ANNAPOLIS – Comptroller reports show Maryland income tax revenues are down $71.7 million from projections for fiscal year 2002.
Even though corporate and sales taxes have been in line with projections, the loss puts even more pressure on lawmakers struggling to balance the budget, just as the Senate this week began voting on budget cuts.
At the beginning of the January-to-April legislative session, fiscal analysts warned the General Assembly it would need to find $937 million to plug a projected gap between spending and revenue.
That gap has now grown larger with falling revenues and commitments to keep a promised 2 percent tax cut, priced at $175 million.
The revenue loss came mostly from slumping income tax payments.
In January, they were $45.2 million below projections for the year, said David Roose, director of the Board of Revenue Estimates at the Comptroller’s Office. That number dropped another $26.5 million in February, Roose said.
Many lawmakers expect total revenue shortfalls to climb as high as $200 million to $300 million for the rest of fiscal year 2002 and 2003.
But Roose wouldn’t confirm the predictions. He said his office needed to study the figures more before making such assessments.
Much of the original $45.2 million drop came from taxpayers who pay on a quarterly basis, Roose said. Lower-than-expected payments from such taxpayers are less significant since they only form 20 to 25 percent of the taxpayer base.
However, he could not explain the drops in February income taxes – a month that doesn’t have collections from quarterly payers. It would require more analysis, he said.
The analysis will be included in the adjusted projection of state revenues by the Board of Revenue Estimates, which should be finished around March 15. The board makes annual revenue projections in December and March to assist lawmakers in structuring the state’s budget.
Lawmakers have already started bracing for the report.
Senate Budget and Taxation Committee members were reminded Wednesday that their votes to trim programs might not make them popular but were needed to reign in the budget so that 2004 was not left with a $1 billion deficit.
“If we could only deal with 2003 and magically be transported to that better place,” of course, it would be easier, said Chairwoman Barbara Hoffman, D-Baltimore.
“We would like to err on the side of caution (regarding revenue projections for the year),” said committee member Sen. Patrick Hogan, D-Montgomery. He said they could always add the money back if they cut too much.
Some of the cuts approved by the panel on Wednesday included:
– $25 million for state employee raises. Instead, they will receive bonuses equal to half of what the pay increase would have been. Lawmakers also agreed to limit the state workforce to 76,900 full time employees.
– $6.5 million in a one-year cancellation of state employee merit bonuses. – $17 million from the state’s information technology budget. – $3.5 million from the Children Entering School and Ready to Learn program, a move largely supported by the Maryland State Department of Education.
Hoffman said the trimming process would be fluid.
Hogan said that if the committee found it hadn’t cut enough after the first round to bring the budget in line with revenue predictions, the panel would revisit program cuts.