On September 30, a special council meeting was convened with Comptroller of Maryland Peter Franchot, Deputy Comptroller Sharone Bonardi and Acting Director of the Bureau of Revenue Estimates (BRE) David Farkas to discuss the findings of a September 29 revenue projection for Fiscal Years 2021 and 2022 and what Greenbelters, the state and nation as a whole should realistically expect in the general economy as the COVID-19 pandemic persists.
The report, made by the BRE, reveals a $1.4 billion increase in projected revenues for FY 2021 from the previous forecast made in May. While this number is encouraging, Franchot and his associates were firm in saying that this is not a turning of the corner, and that the economic situation, contingent on several unknown variables, could very well worsen in the near future. Said Franchot, the “numbers were not as bad as they could have possibly been,” yet these continue to be “tough and serious times,” in the face of unusual and challenging circumstances.
Franchot said that the present situation defies classical economic analysis, in that such a drop in revenue would typically be expected to bring a major downturn in the economy, but that “it didn’t happen this time.” He said that tax revenues from the newly unemployed stayed more or less the same and that business tax withholding from employees has been a significant source of revenues.
He credited the $2.2 trillion federal stimulus as the chief reason, which he described as unbelievably expensive, but also effective and a godsend. Specifically, he cited the CARES Act, the Paycheck Protection Program and the $600 federal weekly unemployment subsidy (now ended).
He stressed though, that another federal stimulus is desperately needed and almost mandatory for the economy to retain this level of stability. Such future stimulus remains uncertain.
The September 29 report is only a temporary assessment, awaiting a more comprehensive and expansive report in December, which will be used by the state legislature in its budget deliberations.
The uncertainty is based on two major factors: the yet-to-be-approved second federal stimulus and the unpredictability of the virus itself. Franchot characterized the virus as a game changer for all predictions.
Franchot revealed that on June 30, the end of FY 2020, the State of Maryland reported a positive fund balance of $585.8 million. He was keen on making that fund available immediately for the state’s small businesses, which are suffering severe challenges to stay open. He said that “small businesses have done so much for the state.”
Said Franchot, Governor Larry Hogan has indicated that he would like to keep that money for public budgets. Franchot countered Hogan, saying that there already exists a $1.2 billion Rainy Day Fund that could be allocated for this. Franchot said that possibly $100 million from that fund could be set aside for businesses as an alternative. Franchot added that constructive conversations with Hogan are ongoing.
He encouraged council to draft a letter to the governor expressing their desire to see the $585.8 million made available for small businesses. Council agreed to discuss the matter at an upcoming meeting.
Bonardi, whom Franchot extolled for her indispensable administrative efforts, said that the agency has “performed well under unfortunate circumstances,” processing more tax returns than in previous years. Effective customer service is a priority. The Greenbelt office is now open by appointment only.
Farkas echoed Franchot’s update and recommendations, predicting a slowing of wage growth as the year proceeds, while also saying that he didn’t “forecast an outright decline.” He said that while the labor market has done poorly, individual income has sustained, mostly due to federal funds, and that sales did not decrease as badly as forecast in May. He said that the lack of a second stimulus would create a worse situation.
In reply to a question from Councilmember Judith Davis, Franchot said that the jury is still out on some of the state grants that the city relies on, like the Highway User revenues. This grant is essential to Greenbelt and “needed to be funded,” said Franchot, with “money needing to be found somewhere.” Yet, he added, with less traffic due to the pandemic, the revenues should be expected to go down.
Councilmember Emmett Jordan asked about adding nonprofit organizations to future stimulus packages, as they are exempt currently. He cited the nonprofit Old Greenbelt Theatre which would benefit greatly. Franchot concurred and supported the idea, citing the AFI Theatre in Silver Spring.
Franchot gave an update on the unfinished Purple Line. The previous lead contractor is under investigation by both the Securities and Exchange Commission and the Department of Justice for illegal business practices, with jail likely for its leadership. He said that the state has now taken charge and is committed to completing the job, even if it means another year of work and a higher cost.
Council reminded Franchot that they support the no-build option on the maglev proposal and are opposed to the widening of the Beltway. Franchot was receptive to their concerns and promised to keep council aware of any updates. Councilmember Rodney Roberts said that the pandemic has made a stark case for the abandonment of the Beltway widening, in light of the reduced traffic and more virtual work.
Franchot said that residents should expect a two- to four-year economic recovery period for a return to pre-pandemic norms. The state will need to be cautious about new spending, taxes and fees. He said that the goal is to put cash back into people’s pockets and into businesses, to rebuild the small-business economy.