Maryland’s financial forecasters now predict a nearly $1 billion increase in state tax revenues this fiscal year.
The Board of Revenue Estimates — Comptroller Peter V.R. Franchot (D), Treasurer Nancy K. Kopp (D), and Budget Secretary David R. Brinkley – unanimously accepted projections that assume state tax revenue of $21.1 billion in the ongoing 2022 fiscal year, a 5% increase since the board last set estimates in March.
The board also accepted the first official estimate for revenue in the 2023 fiscal year at $22.2 billion. That represents a more than $1.3 billion increase over the state’s most recent planning figures for 2023.
The revenue estimates come just after the state’s final accounting for the 2021 fiscal year, which ended with an unexpectedly large fund balance of $2.5 billion.
“The numbers in today’s forecast report and yesterday’s news of a massive $2.5 billion fund balance present us with a unique, once-in-a-generation opportunity. All told, it means state budget writers and policymakers have nearly $5 billion in unanticipated revenue as they begin constructing the FY 2023 budget,” Franchot said during the BRE meeting. “Maryland now has a level of financial flexibility we have not experienced in decades.”
According to the estimates, personal income tax revenues are expected to increase by $396 million more than previous estimates, and sales tax is expected to increase by $281 million in the current fiscal year. The sales tax increase is due in part to legislative changes to tax online sales and streaming, services that have expanded during the pandemic.
Franchot and Kopp encouraged the governor and General Assembly to focus some of the unanticipated revenue on lifting up lower-wage workers and families who have been hardest hit by the pandemic.
“If we are smart about using the resources that we have, we have a very strong and bright future,” Kopp said.
She encouraged state leaders not to “smooth over” serious issues in celebration of the good numbers. Enhanced equity and enhanced economic vigor for everyone in the state should be the focus, she said.
Andrew Schaufele, director of the state’s Bureau of Revenue Estimates, credited the federal stimulus funding for the rosy figures. More than $4.7 trillion has been spent nationally, and more $40 billion in federal stimulus funding has flowed to Maryland, the equivalent of about 10% of the state’s pre-pandemic economy.
Franchot warned that the state’s finances could still face volatility as the pandemic continues and Congress grapples with federal budget issues.
“We must continue to be smart with our money because this ‘sugar high’ from federal dollars will eventually wear off,” he said.
Brinkley said “caution” and “volatility” should be the operative words moving forward, and he encouraged continued caution in spending.
Asked at a news conference Thursday about the state’s budget surplus, Gov. Lawrence J. Hogan Jr. (R) said, “We don’t want to spend it all. We want to continue to be fiscally responsible.”
Josh Kurtz contributed to this report.