Del. Peter Franchot, a Democrat seeking to unseat Comptroller William Donald Schaefer, said in an interview published today that “the Comptroller?s Office has underestimated revenues in ways that have seriously hurt the state.”
“In 2005, they were off by a billion dollars,” Franchot said. Based on that, state officials “made cuts and fees increases which proved to be unnecessary.”
The billion-dollar figure is accurate based on a comparison of estimates made in March 2004 and where the final tax collections wound up 15 months later in June 2005. But people involved in the estimates described it as “consensus process” with a conservative bias.
“You tend to be pretty conservative,” said Theresa Tuszynski, a General Assembly analyst who serves on the Revenue Monitoring Committee.
“The consequences of overestimating is worse than underestimating,” because overestimating produces deficits.
Tuszynski described it as “a collaborative process.” The Board of Revenue Estimates establishes the official figures used to produce the required balanced budget, and it is made up of the comptroller, the state treasurer and the governor?s budget secretary.
Several members of their staffs, along with the legislature?s fiscal analysts, monitor the figures on a monthly basis.
They use the input from four different economic consultants to forecast personal incomes and retail sales, which generate the bulk of state income.
One of the forecasters, John Hopkins of the regional economics firm RESI at Towson University, said the underestimates reflect “the underlying strength of Maryland?s economy,” with the fourth-highest personal incomes in the nation. “If people feel wealthier, they will spend more on goods and services,” said Hopkins, describing the “wealth effect” that “has produced some underestimated growth.”
“The revenue estimates have been within 3 cents on every dollar,” said Kevin Kane, a spokesman for Schaefer.
He noted that in fiscal 2005, 45 states had underestimated their revenues, with some of Maryland?s neighbors, such as Virginia, off by wider margins.
Other states also have “multiple estimates floating around,” but Maryland has decided to arrive at a consensus, Tuszynski said.
“We?re always wrong,” she said. “As the economy is improving, you?re going to be behind the curve.” But the December 2003 estimates were “a pretty big miss.”
