As expected, the Board of Revenue Estimates said Thursday that state coffers will collect $333 million less in the next 18 months than it predicted as recently as December, forcing similar cuts in spending growth that a Senate committee will finalize tomorrow.
“The economic situation has declined,” said David Roose, director of revenue estimates. “Now many respected economists believe a recession is imminent.”
While income tax withholding collections are up 6.6 percent, “the sales tax is actually showing the effect of the weakness of the economy,” Roose said. Only estate taxes are showing significant increases.
For the first time in 17 years, sales tax collections actually have declined two months in a row.
“The hard numbers speak for themselves,” said Comptroller Peter Franchot, who chairs the revenue board. “We have yet to experience the full force and effect of the national economic downswing.
“It?s going to get worse before it gets better,” Franchot added.
In its official letter to Gov. Martin O?Malley laying out the revenue numbers he is required to use in balancing the state budget, the board noted that economists believe the recession will be likely “shallow and short.”
State Treasurer Nancy Kopp noted that “we?re not in the free-fall situation” the state experienced in the severe recession of 1990 and 1991.
The lowered revenue projections have “clear implications for the state,” said O?Malley?s Budget Secretary T. Eloise Foster. There is enough of a planned “fund balance” or surplus for fiscal 2008, which ends June 30, to cover the $75 million revenue decline this year, Foster said. But for next year, “we?re short of where we need to be.”
She noted that Senate budget subcommittees already had cut $100 million, but she hoped to work with the Senate and House to “preserve some of the administration?s priorities.”
Senate President Thomas V. Mike Miller said that “the governor?s programs are going to remain intact,” but will likely be scaled back from his proposed spending plans.
“We?ll leave increments,” Miller said, such as a portion of the proposed $50 million Chesapeake Bay 2010 Trust Fund the Senate tentatively approved Wednesday.
