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Coronavirus ‘economic calamity’ could cost Maryland up to $4 billion a year in revenue; budget cuts likely

Maryland’s state government stands to lose billions of dollars in tax collections due to the coronavirus pandemic, setting the state up for years of budget woes.

But the state isn’t in the immediate, dire situation predicted just a month ago, when forecasts showed Maryland could be short by up to $2.8 billion by the end of June.

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A revised financial forecast issued Thursday shows the state could miss between $925 million and $1.125 billion by the end of June — still a significant number that is likely to result in budget cuts affecting state services and state employees.

And the impacts could be felt for at least two years, according to Andrew Schaufele, the state’s top analyst who develops revenue forecast.

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“It seems this economic calamity is going to continue into the future,” Schaufele said during an online meeting of the Board of Revenue Estimates, which is comprised of the state’s comptroller, treasurer and budget secretary.

By the 2022 budget year, the state could be missing out on between $2.5 billion and $4 billion per year if job losses, lost income and reduced consumer spending continue, Schaufele said.

Schaufele said the prior estimate of $2.8 billion in losses through June was a “worst-case” scenario. He said the updated scenarios represent a “very realistic” range of possible outcomes, though he noted further revisions will be likely.

The Board of Revenue Estimates meets periodically to forecast how much money the state will bring in. The board’s reports are used to guide the state budget.

But the board’s prior reports have been made obsolete by pandemic restrictions that shut down schools and many businesses and threw half a million Marylanders out of work.

The state delayed deadlines for collecting certain taxes, and the taxes that are being collected are way down compared to a typical year. Local governments also are expecting a pinch from lower-than-expected tax collection.

The state is likely to make cuts both in the current budget, which runs through June 30, and next year’s budget, which starts July 1.

Treasurer Nancy Kopp said she hopes to avoid laying off state workers as part of cost-cutting measures. She said putting more people out of work would be counterproductive for the economy.

“We have reserves. We have some options. We have to examine all of those options,” said Kopp, a Democrat. “I would hate to see us add to the problem instead of solve it.”

A month ago, Republican Gov. Larry Hogan directed Budget Secretary David Brinkley to develop proposals for budget cuts. Brinkley said now that he has updated forecasts, he can move forward “in putting some options on the table.”

The governor, treasurer and comptroller have the authority to make budget cuts when the state legislature, which approves the state budget, is not in session.

The newest revenue predictions are based on two models from the Moody’s ratings agency. One includes the effects of more federal financial aid to states, while the other is based on a model without that additional help.

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Both models show a long, gradual recovery of jobs and state revenues. Even by 2023, Maryland isn’t predicted to have the same number of jobs as before the coronavirus pandemic.

State Senate President Bill Ferguson, a Baltimore Democrat, criticized the changing predictions on Twitter. He called the prior estimate of $2.8 billion in losses by June fearmongering by Comptroller Peter Franchot.

Franchot, a Democrat, declined to respond to Ferguson’s criticism.

For weeks, Hogan and other governors have been pressing Congress and Republican President Donald Trump’s administration for direct financial help for state governments in future coronavirus aid packages.

While states received aid in prior coronavirus legislation, it’s been required to be used for specific expenses related to the virus. Now, the states want unrestricted money to plug holes in their budgets. Hogan and his fellow governors have asked for $500 billion.

The effort has gained some supporters, but also detractors, including U.S. Senate Majority Leader Mitch McConnell, a Kentucky Republican who suggested states should go bankrupt instead.

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