Maryland’s government is entering a new year with more than $1 billion in unspent revenue, but should be bracing for a potential economic recession, members of a state fiscal panel said.
The $1 billion in unspent revenue is due to a $500 million surplus from last fiscal year, plus more money coming into state government due to changes in federal tax law and sales tax on online purchases, according to the Board of Revenue Estimates.
Maryland lawmakers could take up an ambitious proposal from a commission studying school funding to increase the state budget for education by billions annually to pay for such programs as all-day prekindergarten for 4-year-olds and low-income 3-year-olds.
But Comptroller Peter Franchot warned Maryland lawmakers against using the unspent revenue and urged them instead to place the money in the state’s so-called “rainy day” fund, in case a recession strikes.
“As the governor and legislators prepare to convene for the 2019 legislative session, let me once again publicly renew my call for fiscal restraint,” Franchot said.
“I know the General Assembly will be considering a number of very worthy and critically important programs and proposals in the upcoming year,” he said. “But it is my sincere hope that my colleagues up the street would be mindful of the great need to carefully consider these proposals' impact on the state's fiscal health and the financial well-being of hardworking Marylanders across our state."
The Board of Revenue Estimates also approved some minor adjustments to state fiscal forecasts at its meeting Wednesday. The board voted to modestly decrease its fiscal year 2019 revenue projections by $18 million after raising the estimates by more than $700 million in September.
Like Franchot, Board of Revenue Estimates Executive Secretary Andrew Schaufele urged caution before spending the surplus. He said banks and other financial institutions are preparing for a possible recession.
“We must call attention to a heightened risk of recession and urge policy makers to plan accordingly,” Schaufele said. “We are six months away from being the longest economic expansion in modern history. Time does not cause recessions, but it does provide more opportunity for the kinds of capital misallocations that do.”