State Revenue Estimates - "How Low Can You Go?" 3-14-09

Next Wednesday, the Board of Revenue Estimates will release new figures on state revenues that will greatly affect how the legislature shapes the final budget.  Unfortunately, the state is currently engaged in a limbo dance with revenue estimates as legislators watch to see how low they can go.

While the actual figures will be kept confidential until March 11th, word on the street in Annapolis is that there will be another big writedown on state revenues.  Legislators on budget committees have been forewarned to hold on to their hats for a rough and bumpy ride.

Comptroller Peter Franchot has been alluding to the revenue shortfalls in his reports and briefings.  In a letter of February 17, 2009, that reviews general fund revenue collection for January, the Comptroller states, "the extremely poor performance of fourth quarter estimated payments and the sales tax point to a substantial downward revision of general fund revenues." 

The sales tax has been particularly lame.  The January numbers reflected the holiday retail sales in December plus the 20% sales tax increase from Governor O'Malley's special session tax hikes.  It was anticipated that this might provide a boost to state revenues but instead actual receipts were only 3.5% higher and, when adjusted for the rate increase, baseline receipts were 8% lower representing a fourth straight month of sales tax declines.

At a briefing before the Senate Budget and Tax Committee, the contrast between the cautious approach of the Department of Legislative Services (DLS) and the cavalier attitude of the O'Malley Administration was front-and-center. 

O'Malley's budget secretary, Eloise Foster, stated that the Administration anticipates a revenue write-down of $800 million to be announced next week (presumably $400 million in current budget year FY09 and another $400 million in the FY10 budget now before the General Assembly).

"It will be worse" stated Warren Deschenaux, Director of Policy Analysis for DLS, noting that it will take time to analyze the bleak revenue picture but that the General Assembly will have less than four weeks to take corrective action. 

Under the Maryland Constitution, the budget bill must be passed by both the Senate and the House by the 83rd day of the legislative session which this year is April 6th.  If the budget is not passed by that date, the Governor must issue an executive order to extend the legislative session.