After Unleashing $430M Surplus, Franchot Preaches Caution

In his role as chairman of the Maryland Board of Revenue Estimates, State Comptroller Peter V.R. Franchot (D), Maryland’s comptroller, made news last week when he projected a robust $430 million in additional revenues for fiscal year 2019.

How did the board come to that estimate?

Addressing a meeting of the Small Business Network of Montgomery County the other day, Franchot explained the process for calculating these estimates: by viewing 2.5 million tax returns from 2014 and looking at them with a simulation of the new federal tax cut included. He said the large amount surprised him because 71 percent of Marylanders will benefit directly from the federal tax cut.

The Board of Revenue Estimates also projected a $39 million decrease in the state’s fiscal year 2018 revenues. The fiscal year ends on June 30.

Comptroller Peter V.R. Franchot

Franchot said he is urging Gov. Lawrence J. Hogan Jr. (R) and the Democratic-led legislature not to get too excited about spending it all. He cautioned that it’s difficult to predict how the economy is going to adjust to the new federal tax cuts and the state’s leaders need to remember the ongoing volatility in both the national business and political environments.

“Like everyone, I hope the end result of the tax cuts is positive, but we have to prepare for the inevitable recession,” he said. “So just as I urge the state not to spend the extra money they receive, I hope businesses will also be careful in how they handle the extra revenue.”

Franchot said that all the state’s chief economists are located in his agency.

“I get all of the economic data on a daily, weekly and monthly basis,” he said. “So in addition to the tax collection responsibilities of our agency, I am intimately connected to the data that we’re producing… We’re pretty good at predicting revenues and observing what’s going on in the economy.”

In addition, the office has a business advisory council with 30 or 40 leading business people participating who tell him, after looking at the data his office produces, what they believe is going on in real time.

Franchot was elected comptroller in 2006, ousting former Gov. William Donald Schaefer (D), who had been comptroller for eight years, in a three-way Democratic primary. Prior to that, he spent 20 years representing a liberal Montgomery County district in the House of Delegates.

His views have moderated since he was elected, and he has come to view the business community as an ally. Where once he was a liberal bomb-thrower, today he preaches customer service and efficiency.

Franchot said the comptroller’s staff knows to practice the three R’s: Respect the taxpayer, respond to the taxpayer and get results for the taxpayer. His office answers 750,000 phone calls a year and calls are answered within 40 seconds; “We will be on your side to the extent it’s appropriate,” Franchot said.

He praised the speed of issuing tax refunds, saying his office has $3 billion it is in the process of giving back to Marylanders and averages 2.1 days from the receipt of someone’s tax return to putting the money back into individual bank accounts.

“No other state in the country comes close to us!” he exclaimed. He added that customer service is something Montgomery County’s employees can always improve. “Employees of small businesses and the county’s citizens want to be heard.”

Franchot is optimistic that Montgomery County will be picked as the location for the new Amazon 2 headquarters.

“I believe this because the stars are aligned and they need to be near Washington in an area like Montgomery County,” he said. “Also, Amazon already has a distribution center in Maryland.”

Franchot praised Montgomery County Executive Isiah Leggett (D) as “one of the finest public servants I’ve ever met in politics.” He credited Leggett and Hogan for speaking with a unified voice to Amazon representatives.

But Franchot also believes online businesses like Amazon have devastated Main Street merchants. He said he has heard of people showing up in small businesses all around Maryland, walking around looking at merchandise and, in front of the store owner, they’ll go online and try to buy an item right there from an out-of-state Internet company.

“That’s just bad manners!” Franchot said he has placed a huge emphasis on urging people to get off the Internet and shop locally. He added for emphasis: “Never have I seen a little league team with Amazon on the back.”

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