O'Malley's Fiscal Plan Questioned

If the trends continue, state officials could shave as much as $250 million off official revenue projections for the coming year, forcing lawmakers to make cuts in the 2008 budget proposal they received from O'Malley last week.

"Based on what we have now, a write-down is more likely than not," said Warren Deschenaux, the legislature's chief fiscal analyst. "The question is the magnitude."

Such predictions, which could also portend a gap larger than $1.3 billion in fiscal 2009, are fueling talk of acting this session to reduce the shortfall.

Del. Luiz R.S. Simmons (D-Montgomery), among others, has promoted the idea of raising the state sales tax from 5 percent to 6 percent, which would generate about $600 million a year in additional revenue.

"There's no reason we couldn't do that now," Simmons said.

Simmons said he is concerned that if "Governor O'Malley proceeds too tentatively, he can find himself in a much worse environment than we are now a year from now. . . . Politically, I'm sure they're thinking this is something they didn't raise during the campaign, so how do they go in and do it now? But I think the public is ready for someone to have an adult conversation with them. There's a genuine opportunity he could seize this year. Everybody knows this state needs money."

Former Montgomery County delegate Peter Franchot (D), who as the state's new comptroller is also the state's chief tax collector, believes O'Malley and lawmakers should tackle the state's looming shortfalls during the current 90-day session.

"From a fiscal standpoint, the prudent timing is sooner rather than later," Franchot said. "It's only going to get worse. We're in an ocean of red ink."

The sales tax has been the most discussed target for new revenue. Busch noted that Maryland's sales tax is lower than that of several surrounding states.

Also, the tax doesn't apply to most services, such as automobile repairs, haircuts or accounting help. Moreover, the state exempts numerous products, including food, medicine, manufacturing machinery and some farm equipment.

Past efforts to broaden the tax's application have met stiff political resistance.

House Minority Leader Anthony J. O'Donnell (R-Calvert) said he believes that raising taxes "should be a last resort."

But he, too, advocated starting work on closing looming budget shortfalls this session by identifying spending cuts and passing slots.

"The sooner you start to resolve those issues, the less pain you'll ultimately have," O'Donnell said. "I don't think we can wait a year."

The case for slots was bolstered, supporters say, by the announcement this week of the cancellation of the Pimlico Special, a storied horse race in Baltimore. Organizers attributed the move to competition from neighboring states where slot machines are legal at racetracks.

Although Miller is preaching action on slots this session, as well as tax and spending measures, some of his top lieutenants have yet to move in that direction. Senate Finance Committee Chairman Thomas M. Middleton (D-Charles) said he tends to agree with O'Malley.

"You're going to have to engage the taxpayers," Middleton said. "The average voter out there is really confused. Governor Ehrlich left the impression that all the budget problems were solved."

That sentiment was echoed by Sen. P.J. Hogan (D-Montgomery), vice chairman of the Budget and Taxation Committee.

"Would I like to do something right now and solve the problem?" Hogan said. "Yes, but I know the problem better than most. Others deserve to be convinced."