ANNAPOLIS – Lawmakers heard a favorable forecast Tuesday – not a cloud on the horizon for Maryland revenue. They are looking toward a “record-setting year” in state aid to local government, continually increasing aid to education and a $1.4 billion surplus predicted through the end of this fiscal year.
“This is a lot better a year than we’ve had for the past few years,” said Warren G. Deschenaux, director of the Office of Policy Analysis, which presented its predictions to assist the Spending Affordability Committee in setting a spending limit for the governor’s budget next month.
“Revenues are up. Spending is up,” he said, referring to full funding for programs that have not had that in recent years. But, he warned the legislators of the possibility of declining housing markets, increasing interest rates and rising fuel costs.
“Easy come; easy go,” Deschenaux said.
Opening a meeting of four different legislative committees, Deschenaux pointed to his first of many graphs, a “dramatic squiggly line” representing the “roller coaster of the economy.” In this roller coaster, he said they were all riding in the back, unable to see when they were at the very top, unable to prepare fully for a fall.
Theresa M. Tuszynski, who performed the fiscal analysis for the upcoming year, said her predictions built in a gradual increase in mortgage rates and a decline in the housing market.
At the moment, higher revenues are being fed by unexpected increases in the personal income tax and in sales tax – including real estate tax – collections. Property tax revenue also increased due to a rise in property values and assessments despite a lowering of the tax itself by 13 counties.
Officials said that the baseline prediction for the next fiscal year’s budget, which begins in June, is $13.7 billion, an increase over the current budget by $1.3 billion.
In a separate meeting earlier, Deputy Attorney General Maureen M. Dove threw what could be a curve ball to many of the same legislators. Due to declining tobacco sales nationally, the federal government is considering lowering the amount of money it demands from tobacco companies as part of its historic settlement with the industry. This money goes to the states.
Dove said Maryland could lose as much as $26.1 million. Secretary of Budget and Management, Cecilia Januskiewicz said the possible loss of tobacco money “could really create a problem for our budget.”
Still, the tone of Tuesday’s revenue forecast seemed quite sunny. “We are over $1 billion higher than predicted,” Deschenaux said. “We are riding upward” on the revenue roller coaster.