Tax revenue falls, board says

State revenue panel estimate is $50 million less than expected

March 10, 2007|By Andrew A. Green | Andrew A. Green,sun reporter

Maryland's Board of Revenue Estimates said yesterday that tax collections will be about $50 million less than expected in the current fiscal year and the next, a further sign that softening in the economy will exacerbate the state's budget problems in the next few years.

Some fiscal leaders in Annapolis had worried that the revenue drop-off would be much worse, forcing Gov. Martin O'Malley and the General Assembly to make immediate, deep reductions to the current budget and the one now being debated in the legislature.

The report largely staves off that problem, but it suggests that Maryland's long-term fiscal problems, a gap of $1.3 billion between projected revenues and expenses starting next year, won't be diminished by economic growth alone.

"The good news is that the board's estimate for fiscal revenues ... is essentially unchanged," Comptroller Peter Franchot said. "But today's news is not exactly cause for celebration. Revenue growth is expected to be extremely weak ... and it will not support the spending needs of our state."

David F. Roose, who heads the revenue estimates division in the comptroller's office, said revenue growth is expected to be 3.7 percent this year and 4.3 percent next year. Over the last several years, growth has been as strong as 10 percent, Roose said.

Growth was strong through the 2006 budget year, which ended June 30, but slowed dramatically after that, Roose said.

Treasurer Nancy K. Kopp, who serves on the revenue estimates board, said the weak growth is a sign that Maryland needs to rethink its tax structure, a change that would likely involve increases in the overall amount residents pay for government.

"The people of Maryland are sensible and sensitive enough to know that whenever the basic programs of the state are at stake, we need a tax structure that better reflects the economy of the state," Kopp said.

T. Eloise Foster, the secretary of Budget and Management, said that OMalley recognizes the scope of the state's problems and is committed to finding a solution. But he wants to take his time to find efficiencies and to consider all options, Foster said. He has said he wants to hold off on action until next year.

"Everything is on the table," Foster said. "It's looking at the overall tax structure and seeing if it is adequate for our needs going down the road."

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