So what does Maryland’s increasingly bleak revenue picture say about the economy? According to the state’s Board of Revenue Estimates, nothing good.
Since December, when the board last estimated state government revenue, the picture has gotten worse. The board predicted Thursday that the state would get $74.7 million less than it expected during fiscal 2008, which ends in July, and $258.2 million less than it hoped in fiscal 2009.
Here’s a clip from the board’s letter to Gov. Martin O’Malley. Excuse the length, but I think it’s telling.
“The national economy has slowed faster than expected at the time of our December forecast. At that time, consensus opinion was that the United States would skirt a recession. Now, with real GDP growth slowing to 0.6% in the fourth quarter of 2007 and 17,000 jobs lost in January, many respected economists believe we are in the midst of a recession, though likely a shallow and short one. As you are aware, trouble in the housing market has spread to credit markets, and both consumer and business confidence have suffered.”
Two of the revenue sources that have suffered most are personal income tax and sales tax. Those are the state’s two largest cash cows, and the board writes that they are also sensitive to economic changes.
So what does this tell you? How telling of a barometer do you feel that the state’s balance sheet is for the wider economy?
The “R” word is being thrown around a lot, and we may not know we’re in a recession until it’s been going on for awhile. I have to wonder whether the definition really matters at this point.
