of a slow and uncommonly tepid economic recovery. Far too many Marylanders are still taking home the same or less pay at a time when their living costs are rising, meaning they have less disposable income to spend in an economy that’s primarily based on consumer spending.

So we should note some promising signs that there are fewer risks in 2014 than in the past several years, but we must also be cognizant that the Maryland economy remains exceedingly fragile, particularly for working families and small businesses.

We need to proceed with an exceedingly cautious mindset and avoid policy decisions that add uncertainty, would take money out of the pockets of consumers and would make employers reluctant to invest, grow and hire.

As demonstrated by this report and evident in the broader economy, a sustained economic recovery is going to come down to jobs, both here in Maryland and throughout the nation. As long as we see continued weakness on this front, consumers will inevitably pull back, which will cause businesses to struggle and an economy that will continue to underperform. So we simply cannot afford to create any unnecessary road blocks to job growth.

But if we maintain a cautious mindset, Maryland’s economic bones are as strong and resilient as ever, and I continue to be proud of our battle-tested leadership that has capably led this state through these years of economic and fiscal crisis.

For Maryland families and small businesses, the economy remains fragile, and as the State’s chief fiscal stewards, we must continue to exercise tremendous caution and restraint.”

Note: Closeout report attached

Contact: Andrew Friedson, 410-260-7060 (office) 443-414-3083 (cell)