Maryland officials on Wednesday lowered projections of state tax revenue for this year and next by a combined $405 million, blaming an economy that is still recovering at a more sluggish pace than expected.
The action will require no immediate cuts in the state’s $16 billion general-fund budget, and Maryland remains in better fiscal health than most other states in the region, including Virginia, which announced a $2.4 billion shortfall in August.
But some Maryland leaders warned that they could face more challenging budget choices ahead if job growth does not pick up. The largest revenue write-down Wednesday was for personal income-tax projections.
“As state policymakers, we need to be smart in how we spend taxpayer dollars, recognizing that to invest in the things we need, we will have to forgo many of the things we simply want,” said Comptroller Peter Franchot (D), who heads the panel that revised the revenue.
The Board of Revenue Estimates lowered the revenue projection for the current fiscal year, which began in July, by about $177 million. The projected figure for the following year was lowered by about $228 million.
Officials said the resulting shortfall in this year’s budget can be absorbed by a $186 million surplus fund that Gov. Martin O’Malley (D) and lawmakers crafted earlier this year. That includes more than $80 million in cuts that O’Malley directed in July anticipating a revenue write-down.
Most of those cuts came out of the operating budgets of state agencies and the university system.
“We planned appropriately and were prudent,” said T. Eloise Foster, O’Malley’s budget secretary.
Foster on Wednesday said she was “disappointed” by the need for a write-down but said that “we have to remember that we are still forecasting economic growth,” albeit at a slower pace than hoped.
House Speaker Michael E. Busch (D-Anne Arundel) said he was not overly concerned about the revenue revisions, which he attributed largely to “the general economic climate of the country and the region.”
Busch also noted that several surrounding states are taking more far-reaching actions as they grapple with budget challenges, including withholding pension contributions and dipping into “rainy day” funds to pay current bills. Maryland maintains a rainy-day fund of about $800 million that will not be affected by Wednesday’s news, Busch said.
“We’re positioned very well compared to our sister states in the surrounding region,” he said.
Larry Hogan, the Republican nominee for governor, offered a less charitable take, calling the write-down “utterly devastating” and taking a shot at his opponent, Lt. Gov. Anthony G. Brown (D).
It “confirms what we have been saying, that Martin O’Malley and Anthony Brown have taxed and spent our economy into the ground,” Hogan said in a statement. “Overtaxed Marylanders are earning less, small business profits are disappearing and people have less to spend on goods and services.”
Brown campaign manager Justin Schall said, “It’s disappointing that Republican Larry Hogan would continue to root for bad economic news to further his own political career.”
“Maryland families deserve better,” Schall said. “We will do what all Maryland families do when faced with hardship. We will tighten our belts and make do with less.”