Franchot urges Hogan to tap reserves to aid businesses

Gov. Larry Hogan and Comptroller Peter Franchot.

Maryland Comptroller Peter Franchot has issued an urgent call for action to rescue the state’s small businesses suffering from the impact of the pandemic.

In a call last week, Franchot praised the efforts of business owners as they continue to find ways to survive in the reduced circumstances created by Covid-19 restrictions and quarantines.

“Small businesses desperately need relief from the state of Maryland,” he said. “Small businesses on the main streets of Maryland have been loyal to the state for decades. Many of them are family owned, they pay their taxes, they engage in philanthropic efforts with the community.”

He indicated there is money available, though Gov. Larry Hogan has not authorized its release to assist small businesses.

“I went to the governor several months ago and said we need to dip into the Rainy Day Fund,” he said. “It’s raining cats and dogs, and that is what the fund is set up to do.”

The fund, Franchot said, now holds $1.2 billion.

On Sept. 9, Mr. Franchot announced that the Fiscal Year 2020 General Fund revenues totaled $18.634 billion, an increase of 2.4 percent, or $435.1 million, over FY 2019, and 0.5 percent, or $102.2 million, below the Board of Revenues Estimates projection from March.

The state closed FY 2020 with an unassigned balance of the General Fund of $585.8 million, or less than 1.2 percent of the total FY 2020 operating budget of $47.27 billion.

More than 1.1 million Marylanders have filed for unemployment since March.

A disagreement — a respectful one, Franchot emphasized — developed between the two leaders. Hogan said he wanted to use the general fund to patch up the state budget, which experienced a shortfall in sales and use tax collections as the pandemic slowed the economy.

“The Covid-19 pandemic has caused an unprecedented fiscal crisis for state and local governments nationwide, which according to Moody’s Analytics will face $500 billion in shortfalls over the next two fiscal years, with more than 4 million jobs at stake,” Hogan said Sept. 29, after a meeting of the Board of Revenue Estimates.

“Though we are in a better position both economically and health-wise than much of the country, this is still the biggest fiscal challenge we have ever faced,” the governor said. “We will continue to plan for the worst, press Congress to act on additional relief, and make the tough decisions necessary to balance our budget.”

While acknowledging that the state’s financial health is vital, Franchot said, “Even more crucial are these small businesses’ budgets, because they are in danger of closing permanently.”

The Comptroller released a statement Oct. 1, saying, “Our dramatic write-up of revenue projections, as announced earlier this week, is largely attributable to the success of the federal stimulus programs for small businesses, unemployed Marylanders, and families struggling to make it by during this pandemic. Stimulus works; and our experts tell us that without a second round of federal funding, we’ll be taking a huge risk as we enter a winter filled with public health and economic uncertainties.”

The statement continued: “In addition to a second round of federal stimulus, we must take action at the state level as well. Here in Maryland, we are fortunate to be in a solid financial footing to immediately direct $585 million in unspent revenue from the previous fiscal year for a Small Business Stimulus and Rescue Package. We can accomplish this without withdrawing a single penny from our $1.2 billion Rainy Day Fund.”

Money from the proposed Rescue Package could be distributed as grants, he said, to the more than 100,000 small businesses in the state. The move would stabilize the companies, and be more efficient, he said, that recreating companies.

The decision to use the $585 million in unspent revenue is entirely up to the governor, Franchot said, as he asked citizens to contact Mr. Hogan directly or to speak to their elected officials about the issue.

“Maryland’s economy can only bounce back strong if we have a thriving community of local entrepreneurs and innovators. We, quite literally, cannot afford to see more of our small businesses fail,” Franchot’s statement said. “The Governor and the General Assembly must act quickly, and investing the entirety of our Fund Balance to save our small business is a prudent start.”

The Office of the Comptroller provides the latest tax and financial information to Maryland residents. As the leader of the organization, Franchot sits on the Board of Public Works with Hogan and Treasurer Nancy Kopp. The Board makes decisions regarding state expenditures.

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