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

wpclipart.com

 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 Board Slightly Reduces Estimates

The Board of Revenue Estimates has revised the official estimate of state revenues downward by $115 million. The $115 consists of $77 million in the current year (1/2 of 1 percent) and $38 million in the upcoming fiscal year 2014 (1/4 of 1 percent). The decrease comes mostly from sales tax proceeds, with smaller reductions attributed to corporation and individual income tax. Even with this revision, revenues would grow 4.9 percent this year and 2.4 percent next year.

Comptroller Peter Franchot, the chair of the Board of Revenue Estimates, attributed the reduction to:

• Reduced consumer expenditures related to the 2 percent increase in federal payroll taxes that took effect January 1 (a part of the “fiscal cliff” provisions that was allowed to take effect).
• The economic ‘de-multiplier’ (my phrase, not Comptroller Franchot's) effects of anticipated federal budget cuts on Maryland’s economy.

This estimate revision arrives just as the legislature is completing its hearings on agency budgets and beginning to make its budget decisions.

In constructing the proposed budget, Governor O’Malley allowed for a cushion of over $1 billion.  He did this precisely because the resolution of the federal government’s budget was uncertain and that federal actions could affect state revenues and programs.

The legislature should not over-react to this modest reduction in revenue growth. The state budget remains balanced through June 2014 with a comfortable margin. Inflicting state budget cuts on top of federal cuts will not help our economy.

The Week Ahead

Last week we signed onto a letter from 23 organizations calling for greater funding for the Maryland Meals for Achievement (MMFA) program. Schools participating in MMFA provide breakfast in the classroom each morning to every student, regardless of family income. The MMFA program improves academic performance, reduces behavior problems, and increases students attention spans.

Sometime this week we expect the Comptroller to announce the results of the FY 2012 closeout. Fiscal year 2012 ended June 30th. The Comptroller also maintains an archive of previous closeout reports.

Monday, August 27th

• Commission to Study Campaign Finance Law meets. 9:30am in room 130 of the House Office Building, Annapolis.
• Community Services Reimbursement Rate Commission meets. 6-8pm in the Conference Room at the Maryland Association of Community Services, Unit P, 8835 Columbia 100 Parkway, Columbia.

Tuesday, August 28th

• Public Health and Long Term Care Subcommittee of the House Health and Government Operations Committee meets to discuss HB 1090. HB 1090 would have regulated palliative care services, but failed to pass in the 2012 session. 1pm in room 241 of the House Office Building, Annapolis.

Wednesday, August 29th

• Capital Budget Subcommittee of the House Appropriations Committee meets for a briefing on the new youth detention center report. Public testimony is not usually accepted for briefings. However, written public testimony will be accepted for this briefing. Submit 40 copies no later than August 28, 2012 by 3pm. The briefing starts at 10am in room 120 of the House Office Building, Annapolis.
• Bureau of Labor Statistics releases July employment figures for metropolitan areas.

Friday, August 31st

• Friday is the first of the rolling deadlines for executive agencies to submit their FY 2014 budget requests to the Department of Budget and Management.