Maryland panel sees $238 million revenue shortfall in current fiscal year and next

Maryland will have $238 million less than anticipated in its budget this fiscal year and next because of sluggish economic growth, according to revenue estimates released Thursday by a panel of the state’s top finance officials.

Comptroller Peter Franchot (D), who chairs the Board of Revenue Estimates, said the panel’s data suggest the recovery has so far bypassed most Marylanders — and he appeared to lay at least part of the blame on Gov. Martin O’Malley’s and the General Assembly’s eagerness to raise taxes and fees.

“Everything across the board is down,” Franchot said in an interview. “The middle class — it’s shrinking, not growing. This is proof positive that something’s wrong.”

O’Malley (D) presented a $39.3 billion budget in January — the final budget proposal of his tenure as governor — that contained few new initiatives but, he said, would close a projected $421 million deficit without raising taxes.

He also said his plan would put the state on a path toward removing a structural deficit by 2017. O’Malley said his administration’s fiscal policies reflected difficult choices over the past seven years that have bolstered the middle class and strengthened the state at a time of economic uncertainty.

“We’ve made $9.1 billion worth of cuts over the past seven years, and the executive branch is smaller on a per capita basis than at any time since 1973,” O’Malley spokeswoman Nina Smith said. “The governor and the leadership will enact a balanced budget this year that continues to invest in key priorities — like our No. 1-ranked public schools, holding down the cost of college, and job-creating innovation — and that does so without raising taxes.”

The Board of Revenue Estimates reduced estimates for fiscal 2014 and 2015, citing relatively stagnant wages and salaries and slow economic growth, particularly in the fourth quarter of 2013. Franchot said the data suggest that many small businesses were still struggling to meet payroll and turn a profit, while many families have cut back on spending.

The board’s estimates mean that the General Assembly will have to trim $126.7 million from the current fiscal year’s budget and about $111 million from next year’s.

“It’s not what the governor will want. Or the legislature. But facts are facts,” Franchot said. He said that further raising fees, taxes or increasing other financial burdens would worsen the problem.

“Clearly, the wrong direction right now is to take money out of consumers’ pockets. Leave it there and let the private sector heal the economy, and that will produce growth,” Franchot said.

The board is composed of Franchot; state Treasurer Nancy K. Kopp; and T. Eloise Foster, who is the secretary of the Department of Budget and Management.

A top Republican said the new data should force the legislature and the governor to reconsider new spending. “All is not well in Maryland’s fiscal house,” House Minority Leader Del. Nicholaus R. Kipke (Anne Arundel) said in a written statement. “It is time for their elected leaders to actually exhibit the fiscal restraint they give lip service to.”

A top state budget analyst earlier this year also urged more caution in spending than is anticipated in O’Malley’s budget proposal.

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