Panel cautions that small uptick is not indicative of long-term economic growth
ANNAPOLIS, Md. (September 19, 2019) - The Board of Revenue Estimates (BRE) unanimously voted today to increase the revenue projection for the State of Maryland for Fiscal Year 2020 by $130 million and to set the first projections for Fiscal Year 2021 at $19.1 billion.
Comptroller Peter Franchot, Treasurer Nancy Kopp and State Budget and Management Secretary David R. Brinkley, who comprise the BRE, noted that while overall revenues are up, that’s largely a reflection of a strong tax year in 2018 and not a harbinger of long-term economic growth.
Below are Comptroller Franchot’s remarks from the BRE meeting, as prepared for delivery:
“This write-up should not be taken as a stronger performance to come, as much of the increase is attributable to events that have already taken place, including a strong tax year in 2018.
“As we discussed with the release of last month’s closeout report, we saw stronger-than-expected capital gains – suggesting a continued reliance on the volatile income of nonwage earners. We also saw an increase in Sales and Use Tax revenues following the Wayfair decision that allowed states to collect sales tax from online remote sellers.
“But these numbers are belied by other, more concerning trends, such as the fact that we are again writing down our wage growth estimates.
“While we may be experiencing the longest-recorded period of economic growth at 122 consecutive months, the tight labor market is not generating the wage growth that it has in the past.
“Our top three industries – the federal government, information, and financial services – have contracted while lower-wage industries are growing. And there is a demographic shift in the workforce, as a generation of older employees retires and younger employees with lower salaries take their place.
“This bears weight not only on our income tax revenue, as you would imagine, but it also indirectly impacts sales tax revenue when people simply have less disposable income to spend.
“Of course, we’re also faced with more significant economic trends at the national level:
- The inverted yield curve, which has preceded nearly every recession in modern U.S. history;
- A ballooning federal deficit; and
- Not the least of which, reckless and erratic trade policy from Washington.
“Each of these in their own right would demonstrate greater market volatility, but together it is impossible to deny that our economy is approaching a very tenuous inflection point, one that we would be foolish to ignore or not prepare for.
“That is why I have called on the Governor and the General Assembly to deposit the $216 million fund balance from Fiscal Year 2019 in our Rainy Day Fund.
“If we wish to invest in bold, new ideas, we must be just as creative and bold in how we fund them – without reaching deeper into the pockets of our taxpayers.
“In fact, today we released a new report from the Business Economic and Community Outreach Network (BEACON) at Salisbury University that found starting school after Labor Day has a “clear, positive impact on both state and local economies” with a total net economic impact of up to $115 million.
“A Post-Labor Day start is good for our children, our small businesses and our state’s economy, and this is the kind of common-sense policy we should be considering. It increases revenue without adding another financial burden to Marylanders.
“The bottom line is when our future economic outlook is this uncertain, we must prioritize safeguarding taxpayers from these harder times by practicing fiscal restraint.
“I say this remembering, vividly, the tough choices Maryland and our hardworking families had to make as we weathered the Great Recession. As elected officials, we are entrusted to make the right decisions for our constituents, particularly when that means spending their hard-earned taxpayer dollars wisely. And we must show that we have learned our lesson from a decade ago.”
Susan O’Brien - firstname.lastname@example.org
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