Franchot Describes State Economy as on 'Very Shaky Ground'
Saturday, January 19, 2008
Maryland Comptroller Peter Franchot (D) offered a bleak assessment of the state's economy yesterday, saying recent changes to the state's tax laws could negatively affect an already dire financial outlook.
Delivering Maryland's first State of the Treasury speech in recent history, Franchot, who considers himself the state's chief fiscal officer, said the subprime mortgage crisis, instability in financial markets and declining retail sales are driving the economy into "a period of profound uncertainty."
"The U.S. and Maryland economies enter the new year on very, very shaky ground," Franchot said. "The conditions that define our current economic landscape provide cause for really serious concern."
Buffeted by plummeting home values, single-family home construction has fallen to its lowest level in more than 16 years, Franchot said. Meanwhile, the rate of home foreclosures in Maryland has soared to an all-time high.
"There is no question that this is taking its toll on the nation's economic psyche," Franchot said. "Economists are increasingly concerned about the prospects of a national recession, and so am I."
In his speech, Franchot painted a gloomier portrait of the state's economy than was contained in an economic forecast issued last month by the Maryland Board of Revenue Estimates, which Franchot chairs.
That report called the state's housing market "a tumble" and said energy costs are at historically high levels. But the report said employment has continued to grow.
"Growth is expected to continue through the forecast period, albeit weak through much of 2008," the report said. "As the imbalances in the housing market and related issues are worked through, confidence will return and the economy will accelerate in 2009."
Franchot spokesman Joseph Shapiro said the comptroller's outlook was bleaker than the report's because economic conditions have worsened in the past month and because Franchot was looking beyond the next fiscal year.
In his 40-minute address, Franchot highlighted accomplishments during his first year in office, including increased tax collection enforcement measures and a focus on building Maryland's life sciences industry and knowledge-based economy.
But the comptroller railed against Gov. Martin O'Malley (D) and the General Assembly for legislation passed in November in a special session designed to close a budget deficit.
Franchot said he was particularly troubled by the expansion of the state sales tax to computer services, a measure he said he would fight to repeal.