Donald Fry: Reading Maryland’s fiscal tea leaves

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By Donald C. Fry

Many in Maryland’s government will be anxiously awaiting fiscal projections to be delivered at next week’s state Board of Revenue Estimates meeting, scheduled for September 16.

Government leaders will be seeking substantive signs that state revenues are beginning to recover from a traumatic, recession-driven fiscal year that ended July 31, when state baseline general fund revenues declined by 3.7 percent, marking a second consecutive year of declining state revenues, according to data released on Sept. 1 by Comptroller Peter Franchot.

Collections in FY 2010 declined for the top two revenue sources – individual income tax and sales tax – that together account for more than three-quarters of revenue to the state’s general fund. Individual income tax revenue declined by 4.6 percent, while sales tax collections declined by 2.7 percent. Collections also declined for six of the remaining 12 revenue categories.

Despite the decline for the year, some encouraging data for revenue watchers surfaced near the end of the fiscal year. General fund revenues for June increased 2.8 percent over the previous year, including growth in individual income tax and sales tax collections. For the month, individual income tax receipts increased 4.3 percent. Also, June was the first quarter that experienced growth in estimated income tax payments since the third quarter of 2008, according to the Franchot revenue letter to state leaders.

Among major revenue sources, only lottery revenue declined in June, and most other revenue sources showed some growth..

And even though overall revenues declined for FY 2010, they exceeded the revised revenue estimates by $183.7 million. While this is good news, Comptroller Franchot cautions Marylanders not to get too giddy over it.

Despite encouraging early signs of a potential revenue uptick, Maryland has just finished a fiscal year that was “one of the worst performances in recent generations,” Franchot noted in releasing the FY 2010 data.

“While I am obviously pleased that the state has managed to outperform our conservative forecasts, it is important that we put these numbers into their proper context,” said Franchot, pointing out that the economic climate remains “highly volatile, with obvious evidence to suggest that our anticipated recovery has lost momentum.”

The comptroller’s fiscal caution is well-advised.

Next week’s Board of Estimates meeting will give us a clue as to how the state’s financial experts are reading the current mix of fiscal tea leaves on the state and national levels. Keep in mind that the state’s current estimates that were released in March already forecast a 3.6 percent revenue growth in FY 2011 for the general fund.

Whichever way the Board of Estimates adjusts its projection, Maryland’s $1.5 billion deficit forecast will remain very much in play for the next governor and General Assembly.

Through a combination of budget cuts and deployment of federal stimulus funding, state leaders managed to outperform the revised fiscal forecasts for FY 2010. New revenue related to BRAC and other federal employment initiatives and the implementation of a limited number of slots in Maryland offers some prospect of welcome new revenue sources in the coming years.

But whatever our state’s potential revenue prospects, it would not be prudent to count on pre-recession levels of revenue growth anytime soon. Also, some very significant fiscal challenges remain to be addressed, including a major shortfall in funding for transportation infrastructure and growing unfunded liabilities in state retiree pension and health care benefits.

Maryland is not out of the fiscal woods yet. Let’s hope lawmakers go to Annapolis in 2011 recognizing that the best way to the edge of the forest is by developing a clear strategy for our state’s post-recession economic recovery and matching it with a sustainable budget.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Previous Center Maryland columns by Donald C. Fry:

Getting beyond sound bites and bumper stickers

Biotech tax credit more popular than ever, but the ‘rock-concert’ lines are gone

Bad timing for upcoming business tax report

For economic indicators, the ‘whipsaw’ effect continues

Do census data foretell a Baltimore city population rebound?

Remember the value of business after the election

New report ranks Baltimore among stronger regions to weather the recession

New living wage proposal: wrong idea, wrong time for Baltimore

Northeast needs more attention from federal rail planners

New national report has familiar ring for Maryland bioscience advocates

New report underscores Maryland’s work force development challenges

State’s health initiative: a ‘win-win’ for employers and their workforces

As Baltimore hikes taxes, are state’s counties next?

After the ‘fiber from heaven’ scramble, what’s next?

BRAC growth no longer a future event – it’s happening now

Economic development is a contact sport

Despite the recession, bioscience growth still percolates in Baltimore

State stumbles in enacting new education collective bargaining process

Wind power has potential in Maryland, but solar emerges as early renewable option

It's not good to be clueless in cyberspace

Amid fiscal shuffle, Maryland lawmakers pass measures to spur business growth

Thankfully, Baltimore leads with substance over style in luring Google

Leave damaging transportation provisions out of the budget

Amended budget continues recession-induced fund shifts and stimulus rescue

General Assembly setting stage for combined reporting push in 2011

Wrong timing for proposal to change Baltimore City school board

Baltimore City isn’t alone in facing pension funding challenges

A government investment program that delivers

Proposed transportation fund raid -- a bad habit continues

Where's the outrage over crime?

Small business is where innovation lives
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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.