State economy shows improvement

The state's economy may be taking a turn for the better, which is good news for higher-education funding.

In December, the state expected to bring in about $12.3 billion in funds this year from taxes and other sources. Officials announced a new estimate yesterday, and though their newest estimate is down slightly from the first one — the state now expects to earn about $66 million less — the plunge is less sharp than it has been in previous years and will likely not cause state officials to cut into the governor's higher education budget. Estimates for 2011 are holding steady.

"[The economy's] getting worse more slowly," said state policy analyst Warren Deschenaux, who added that though some people were starting to predict the end of the state's budget crunch, he didn't want to "jinx it."

Last year, officials overestimated the 2009 budget by $446 million and the 2010 budget by $716 million, forcing Gov. Martin O'Malley to slash hundreds of millions from his 2009 budget. At the time, university officials feared these cuts would translate to huge decreases in higher- education funding.

This year, the mood is more optimistic.

"Past downward revisions in revenue estimates have been much greater," university lobbyist Ross Stern said. "At least it's not a couple hundred million dollars."

Delegate John Bohanan (D-St. Mary's), who has been a strong advocate for higher-education funding, said $66 million is a relatively small part of the state's budget, and the best news is the state is expected to maintain steady growth into the next year.

"The good news that I saw today is that for the first time in quite a while, we didn't have additional markdowns for the next fiscal year; they've left it alone," he said. "We expected 3.1 percent growth, and we're staying that way."

The Department of Legislative Services has counseled committee members to cut several million dollars from the University System of Maryland in the past months.

Deschenaux, the director for the Office of Policy Analysis in the state's Department of Legislative Services, noted the drop in expected revenue for 2010 wouldn't effect the ongoing discussions about the university's budget.

"It's not likely to have much impact at all," Deschenaux said. "The governor's budget proposal provides enough fund balance to absorb that ... whatever happens to higher ed. won't be because of today's estimate."

Carol Novella, assistant director of the Bureau of Revenue Estimates, said the state expects to make less money than originally predicted for the remainder of 2010 largely because of one-time occurrences, such as the snowstorm, which caused a big drop in the amount of money the state was able to raise from the lottery ticket sales tax.

"No one is going to run out to buy lottery tickets during a snowstorm," she said.

Novella added, because of the recession, the state also made less money from income taxes. In a yearly letter to the governor's office, the Bureau of Revenue Estimates pointed out the recession will have lingering effects on the state's economy in the future.

apino@umdbk.com