Low Sales Tax Receipts Worry State Assembly

Lawmakers Dispute Whether Shortfall Merits Special Session

Sluggish sales tax collections are exacerbating Maryland's budget woes, lawmakers were told yesterday, rekindling debate over whether a special session of the General Assembly is necessary.

In a letter to Gov. Martin O'Malley (D) and legislative leaders, Comptroller Peter Franchot (D) reported that revenue projections for the current fiscal year, which ends next June, had been revised downward by $132.5 million, mostly due to slower-than-expected sales tax collections related to a depressed housing market.

If the trend continues, it will add to a projected shortfall of close to $1.5 billion in the 2009 fiscal year, which the Democratic governor and leading lawmakers plan to close through a combination of tax increases and spending cuts -- and possibly with revenue from the legalization of slot-machine gambling.

O'Malley and other proponents of holding a special session this fall said Franchot's report underscored the need to fix the budget now. The sooner tax increases are enacted, they argued, the sooner the state will see an uptick in tax collections.

"With the decline in the sales tax revenue, it means the problem that Governor O'Malley inherited is becoming larger instead of improving," said Senate President Thomas V. Mike Miller Jr. (D-Calvert), a leading proponent of holding a special session. "This enhances the need for one. We've delayed too long."

But House leaders, who have been cool to the idea of a special session, seized upon language in Franchot's report about an uncertain economy, including the risk of a recession. Franchot said he anticipated having "a much clearer understanding" of revenue trends by December.

In an interview, Franchot said his letter is "a yellow flashing light that the state fiscal situation is volatile."

House Speaker Pro Tem Adrienne A. Jones (D-Baltimore County) said the uncertainty bolstered her position that there is no need for lawmakers to reconvene before mid-January, when their annual 90-day session begins.

"I'd rather deal with accurate numbers," Jones said. "We want to do it right."

O'Malley, who is advocating a special session in November, is planning to discuss budget proposals Monday with Miller and House Speaker Michael E. Busch (D-Anne Arundel) and with a larger group of lawmakers Tuesday morning, an aide said.

"Today's news confirms that the budget situation is only getting worse, and it reinforces the need for us to act quickly," O'Malley spokesman Rick Abbruzzese said.