- The Enterprise
- The Recorder
Maryland revenues are growing but not at as fast a clip as some states that are seeing a major spike in collections.
Through April, fiscal 2011 general fund revenues were up 7.6 percent over the same time last year, and end-of-year returns are expected to exceed midyear estimates. The fiscal year ends June 30.
“[These are] encouraging signs of recovery, but we need to be very, very careful about new taxes, new fees that would obstruct the momentum what little momentum there is out there,” said Comptroller Peter V.R. Franchot (D). “It’s a bright light, but it’s a very small light and it’s a very uncertain light.”
Final income tax payments collections included with tax returns already have surpassed the full-year forecast by almost $50 million, and another $75 million to $100 million more will be collected over the last two months of the fiscal year.
Income tax withholding, the top source of state revenues, is on pace with fiscal 2011 estimates of 4 percent growth over last year.
But sales tax receipts were 2.2 percent less in April 2011 than in April 2010. Overall, sales tax collections, the second largest source of revenues, are falling 0.5 percentage points short of expectations, which amounts to roughly $17.5 million, said David F. Roose, director of the Bureau of Revenue Estimates.
High gas prices partially account for the slumping sales tax receipts, he said, adding that the higher income tax collections will more than make up for a potential sales tax decline.
“Maryland consumers are clearly feeling squeezed and are holding on to their money as far as sales tax revenues,” Franchot said. “There’s a clear lack of consumer confidence, and that’s a threat to the recovery.”
Still, Maryland is among 23 states that are on track to bring in more income tax revenues than predicted, according to a recent report from the National Conference of State Legislatures.
Thanks to big upticks in capital gains income, California expects to bring in an extra $6.6 billion through next June, while New Jersey is predicting nearly $1 billion in additional revenue. Employment gains are behind Michigan’s anticipation of several hundred million dollars more. The rising stock market also is improving some states’ revenue situations.
But Franchot said those numbers can be misleading because they are based on previous years’ underperforming figures. Maryland’s fiscal situation has been far more stable, he said.
“Anyone who is celebrating in California is crazy. They have an uptick because they were down in the cellar somewhere,” said Franchot, referencing a yawning deficit that reached $28 billion in December.
Both Roose and Franchot declined to put a number on how much above total revenue estimates the state will finish fiscal 2011, saying a lot could happen in the next two months.
However, Roose said it won’t be similar to 2005, when the state brought in $400 million to $500 million more than it anticipated.
Even if the state ends the year with a surplus, state officials should not revise future year revenue projections upward until the economy shows consistent long-term improvement, Franchot cautioned. Rather, the money should be put aside to protect against future revenue reductions.
“This could be a phenomenon limited to 2010,” he said of the increased revenue streams. “We should hold the line because there is a lot of volatility in world and national economic conditions.”