Projected Shortfall Adds to Challenges In Trimming Budget

With the economy sluggish, a state panel projected yesterday that revenue flowing into Maryland's coffers would fall short by $333 million for the remainder of this fiscal year and the one that begins in July.

The estimate was widely expected in Annapolis, where a Senate committee has been cutting from Gov. Martin O'Malley's proposed budget for next year. But the projection underscored the budget challenges Maryland is still facing, even after a special session was held in the fall to address the state's long-term finances.

Reductions have been made to the $15.2 billion in general-fund spending proposed by O'Malley (D), including cuts in state funding of stem cell research and aid to the University System of Maryland that could jeopardize a proposed tuition freeze for this fall.

The Senate Budget and Taxation Committee is also expected today to cut at least half of a planned $50 million allocation to a fund devoted to cleaning the Chesapeake Bay.

"I think we were prepared for these numbers," said Sen. Ulysses Currie (D-Prince George's), the committee's chairman. He said he would not have been surprised by a larger revenue revision.

The report, provided by the Board of Revenue Estimates, said that several revenue sources show "troubling developments."

The panel revised downward its projections for the individual income tax and the sales tax, the two largest sources of revenue for the state and among the most sensitive to economic conditions.

Comptroller Peter Franchot (D), who chairs the panel, said the figures show that Maryland "is not immune" to national economic trends. "The conditions are likely to get even worse before they improve," he said.

The report cites trouble in the housing market that had spread to credit markets and says that business and consumer confidence have suffered.

The souring fiscal forecast comes after the General Assembly completed a special session in November, in which lawmakers raised taxes by about $1.4 billion annually and directed O'Malley to cut next year's budget by more than $500 million.

Exactly how much more lawmakers will trim from O'Malley's budget will hinge in part on how much money they want to leave unallocated next year in case the economy worsens.

The Board of Revenue Estimates projected that revenue collections would fall short by $75 million this fiscal year, which ends in June, and $258 million next year.