State reports $310 million surplus in '04 budget

Maryland ended its budget year in June with a larger surplus than expected, creating a $310 million cushion that should soften the impact of looming cuts to agencies, state officials said yesterday.

Higher-than-anticipated property and income tax revenues, coupled with unspent funds returned by agencies, helped provide the surplus in the $23.6 billion budget, officials said.


"Though a surplus is welcome news, much of it is a one-time fix, and it falls short of what Maryland will need in future years to balance what we want with what we can afford," Comptroller William Donald Schaefer said in a statement reporting final figures for the 2004 budget year, which ended June 30.

In particular, rising costs for education and health care are projected to outstrip tax revenues.


"Even if this surplus is sustainable - and there's no guarantee it will be - we are still far short of where we need to be to balance future state budgets," Schaefer said.

If revenue growth continues at its current pace, a projected deficit of $800 million to $1 billion for fiscal 2006 would be shaved to about $400 million, said Warren Deschenaux, the General Assembly's chief budget analyst. The 2006 fiscal year begins July 1, 2005.

"It means you can manage the 2006 budget without tremendous dislocation, if that is the decision," Deschenaux said. "As you look at 2007, you still have a major hill to climb. It's not going to obviate the need to do something structural, eventually. It just buys a little more time."

Budget Secretary James C. Chip DiPaula Jr. said, "While this is positive news, it is a far cry from any long-term solution."

The rosy figures were released a day after officials announced that Maryland had the best job growth in the nation last month, reinforcing a trend in many other states.

The latest numbers have the potential to affect debates over slot-machine gambling and higher taxes when the General Assembly reconvenes in January. With tax revenues growing faster than projected, there is less pressure for a new source of cash from gambling or higher tax rates, observers say.

Nationwide, states' tax receipts were an average of 6.7 percent higher in the April-June quarter than in the comparable quarter a year ago, according to a recent report by the Nelson A. Rockefeller Institute of Government in New York.

Tax receipts in the Mid-Atlantic region grew at a 9.6 percent clip, trailing only the Far Western states, whose tax revenue grew at 10.9 percent, the institute said.


Driving Maryland's fourth- quarter gains were income taxes from individuals, which were $89 million higher than expected for fiscal 2004, and corporate income taxes that exceeded expectations by $31 million.

Sales tax receipts were $56 million higher than expected for the year, and lottery revenues were $18 million higher. Agencies returned $12 million in unspent funds.