ANNAPOLIS – Maryland may have difficulty funding existing government programs, let alone any new security measures demanded by last week’s terrorist air attacks, given the new lower estimates of sales and corporate tax revenues released Wednesday.
The new estimates were sent to Gov. Parris N. Glendening one day after the reopened stock market plunged nearly 800 points, the biggest single-day point fall in history.
“For the sake of all Marylanders, especially those who rely on state programs for vital needs, I urge you to act with restraint in the coming months,” said Comptroller William Donald Schaefer in a letter to the governor. Schaefer released the letter during a Board of Public Works meeting Wednesday.
September general fund revenue estimates were $40.2 million lower than current official figures, without taking into account the economic fallout of last week’s terrorist attacks.
Four jetliners were hijacked Sept. 11. Two smashed into the towers of the World Trade Center in New York, another plowed into a section of the Pentagon and the last crashed into a field near Pittsburgh, Pa. The estimated death toll stands at more than 6,000 in the incidents.
The stock market closed down another 144 points Wednesday as American Airlines mirrored cuts made by Continental and US Airways in announcing that it will layoff 20,000 workers.
“The net impact almost certainly has got to be negative,” said David Roose, the director of the Bureau of Revenue Estimates. “The question is how big?”
Ultimately, Roose said, consumer confidence will determine the economy’s direction.
Glendening downplayed the revenue estimates at a news conference Wednesday, pointing out that $40 million is a small fraction of the state’s budget and the state has $998 million in reserve.
“The state continues to be very, very strong,” the governor said. He did however warn of longer-term ripple effects from last week’s attacks.
Glendening has said that he will not touch those reserves before December.
The general economic slowdown and shaky consumer confidence led to lower sales tax and corporate tax revenue estimates, Roose said. Sales tax figures are down 2.5 percent over current official estimates and corporate tax revenue estimates are 9 percent lower.
Transportation and tourism are likely to feel the greatest impact in the coming months, he said. But it is too early to know any specific numbers.
Defense contractors like Northrop Grumman and Lockheed Martin are likely to benefit from increased defense spending. Construction trades could see a surge as federal installations across the state beef up security, he said.
Baltimore/Washington International Airport will feel the brunt of the transportation sector’s pain, but the indefinite closure of Ronald Reagan Washington National Airport could buffer the impact. Much of National’s traffic has been diverted to BWI, Roose said.
The real economic impact of the terrorism will not be clear for some time.
“Obviously last week’s terrorism impact will have a toll,” but it is premature to say exactly what, said Eloise Foster, secretary of Budget and Management.
Foster emphasized that the lower revenue estimates are not official and should only be used in planning. The next official estimates will be released in December.
Maryland’s Constitution requires a balanced budget, Foster said, so officials will “do whatever we have to do” to meet that law.