BALTIMORE (WBFF) — Maryland is expecting to collect nearly $320 million more than previously projected this fiscal year, but state leaders warned Thursday that the additional revenue does not eliminate the difficult budget decisions awaiting lawmakers.
The Maryland Board of Revenue Estimates increased its fiscal year 2027 general fund revenue forecast by $319.9 million, bringing the total projection to approximately $27.44 billion.
Despite the write-up, ongoing general fund revenues are actually expected to decline 0.9% compared with fiscal year 2026. The state says that decline reflects several factors, including one-time revenues received last year, increased lottery distributions for capital projects and a major refund stemming from the Potomac Edison court case.
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State fiscal leaders cautioned against viewing Thursday’s higher forecast as a solution to Maryland’s broader budget problems.
“Today’s news is not so good that it changes the difficult decisions that we have ahead,” Budget Secretary Jake Weissmann said during Thursday’s Board of Revenue Estimates meeting. “We know that a significant budget shortfall lies ahead and addressing it will take hard work and difficult choices in the next legislative session.”
One of the largest new hits to Maryland’s revenue outlook comes from the Potomac Edison court case decided earlier this summer.
The dispute involved whether equipment used by the utility to transmit and distribute electricity qualified for an exemption from Maryland’s sales-and-use tax. The Maryland Supreme Court held that qualifying equipment could fall under the exemption because it is used in processing electricity, including changing voltage as electricity moves through the transmission and distribution system.
The ruling is now showing up directly in Maryland’s revenue forecast.
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The Board of Revenue Estimates said the Potomac Edison case will result in a one-time $280 million reduction because of a refund. The ruling is also expected to reduce ongoing general fund revenue by a little more than $15 million annually.
Overall, the state’s fiscal year 2027 sales-and-use tax forecast was reduced by nearly $197 million compared with the previous estimate, falling from approximately $6.59 billion to $6.40 billion.
That reduction comes despite the state slightly increasing its assumptions for underlying sales-tax growth.
Ongoing general fund revenue increased by $1.9 billion, or 7.5%, in fiscal year 2026 compared with the previous year. When a one-time $380 million transfer from the local income tax reserve account is included, total general fund growth reached $2.3 billion, or 9.1%.
Personal income and sales taxes both posted strong growth, which state analysts attributed in part to capital gains, stronger taxable consumer spending and recent changes to state tax law.
But the Board of Revenue Estimates cautioned that some of last year’s strength came from extraordinary, one-time revenue that will not repeat.
The state’s labor market also continues to present a different picture from the relatively strong revenue collections.
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The presentation to the board described a continuing “job recession,” although employment losses have narrowed during 2026.
Withholding collections, or taxes taken directly out of workers’ paychecks, have also slowed. Personal income tax revenue increased 9% in fiscal year 2026, but officials said withholding collections slowed during the second half of the fiscal year.
Federal employment remains another potential risk for Maryland. The board specifically identified potential additional reductions in federal spending and employment as one of the uncertainties facing the revenue forecast.
The September forecast now expects individual income tax revenue to grow just 1.9% in fiscal year 2027, while corporate income tax revenue is projected to decline slightly. Sales-and-use tax revenue is projected to decline 1.3%, in large part because of the Potomac Edison refund.
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