Thoughts on Just Released Revenue Estimates

We just released the Board of Revenue Estimates' official report and I wanted to share it with you along with my thoughts. I strongly believe in being open about what the report truly means and dedicated to honestly dealing with the situation at hand.

Click here to download the Board of Revenue Estimates report (.pdf)

I am very pleased that revenue performance has, for the most part, been in line with the expectations of the Board of Revenue Estimates.

I want to be certain that we don't misconstrue the meaning of today's report - short-term revenue stability is not the same as total economic recovery.

Estimates for the remainder of the current fiscal year anticipate a decline in revenue of more than 5 percent, the worst revenue performance the State of Maryland has experienced in more than four decades.  As we move into Fiscal Year 2011, revenue is estimated to increase by only 3.6 percent, the 8th worst revenue performance in the State since 1969.  While today's report is relatively unchanged, the underlying assumptions for economic and revenue performance in the State of Maryland remain exceedingly grim.

While many of the pundits are quick to declare that the worst is behind us - there are clear signs that point to ongoing trouble in the economy:

The job market is still exceedingly fragile
As high as they are, the official U.S. unemployment rate of 9.7 percent, and the official state unemployment rate of 7.2 percent do not account for those who are underemployed, those who are afraid of losing their jobs, or those who have simply become frustrated and dropped out of the job market altogether.

The national and state housing markets remain exceedingly soft
Our nation's housing market remains mired in a vicious cycle of unemployment, foreclosures, market saturation and plummeting property values.  Foreclosure filings are still coming in at dangerous levels - here in Maryland, they're running about 40 percent higher than the year before, even though we did experience a month-to-month drop. Nearly 10 percent of the nation's borrowers are delinquent on their mortgages, and over 20 percent of homeowners are underwater - meaning they owe more than their house is worth.

The commercial real estate market remains poised for a severe correction, if not an outright collapse
According to a report issued last month by the Congressional Oversight Panel, $1.4 TRILLION in commercial real estate loans will expire between 2011 and 2014 and will require refinancing. The problem is that commercial property values have dropped more than 40 percent since 2007, and so nearly half of these properties are now underwater, can't be refinanced and are at risk of foreclosure.  

Our national debt is continuing to grow at an alarming rate
Debt continues to spiral out of control and now poses a direct threat to our nation's economic security. The debt crisis in Greece and elsewhere in Western Europe is a jarring reminder of the consequences of excessive borrowing and indiscriminate government spending.   

What we presented at the Board of Revenue Estimates is simply a reinforcement of what we, our friends and our neighbors already know. These warning signs, coupled with the dour economic and revenue assumptions that were presented today, should serve as a stark reminder of the tough choices that continue to confront our fiscal policymakers in Annapolis, and only reinforces the need for discipline and restraint moving forward.

Thank you for your strength and continued support of the State through these difficult economic times. Times are tough and it's important that we, as a people, remain tougher!