By Ann E. Marimow
Washington Post Staff Writer
Tuesday, January 24, 2006; B04

Gov. Robert L. Ehrlich Jr.'s $29.6 billion spending plan puts Maryland on track to confront another shortfall of nearly $1 billion within two years, the chief legislative analyst said yesterday in his annual budget diagnosis.

"Does this have a ring of the familiar?" Warren G. Deschenaux, director of the General Assembly's Office of Policy Analysis, asked lawmakers gathered for his assessment.

"It's strongly reminiscent of the situation you all faced toward the middle of the last turn. The question then, as in now, is: How much do you spend? How much do you save?"

The Republican governor's budget for the fiscal year that begins July 1 relies on a $1.2 billion surplus to give public schools, senior citizens, state workers and the state's colleges and universities a boost and still balance the books. Ehrlich would return $180 million to residents through tax cuts for low-income homeowners, military veterans and caregivers for disabled relatives, in addition to a change in the so-called death tax.

But the prognosis by the nonpartisan Department of Legislative Services's office finds that Ehrlich's budget blueprint would spend almost $700 million more than the state is projected to collect in revenue in fiscal 2007 and $982 million over revenue the next year.

"We're living off the cash until it runs out, and then we've got a problem," Deschenaux said. "We're spending more than we're taking in."

Seated in the third row of the hearing room, the governor's budget secretary, Cecilia Januszkiewicz, smiled throughout the presentation. Afterward, she said that the historical comparison to state spending during the flush years of 2000 and 2001 was not parallel.

"He isn't spending it all in one year, which is maybe what happened in past years," she said.

The governor's budget proposal sets aside $670 million to make ends meet in fiscal 2008, which begins in July 2007, and $100 million to begin to deal with the eventual cost of health care for retired state workers.

The ongoing mismatch between spending and revenue, Januszkiewicz added, "is not because of the governor's new spending, but because of the statutory mandates adopted by the General Assembly."

In 2002, for instance, the Democratic-controlled legislature approved a costly education aid initiative without a dedicated source of funding for its ultimate costs.

Januszkiewicz said Ehrlich is "concerned about" the structural budget imbalance and has tried for the past three years to persuade lawmakers to narrow it by legalizing slot machine gambling. The slots idea has never cleared the General Assembly.

The analysis presented to members of the House and Senate budget committees yesterday is the beginning of the budget debate as legislators begin to study Ehrlich's proposals.

The initial review found a backlog of $162 million in unanticipated expenses, such as $81 million in Medicaid costs, $19.6 million for the medical needs of prisoners and $15.5 million to recruit and retain prison guards.