The Week Ahead - Pro Football Kickoff Edition

Pro football fans in Maryland are geared up for the start of the season. The Baltimore Ravens begin their regular season Thursday. Washington's NFL Team plays its first regulation game of 2013 next Monday.  

Last week we blogged on Maryland’s close-out report for fiscal year 2013. Even though revenues fell $62 million short of estimates, the state ended its year on June 30 with $1.2 billion in the bank. We also blogged on the unprecedented levels of long-term unemployment – with 89,000 Marylanders unable to find work for 27 weeks or more last year.

Coming Up September 3-6

September 4: At 10 am in Annapolis, the Board of Public Works meets.

At 1 pm in Annapolis Maryland's judicial partners will brief the Special Commission of Security in State and Local Corrections Facilities on local court and detention center interaction; the impact of case docketing on detention centers; and security at bail and pretrial hearings

September 5: At 1 pm in Annapolis, the Maryland Health Care Reform Coordinating Council will recap the 2013 Legislative Session, and get an update on Maryland health benefit exchange activities, and the state innovations model planning grant. 

September 6: The US Bureau of Labor Statistics releases national employment and unemployment data for August. 

 

Close-out - revenues slightly under estimate. Maryland ends year with $1.2 billion in the bank.

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 Comptroller Peter Franchot today released the results of the state’s close-out of fiscal year 2013. Fiscal year 2013 began July 1, 2012 and ended June 30, 2013.

The state ended the fiscal year with $510 million in the general fund and $700 million in the “Rainy Day” reserve fund, for a combined balance of $1.2 billion.

General fund revenues fell $62.4 million short of official estimates, growing 4.5 percent over fiscal year 2012. General fund revenues for fiscal year 2013 totaled $14.9 billion.

Favorable variances in expenditures and transfers offset $15.4 million of this loss, so general funds overall finished $46.9 million below the previous estimate.

The Bureau of Revenue Estimates cited poor growth in wages as a cause of the reduction. However, most of the shortfall in revenue was actually in the corporation income tax. Individual income taxes actually finished very slightly above the estimate. Losses in withholding were offset by gains in final payments (or refunds) of 2012 taxes.

The Board of Revenue Estimates will meet on September 17 to release revised revenue estimates for fiscal year 2014 and the preliminary estimate for 2015. The $62.4 million shortfall in fiscal 2013 is less that one half of one percent of general fund revenues. By itself, it does not materially affect the state’s financial picture.

 

Reserves are adequate enough so that mid-year adjustments are unlikely to be needed in the current fiscal year 2014. If the Board of Revenue Estimates determines that federal budget cuts and the state’s overall prospects for income growth will seriously harm future revenue collections, it could make it more difficult for the state to meet current service commitments in fiscal 2015.

A Glossary of Surpluses and Deficits
+$1.2 billion	FY 2013 total balance	The state’s total available reserves as of June 30, 2013, including $511 million in general funds and $700 million in the “Rainy Day” reserve fund
+$511 million	FY 2013 general fund balance	The amount in the state general fund on June 30, 2013
+$247 million	2013 unassigned funds balance	The amount that would be left in the general fund on June 30, 2014 if there were no changes to the FY 2014 enacted budget
-$46.9 million	FY 2013 general fund actual below estimate	The amount by which the fiscal year 2013 ending general fund balance was below the previous official estimate. The $62.4 million shortfall in revenue was partially offset by $14 million in below-estimated expenditures and $1.4 million in transfers in excess of the previous estimate
-$62.4 million	FY 2013 revenue shortfall	The amount by which actual revenues for fiscal year 2013 fell short of the official estimate

Revenue exceeds estimates

Today Maryland Comptroller Peter Franchot announced that revenues for state fiscal year 2012 - which ended June 30 - exceeded the official estimates by $230 million.


This is moderately good news for several reasons:

1. It demonstrates that the economic recovery - weak as it is - is beginning to improve household and corporate income.
2. It reduces the state's revenue shortfall for the upcoming year. 

The Comptroller issued a statement that emphasizes that the economy remains precarious and the recovery is adding jobs and revenue much more slowly than we would like. He is right. Still, the good revenue news suggests a glimmer of light at the end of the tunnel.

There are still two big risks to the economy (and therefore to Maryland's budget). Congress might enact abrupt federal budget cuts, which could send the national economy into a new recession. Or the European economy could deteriorate to the extent that the US economy suffers.

On the plus side, Maryland's state budget is balanced through June 2013. $672 million remains in the state's "Rainy Day" reserve fund. The three bond rating agencies have again upheld Maryland's exceptional Triple-A credit rating.

The budget will remain difficult, but as a result of the state's balanced approach to managing the budget and some level of economic recovery, there is hope for the future.

We will publish MBTPI's complete analysis of the fiscal year close-out shortly.