Revenue Estimates Grow Less Dire, But Top Fiscal Officers Still Cautious

Maryland’s top fiscal leaders agreed Tuesday that state revenues may weather a COVID-ravaged economy better than expected, to the tune of $3.5 billion. But, fiscal analysts warned, the new projections assume that a second wave of infection doesn’t shutter the economy, and that federal stimulus funds will continue to buoy decimated industries and working families ― two things that are far from guaranteed.

The Board of Revenue Estimates — comprised of Comptroller Peter V.R. Franchot (D), Treasurer Nancy K. Kopp (D) and Budget Secretary David R. Brinkley — signed off on estimates that assume state revenues of $18.7 billion in the 2021 fiscal year and $19.7 billion for 2022.

The figures are substantially higher than a previous forecast presented to the board in May, by about $2.1 billion in 2021 and $1.4 billion in 2022. The projections come on the heels of Franchot’s announcement that the 2020 fiscal year, which ended June 30, ended with an unallocated general fund balance of $585.8 million, rather than losses that had been forecast.

David Farkas, acting director of the Bureau of Revenue Estimates, cautioned that new estimates could be very volatile and may change before the board makes final estimates in December that will guide the state’s budget process in 2021.

“It’s very difficult to predict the future and that is even more the case for this particular forecast,” Farkas said. “You know, forecasting uses past relationships and projects them forward. And the coronavirus pandemic is an unprecedented event. There’s nothing like it in our modern data that we use for forecasting.”

The new fiscal year 2021 revenue estimate, while rosier than worst-case scenarios discussed by the board in the spring, is $672.6 million less than the last official estimate in March, which was based on pre-pandemic economic data.

The fiscal experts credited the resilience of the state’s labor market and federal stimulus funding, including expanded unemployment payments, with keeping the state’s economy flowing during the pandemic.

“The revenue figures we are reporting today highlight the tremendous success of the federal stimulus programs and underscores the need for a second round as we head into a winter of public health and economic uncertainty,” Franchot said. “…Without a second stimulus package, we are taking a tremendous economic risk.”

Brinkley said budget cuts proposed by Gov. Lawrence J. Hogan Jr. (R) and approved by the Board of Public Works, where the governor is joined by Kopp and Franchot, also helped with the more positive funding outlook.

But, Kopp said, the estimates also reflect “an economy with very significant differences and disparities,” with a professional class that’s strong and essential workers who are underpaid.

“There are too many people who are not strongly employed, who are not well-trained enough and when they are well-trained, the jobs aren’t there,” Kopp said “We have a lot of work to do on our economy to bridge these differences and to make us a strong whole economy.”

During Tuesday’s meeting, Franchot also renewed a call for Hogan and legislators to use the $585.8 million fund balance to create a rescue fund for locally owned small businesses.

Farkas said the board has also requested an alternative report on a “downside scenario” in which the state’s economy stalls out. That report will be available in the next week or so, Farkas said.

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