Statement of Comptroller Peter Franchot regarding the new revenue estimates released today, December 13, 2012 by the Board of Revenue Estimates:
“Last month, as chair of the Board of Revenue Estimate I convened one of our Economic Advisory Forums and I found it to be particularly informative. At the forum, we heard testimony from key businesses leaders in every geographic region of the State, and in each sector of the economy…and we heard personal accounts from the front lines of the “Real Economy,” confirming the data we’re seeing.
One of the key takeaways for me was the term “porpoising”. Essentially, the private sector is telling us that the underlying economic insecurity out there is causing unpredictable ups and downs from month to month. This prevents businesses from being able to confidently plan ahead which means they’re not hiring new employees, promoting from within or making investments in their company’s future. And this sentiment was underscored by fears and uncertainty with the looming fiscal cliff that poses disproportionate harm to
In fact, at $92 billion, federal spending accounts for one-third of the State’s economy; a truly staggering number. Needless to say, what happens in
So while I’m pleased that we’re here to write up our cautious economic projections by $161 Million for fiscal years 2013 and 2014 we need to understand that these estimates assume that our political parties can come together to solve our nation’s economic challenges.
Given the consequences, it’s a reasonable assumption. But as someone who spent years on Capitol Hill, reason and logic might not be applicable. And cause for caution goes well beyond the fiscal cliff.
This report reflects the fact that the economy is growing, but very modestly. Yet, it has an exceedingly soft economic underbelly with inherent risks. Yes, employment is showing noticeable improvement, but wage growth is exceedingly poor – with
And while the statistics are important, they demonstrate a far more telling story. They show that far too many Marylanders are taking home less pay at a time when their living costs are rising, meaning they have less discretionary money to spend on themselves and their kids in an economy that’s primarily based on consumer spending.
There’s just no way to gloss over the fact that – despite positive news in recent weeks – we still have a steep hill to climb. The truth is that sales and use tax, perhaps our most indicative economic indicator, remains incredibly weak.
And the bulk of the increase in individual income that’s reflected is largely due to the State’s retroactive tax increases, along with fear-induced early dividend disbursements and capital gains sell-offs caused by the looming fiscal cliff. It’s important that as we write these revenues up, we do so soberly, understanding that revenue stability should NOT be confused with economic progress.
And while we’ll take any bit of positive news we can get, it shouldn’t be mistaken for anything more than it is. Consider for a minute that in order to get back to our pre-recession long-term trend, revenues would have to increase by 11.5% annually over the next 3 years!
Then think about the stubborn general fund growth we’re talking about this year. At just 2.9% – once we adjust for the tax law changes – you realize how steep the hill is before us; caused by a recession whose magnitude and depth we haven’t experienced in our lifetimes.
While we share hope about our prospects for a long-range economic recovery, hope is not and economic strategy. So we must remain extremely cautious in our outlook moving forward.
Yes, the hill is significant; but, in the long-term, I know
And I remain as confident as ever that