Maryland finished the most recent budget year with nearly $1 billion in unspent funds, a surplus that was more than 50 percent higher than expected, mostly due to stronger-than-anticipated income tax receipts, officials said Thursday.
"It is encouraging news," Gov. Martin O'Malley told The Baltimore Sun. He said the increase in revenues was "a sign of the recovery" that is "welcome."
O'Malley expressed optimism that the new figures would foreshadow a smaller deficit going forward. The budget gap is currently estimated to be about $1 billion.
State analysts will readjust their long-term revenue and spending estimates later this month to give the General Assembly a better sense of the continuing gap.
Maryland budget writers had expected to close the fiscal year with $641 in excess funds. They had planned to use nearly all of that money — $590 million — to balance the current budget.
The new data shows the state has $344 million more in surplus funds than officials had anticipated.
Much of the unexpected cash will be put in the state's Rainy Day Fund.
Policymakers cautioned against using the new figures to draw conclusions about future budgets.
Sen. David Brinkley, a Republican on the Senate Budget and Taxation Committee, said, "I love to hear that we are in the black." But he added that it was "unfortunate" that most of the money was already committed to the current budget cycle.
"Maryland families are still feeling the crunch," Brinkley said. "We have to be vigilant about being sure the private sector can succeed."
O'Malley cautioned that there still are "tough choices" ahead for Marylanders — in the best-case scenario, he said, the larger-than-expected revenues turn next year's $1 billion projected deficit into a $700 million gap.
That means new taxes and more cuts are still on the table for next year's legislative session. O'Malley recently ruled out the possibility of raising taxes when the General Assembly meets in special session next month to vote on a new congressional redistricting plan, but said that increases are in play for the regular session to begin in January.
The governor likened the state getting the good budget news Thursday to a family enjoying a good financial stretch.
"You are grateful for the good month or two," he said. "But you know you have bills to pay for the year ahead."
O'Malley also cautioned that the federal government could still take a whack at the state's budget when the congressional panel on deficit reduction makes its recommendations.
Maryland's budget relies on roughly $9 billion from the federal government, some of which could be in jeopardy. Rep. Chris Van Hollen, a Montgomery County Democrat, is a member of the 12-person committee.
In a letter to O'Malley, state Budget and Management Director T. Eloise Foster said that it is unclear whether the increased tax receipts would continue, given "the current uncertainties in the national economy."
Comptroller Peter Franchot said that "events of recent months serve as a sobering reminder that we must maintain a cautious fiscal course. "Given the magnitude of the fiscal and economic challenges that lay ahead, both for our state and for the country, I firmly believe that this fund balance must be saved and not spent," he said.