Panel Predicts a Shaky Economic Future

GOP Lawsuit Seeks to Block Tax Hikes

Despite a special legislative session last month to fix Maryland's chronic budget problems, the state could face fiscal challenges in coming years because of an uncertain economy, a state panel reported yesterday.

The report, by the Board of Revenue Estimates, which forecasts tax collections each year, said the deterioration of Maryland's housing market is likely to hold back the economy through next year, affecting virtually every other industry in the state.

Legislative analysts have projected a balanced budget in Maryland next year as a result of the special session, in which lawmakers raised taxes by $1.4 billion annually and directed Gov. Martin O'Malley (D) to cut next year's budget by $550 million.

But Comptroller Peter Franchot (D), chairman of the revenue board, said the panel's report shows a "high risk" that a slower economy could undercut the state's projected $15 billion in general fund revenue next year. He cautioned against approving significant spending increases in the legislative session that begins next month, given "the uncertainty that lies ahead."

Also yesterday, Republican leaders filed a lawsuit to prevent tax increases passed in the special session from taking effect.

The suit says that a six-day adjournment by the Senate in the middle of the session violated a provision in the state constitution, and it seeks to set aside tax increases that were passed, including an expansion of the sales tax to include computer services.

A computer services business owner from Carroll County is also a plaintiff in the suit, which was filed in Carroll County Circuit Court.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) said the case is "frivolous" and based on "bungled legal reasoning."

The break in Senate action during the session occurred so that the House of Delegates could act on bills passed by the Senate.

"Those who are filing suit have incorrectly cited a provision of the state constitution which has the sole purpose of ensuring that one body of the legislature cannot leave and refuse to return and finish their legislative work," Miller said in a statement. "They are using this provision to invalidate work, when its intent is to insure that work is accomplished and complete."