State ends year with more money than expected

Gain comes despite near record revenue decline

September 01, 2010|By Julie Bykowicz, The Baltimore Sun

State government pulled in less revenue during fiscal year 2009 than at almost any time in four decades — but still outperformed its bleak financial forecast, state Comptroller Peter Franchot reported Wednesday.

The state's revenue collections, which include sales and property taxes and various fees, amounted to $12.6 billion in the fiscal year that ended June 30, Franchot said. That represents a year-over-year decline of 3.7 percent, the third-worst performance in the past 40 years.

But because financial analysts had predicted an even more drastic decline, the state ended the year with $183.7 million more than projected. That left a year-end balance of $344 million.

By law, that money goes into the state's rainy-day fund, but Gov. Martin O'Malley can use it without legislative approval. Some have suggested that he reimburse state workers for at least one of their furlough days, for which they lost pay, or give back to counties that lost funds when the state used road maintenance money this year to balance the budget.

A spokesman for the governor said it was too soon to know where the money would go. O'Malley likely will wait at least another two weeks, until financial analysts have made their revenue projections for next year.

"This is clearly a positive sign," the spokesman, Shaun Adamec, said of the unexpected $183.7 million. "The governor has said in the past that as the economy allows, the first priorities for restoration would be to the local counties and municipalities and to state employees, both of whom have been impacted by budget reductions in the past. Those decisions haven't been made with regard to this fund balance."

Franchot said he hoped the money would stay in the rainy-day fund for at least a year, until a more complete picture of the national economy becomes clear.

"We just don't know what's going to happen yet," he said.

Franchot summarized his year-end report at a Wednesday meeting of the Board of Public Works, a three-member panel that includes O'Malley and Treasurer Nancy K. Kopp, both fellow Democrats.

It was a striking contrast from last year, when lower-than-anticipated revenues prompted the board to slash spending to bring the state budget into balance.

Still, Franchot maintained a gloomy tone, saying only that the state had "outperformed its catastrophic projections."

"That's great," O'Malley said.

"It's not just great, it's a great sense of relief," Franchot said. He went on to say that the national recession has taken its toll on Maryland, even though it is doing better than other states.

To get back to pre-recession revenue levels, Maryland would have to see 14 percent growth each of the next four years. State revenue is projected to increase by 3.6 percent this year.

"Anyone who thinks we can grow our way out of this is mistaken," Franchot said. "We simply have to face reality."

He said the state would need to continue its belt-tightening in "this new age of austerity."

O'Malley, who is running for re-election, focused on the positive signs, pointing to five months of job growth, a decline in unemployment claims in recent months and Forbes magazine's prediction that Maryland would be one of just three states to see revenue growth this year.

"We'll just have to keep up the cutting and the tough choices that we've shown ourselves capable of," the governor said.

julie.bykowicz@baltsun.com

twitter.com/bykowicz

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