Comptroller Peter V.R. Franchot (D) wants the state to direct a general fund surplus to small businesses coping with the COVID-19 pandemic.
Franchot announced on Wednesday final close-out numbers for the 2020 fiscal year that ended June 30, which include a $585.8 million unallocated balance in the state’s general fund.
Citing the state’s existing $1.2 billion rainy day fund, Franchot said he would urge the governor and General Assembly to devote the entire general fund balance to a stimulus and rescue program for small businesses.
“These small businesses will simply not survive this economic devastation in the absence of state support ― and Maryland would be in danger of losing thousands of jobs, direct and indirect economic benefits, and community investments that they generate,” Franchot said in a written statement.
However, the presence of a general fund balance ― after a dire prediction in April of potentially billions in lost revenue by the end of the fiscal year ― underscores the state’s economic strength. Franchot and David Farkas, acting director of the Bureau of Revenue Estimates, attributed the better-than-expected figures to the large presence of federal jobs in the state, as well as the federal response to the epidemic, including expanded unemployment programs.
More than 1.1 million Marylanders have filed for unemployment since March. Yet the state saw a 4.2% increase in personal income tax revenue and a 1.8% increase in corporate income tax revenue.
Overall, general fund revenues increased by about 2.4% in 2020 despite the COVID-19 pandemic taking hold in the final months of the fiscal year.
As Marylanders delayed or skipped spending on taxable goods, the state’s sales and use tax revenue fell by 3.7% from 2019 levels. Consumers shifted reduced spending to untaxed goods during the pandemic, including essentials like groceries, Farkas wrote.
The pandemic also shifted spending to online retailers, who are subject to new tax laws in Maryland after a 2018 Supreme Court decision.
A 2019 bill to tax third-party online sellers anticipated about $99 million in new tax collections from online sellers in the 2020 fiscal year. Instead, the state saw collections jump from $80 million in the 2019 fiscal year to $331.4 million in 2020.
The first $100 million in taxes paid by remote sellers is directed to the state’s general fund, while any amount over that is dedicated to public school reform efforts.
Franchot on Wednesday continued to urge caution in state spending.
“It is impossible to defy the laws of economic gravity, and over the last decade, I have urged my colleagues to put more money aside so our state can weather the economic uncertainties that lie ahead without the need for steep budget cuts and tax increases,” he said in his statement. “Like so many Maryland families and small businesses, we must forgo the things we want and prioritize the things we need.”
Franchot said state revenue shortfalls of up to $4 billion are still predicted for the 2022 fiscal year.