'Doomsday' Budget Dictates Tough Cuts

With $1.5 Billion Shortfall Expected, Analysts Make Sobering Suggestions

In Maryland, here's what a worst-case budget scenario might look like next year: State funding of education frozen for a year. Some promised money no longer available for nursing homes, drug treatment and children with disabilities.

Dollars flowing to the university system would not be adjusted for inflation, resulting in possible tuition increases of 15 percent. And counties would have to shoulder half the burden of teachers' retirement costs -- a potential $324 million hit to their budgets.

If Maryland lawmakers do not raise taxes in the coming year, they could be forced to take those steps and nearly 150 others to close a looming budget shortfall of nearly $1.5 billion, they were told yesterday.

The presentation of a "doomsday" budget by legislative analysts was intended to help legislators come to grips with the magnitude of Maryland's budget problems -- and help legislative leaders make the case for tax increases.

"I don't think anyone's expecting that we're going to cut ourselves out of this," House Speaker Michael E. Busch (D-Anne Arundel) said after the briefing of the House and Senate budget panels. "But we're trying to make sure we make government as efficient and effective as we can first."

Choices about tax increases, spending cuts and the possible legalization of slot-machine gambling will have to be made by next spring, when the Democrat-led legislature plans to approve the $15 billion general fund budget for the fiscal year that starts in July 2008.

Sen. J. Lowell Stoltzfus (R-Somerset) called yesterday's exercise "a setup to make people holler and scream to justify tax increases" and said Democrats should have done more to address the budget situation during the legislative session that ended in April.

Gov. Martin O'Malley (D), who must submit a proposal by January to start the budget process, told reporters yesterday that the doomsday scenario would spark talk about the balance between spending cuts and tax increases.

"A lot of this is going to depend on how this cuts-only approach is greeted by the legislature and what kind of stomach they have for it," said O'Malley, who was attending a conference of the Maryland Municipal League in Ocean City.

"Can we eliminate this deficit only by cuts?" he said during an address to the group. "Yes, we can. . . . But it will involve a lot of really bad choices that will make us weaker as a state."

Busch has suggested raising the sales tax and corporate income taxes, among others, while Senate President Thomas V. Mike Miller Jr. (D-Calvert) has insisted that the legalization of slots be part of any budget-balancing package. By some estimates, slots could yield $800 million a year for the state, though it would take a few years to realize that amount.

O'Malley has said budget cuts will be a part of the solution, but he said yesterday that he wants to protect aid to counties and municipalities.