The Board of Revenue Estimates voted to reduce the revenue projections for the state of Maryland for fiscal 2018 by $53 million, representing a 0.3% decrease over prior estimates. The board also unveiled the first official estimates for fiscal year 2019, which is projected to be $17.6 billion, representing a $73.5 million reduction.
The actions are largely driven by weaker-than-anticipated sales tax revenues, which are the result of sluggish income growth, changing buying habits with more online purchases being made and tepid consumer confidence stemming from uncertainty about potential federal government cuts and other actions.
Following are Maryland Comptroller Peter Franchot’s remarks, as prepared for delivery.
“This action comes just weeks after we closed the books on fiscal year 2017 with $90 million above our original projections, which provides reason for restrained optimism.
“The proposed reductions in fiscal 2018 and fiscal 2019’s estimates are primarily influenced by the continued weak growth in sales and use tax revenue, and a modestly reduced outlook for average wage growth in Maryland. In this revision, the largest write-down is the sales and use tax projected revenues, which underscores the fact that consumer spending remains unpredictable.
“Following a very brief but relatively successful holiday season, sales tax revenue declined this past spring. Over the last several fiscal years, we’ve barely attained 2% growth in sales and use tax revenues. Our prior estimates had generally held that the state would at least see 3% to 3.5% growth. But we know these figures are influenced, in large part, by the meager income growth that we continue to experience, and the political uncertainties coming out of Washington.
“As we continue to weather these uncertain economic conditions, Maryland working families are understandably putting more money in the piggy bank instead of spending on things they want, instead of need.
“In this consumer-powered economy, far too many businesses — and in particular, small and locally-owned businesses that are the backbone of the Maryland economy — are struggling to survive at a time when consumers are reining in their discretionary spending.
“We continue to experience the slowest and most tentative economic recovery of our lifetimes. And as I’ve said in the past, I think that it would be imprudent to expect a return to pre-recessionary patterns of economic expansion.
“To be prepared for the fiscal uncertainties of the future, I believe fiscal policymakers need to consider this rate of growth in our revenues as the ‘new normal,’ if you will. And I would encourage my fellow state leaders to adopt this approach when making spending and fiscal policy decisions in the months ahead.
“I do want to tip my hat to Governor [Larry] Hogan and to the General Assembly for continuing to exercise fiscal restraint and for recognizing the fiscal and economic realities that our state faces today. More than anything else — and I know both the Governor and the General Assembly are in bipartisan agreement on this — we must establish a business climate that is characterized by stability and predictability, one in which employers feel comfortable investing capital and creating good-paying, long-term jobs.
“We must avoid decisions that take more money out of the pockets of consumers who are already reluctant to put money back into the Maryland economy, which is why we need to continue to reject any proposals that would increase or create new taxes and fees.
“We need to provide some stability and relief for our working-class citizens and small businesses. And furthermore, we must remain smart and forward-thinking about how we spend limited taxpayer dollars and resist adding to our existing state debt — recognizing the fact that we simply cannot sustain continued debt accumulation that can be dangerous to our fiscal stability in the years ahead.
“The fiscal realities we face require us to invest in the things that we need, and forego many of the things that we simply want. This is the same principle that so many households and business owners use when planning and executing their own budgets — and we have a solemn responsibility to do the same as their elected representatives.
“I am confident that if we continue on the current path of fiscal prudence, we will be well-positioned to emerge from these economic and fiscal challenges stronger than before. And we will be properly prepared to weather future disturbances in our economy.”