Reiterating his call for caution in the midst of a slow economic recovery, Maryland Comptroller Peter Franchot released the final closeout numbers for Fiscal Year 2015.
General Fund revenues totaled $15.9 billion in the fiscal year, $214.1 million above the official state forecast and representing a growth rate of 5.1%. While the results validate a sense of cautious optimism, there are underlying issues that overstate growth relative to underlying economic activity.
The revenue data reflected moderate improvement in wages and salaries and consumer spending, but they remain subdued relative to pre-recession levels. Withholding receipts finished the year up 3.9% from the prior year, in line with expectations and an improvement from last year’s 3.0%, but modest when compared to pre-recession growth rates and a reminder of continued economic pressures facing wage earners.
Sales and use tax receipts increased by 5% from the previous year, but after factoring the impact of Amazon’s physical presence in Maryland, were still weaker than pre-recession norms.
Individual income tax revenues finished the year up 7.4%; however, the growth rate is skewed higher as a result of an artificially depressed tax year in 2013. The threat of a fiscal cliff in 2012 drove down income tax revenues as individuals shifted income from tax year 2013 to tax year 2012 to minimize federal tax liability.
Given the state’s uncertain near-term economic outlook, Franchot urged the governor and General Assembly to proceed with caution and fiscal restraint.
“These revenue figures highlight an economy that has improved but is still fragile and has not returned to pre-recession growth rates,” he said. “We must proceed with the utmost caution and continue on a prudent fiscal course in the months ahead. I firmly believe any fund balance must be saved and not spent to assure Maryland taxpayers that their government understands the uncertain fiscal and economic climate.
“To turn the corner on the state’s economic recovery, we must provide a sense of predictability to businesses with a multi-year moratorium on all new or increased taxes, fees and major regulatory changes. This will give businesses the confidence to hire, invest and grow and give consumers the confidence to spend. If we can maintain a cautious mindset, Maryland’s economic bones are strong enough and resilient enough to withstand these challenges.”
Franchot noted several factors that have contributed to a slow economic recovery for the past fiscal year, which began July 1, 2014, and ended June 30, 2015. Among them were the ongoing consequences of sequestration on a state economy that remains heavily reliant upon federal jobs, spending and business opportunities; continued high unemployment relative to pre-recession levels (5.2% in July versus 4.3% pre-recession); and average wage growth close to or below historic inflation rates.