Proposed Budget Remedies Include Slots, More Taxes

Gov. Martin O'Malley (D) said some of the $1.3 billion shortfall can be reduced by better management of government by his Cabinet secretaries. (By Robert A. Reeder For The Washington Post)

By next year, Maryland residents could pay another penny per dollar in sales tax on most products they buy. They could pay several cents more for each gallon of gas they put in their cars and another dollar for each pack of cigarettes they smoke.

They could face new levies when they get their car repaired, get help preparing their taxes, get a haircut or even when they use an escort service. And they could, at long last, get the chance to play slots at racetracks.

Few, if any, of these ideas are expected to become law by the time the General Assembly wraps up its session next month. But all, lawmakers say, will be given very serious consideration in the coming year to help address a looming budget deficit that is expected to exceed $1 billion.

Gov. Martin O'Malley (D) and lawmakers have concluded that the state can no longer avoid dealing with what is known in Annapolis as a "structural deficit." In simple terms, for every $1 in revenue that Maryland collects, state government is now spending about $1.10.

"It doesn't take a math major to know that's not sustainable," said Del. Murray Levy (D-Charles), a leading voice on the House Appropriations Committee. "Judgment Day is coming. We know it, and there's no way around it."

O'Malley submitted a balanced budget for the coming fiscal year. But he did so by draining nearly $1 billion from a state "rainy day" reserve fund -- leaving little more than the minimum amount required by law. The House plans to pass O'Malley's budget, largely intact, this week.

Although lawmakers say it is too early to predict exactly what they will do beyond that, they are starting to talk about options they might weigh as early as a special session this year or when they reconvene in January.

"It's going to take spending cuts. It's going to take taxes, and it's going to take slots," said Senate President Thomas V. Mike Miller Jr. (D-Calvert).

Besides a looming shortfall of $1.3 billion in Maryland's $15 billion general fund -- which pays for services such as education, health programs and public safety -- a separate state fund for transportation projects is failing to keep pace with growing gridlock in Maryland's Washington suburbs and other areas.

The problems are years in the making, but lawmakers point to two decisions largely responsible for the position they are in today: an income tax cut pushed through nearly a decade ago by then-Gov. Parris N. Glendening (D) that sapped more than $700 million a year from the treasury; and Maryland's landmark 2002 Thornton education program, designed to pour tens of millions of dollars into jurisdictions that a statewide commission said had historically been underfunded.

Lawmakers never reached an agreement on how to pay for Thornton, which now costs the state about $1.4 billion a year.

A booming economy, coupled with fund transfers that shortchanged land preservation and transportation programs, allowed the state to get through the four-year tenure of Gov. Robert L. Ehrlich Jr. (R) without addressing underlying budget problems.