By Megan Poinski
The state’s economy is growing extremely slowly, and two fiscal regulatory bodies recommended caution on Wednesday as the state goes forward.
The Board of Revenue Estimates released its updated revenue estimates for the current fiscal year, as well as for the next fiscal year. Also on Wednesday, the Capital Debt Affordability Committee approved its annual recommendations for new general obligation bonds that the state can take on in the next fiscal year’s budget.
The estimates for the rest of fiscal year 2012 indicate that the state will take in $195 million more than initially anticipated, showing revenue growth of 4.2%. Comptroller Peter Franchot, chairman of the Board of Revenue Estimates, said Wednesday that this is a good thing because it means the state will not have to make painful cuts in the current year.
However, he continued, it is not an ideal situation. The revenue estimates increased because individual income tax collection was boosted 5.5%. These taxes are from the first part of 2010, Franchot said. Meanwhile, the estimates for corporate taxes and sales taxes were all revised downwards – about $34 million less than previously estimated for corporate tax, and $102 million less than anticipated in sales and use tax.
“This is much slower growth than previously expected,” Franchot said. “It reflects the national economy, and shows that an economic recovery never really happened. A double-dip recession is a far greater possibility now than it was six months ago.”
With the national economy teetering, jobless rates staying stagnant, and consumer confidence falling, Franchot said that the state faces an “extraordinary degree of economic volatility.”
The state’s economy is expected to continue to grow in fiscal year 2013, but slower. The estimate released on Wednesday indicates 2.8% economic growth in fiscal 2013, mostly buoyed by projected increases in corporate tax collections.
State Treasurer Nancy Kopp, another member of the Board of Revenue Estimates, said that the estimates are conservative.
“While it is very good to have growth, this is slow growth,” she said.
Kopp said that much is riding on the actions of Congress and the “Super Committee,” which is working to come up with a plan to cut $1.5 trillion in federal spending. With partisanship ruling the day, and potential large cuts to federal transportation and medical funding, Kopp said that Congress’ actions will have a pronounced impact on the state’s budget.
O’Malley said that he was thankful that there is some financial good news about projected revenue growth, as well as the fact that the state closed out fiscal year 2011 with $300 million more than anticipated. He also said he hopes Congress will do its job and pass sound financial policy, such as President Obama’s jobs bill.
In its meeting on Wednesday, the Capital Debt Affordability Committee ratified a report that shows slowly growing revenues – and a quickly approaching debt ceiling. The report contains figures similar to those presented at the committee’s first meeting last month. The committee, made up of financial officials from the legislature and executive branch, makes recommendations of how much more debt the state should go into next year. Committee members weigh the state’s debt service, revenue projections and the economic outlook.
Committee members unanimously recommended a debt limit of $925 million in new debt – the same amount they recommended last year, and a similar amount to what they intend to recommend through 2016.