O'Malley's Fiscal Plan Questioned

Governor Delaying Tough Decisions on Slots, Deficit

Gov. Martin O'Malley argues that his administration could use the coming year to scour the budget for savings. (By Ricky Carioti -- The Washington Post)

As Maryland's financial outlook worsens, some Democrats in Annapolis are starting to second-guess Gov. Martin O'Malley's choice to delay tough decisions about looming billion-dollar budget deficits and the legalization of slot-machine gambling until a year from now.

"When you see a snake in the yard and you have a hoe, you kill the snake right away," said Senate President Thomas V. Mike Miller Jr. (D-Calvert), sizing up the coming fiscal problems as "a python."

O'Malley, who took office this month, has submitted a balanced budget for the coming fiscal year, but analysts project a $1.3 billion shortfall for the fiscal year that begins in July 2008. Start cutting spending and raising taxes now, some lawmakers argue, and the task of balancing that budget will be far less painful.

Last week, O'Malley offered a package of legislative priorities that included proposals to reduce automobile pollutants, expand access to subsidized health insurance and replenish the oyster population in the Chesapeake Bay. The new governor avoided some of the most controversial issues that the legislature has debated in recent years.

Miller has argued for months that the legislature should forge ahead this session with the legalization of slots, which could add several hundred million dollars a year to state coffers. And last week, Miller said he would support any package of tax increases and spending cuts that he, House Speaker Michael E. Busch (D-Anne Arundel) and O'Malley could agree upon this session.

The last time lawmakers sought to tackle the state's chronic budget problems, Miller and Busch -- two powerful but dramatically different personalities -- locked horns. Miller pushed slots as a solution, and Busch muscled a $1 billion tax package through his chamber, but neither became law.

Aides to O'Malley said they want to avoid a repeat of that scenario from three years ago, given the new governor's promise of a more collegial atmosphere in Annapolis. O'Malley also argues that his administration could use the coming year to scour the $30 billion budget for savings and start building a public case for any tax increases or dramatic spending cuts needed to close the remaining gap.

"You can't ask the taxpayers for more without trying to cut government spending first," said O'Malley spokesman Steve Kearney. O'Malley has recently begun mentioning in his public appearances the fiscal "dark cloud" on the horizon.

"I think in fairness to a new governor, you have to give him the opportunity to look at the operations of government and find efficiencies," said Busch, who has endorsed O'Malley's approach of delaying difficult tax and spending decisions. "The reality is, this governor has the luxury of doing that. . . . There's no dire need to jump in this year."

Indications, however, are that the state budget outlook is growing more dire.

A robust Maryland economy helped pump up state revenue during the final years under Gov. Robert L. Ehrlich Jr. (R), allowing lawmakers to fund record increases in education spending while generating hundreds of millions in surplus cash that O'Malley tapped to balance the fiscal 2008 budget.

But tax collections have been sluggish in recent months. Income tax collections are not keeping pace with projections. Sales tax revenue is lower than expected, largely due to a sagging housing market, analysts say. Even lottery ticket sales are not keeping pace.