ANNAPOLIS, Md. (March 6, 2014) — The Board of Revenue Estimates met today to write down revenue estimates for fiscal years 2014 and 2015 by $238 million. Comptroller Peter Franchot, as chairman of the Board, released the following statement.
“Today we are writing down our already cautious revenue projections by $238 million. These figures should provide emphatic confirmation of the obvious that this remains the slowest and most anemic economic recovery that most experts can remember. In fact, for far too many Maryland families and small businesses, this hasn’t felt like an economic recovery at all.
The same challenging conditions discussed in previous meetings of the Board remain firmly in place today. Wages and salaries are relatively stagnant; local, independent businesses are struggling to meet payroll, cover mandatory costs and turn a net profit; and working families have cut back their spending because they just don’t have the money.
In a consumer-driven economy, it should come as no surprise that when consumers are struggling, businesses will inevitably feel that pain, particularly in an environment where margins have already been trimmed down to the bone, in many cases.
It’s important to note that much of this write-down reflects poor economic and revenue performance in the fourth quarter of 2013, rather than the state’s revenue outlook moving forward. So, this report truly serves as an indicator of the economic challenges Marylanders are facing today and not merely as an estimate of what we expect them to experience in the future.
In the broader context, economic indicators tell the real story of what’s happening in the Maryland economy. Despite revenues in recent quarters being buoyed by strong stock market performance and a gradually recovering real estate sector, the story remains essentially unchanged. Unemployment is still historically high for Maryland’s standards, and in 2013, we lagged the improvements that were seen nationally. Average hourly earnings in Maryland are almost exactly even with where they were in the depths of the economic downturn and Maryland still ranks near the bottom nationally in private sector wage growth.
Based on those indicators, poor performance throughout the holiday season and weakness in year-to-date income tax receipts, it should come as no surprise that we’re writing down sales and use tax receipts by nearly $48 million, or that with reduced employment projections, we’re lowering withholding growth from an already tepid 3.3% growth rate down to 3%. Thirty basis points may seem relatively small, but as the largest source of state revenue, it is a substantial downward revision with a significant revenue impact. The near term economic challenges we face cannot be glossed over.
In recent meetings, though, I’ve urged those reading the report to avoid the temptation to misinterpret encouraging snippets of data out of context, and rather, to focus on the broader economic picture.
Today, that same sentiment holds true. While the near-term challenges we face are significant, and the pain being felt by our citizens is very real, there is still reason for long-term optimism about the Maryland economy. The bottom line is that we are very cautiously optimistic that things will pick up, ever slightly, as we continue through 2014 and we hope to experience gradually sustainable improvement in 2015.
But, I certainly realize that our cautious optimism is no consolation for the Maryland families struggling to put food on the table and the small businesses facing challenges just to make payroll.
So as state policymakers, we must act with the utmost caution. We need to be smart in how we spend taxpayer dollars and recognize that in order to invest in the things we truly need, we’ll have to forego many of the things we simply want.
We will have to be more forward-looking about how we borrow money as a state, because we simply cannot sustain our current patterns of debt accumulation without provoking actions that could do further harm to our state’s economy, adding to the significant challenges we already face. And, we simply cannot take any more money out of the pockets of consumers who are already feeling the pinch of an economic downturn that has now lingered for well over half a decade.
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 in job growth, consumers will inevitably pull back, causing businesses to struggle and an economy to underperform. We cannot afford to create any unnecessary road blocks that would make employers reluctant to invest, grow and hire. But if we maintain a cautious mindset, Maryland’s economic bones are strong and our families and small businesses are resilient.
I continue to have the utmost confidence in our battle-tested leadership that has capably led us through these years of economic and fiscal uncertainty, as long as we continue to exercise caution and restraint.”
Note: Closeout report attached
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