Maryland May Face $1 Billion Shortfall

Maryland could face a budget shortfall of up to $1 billion in its next fiscal year despite a series of tax increases and spending reductions that were intended to largely solve the state's chronic fiscal problems.

The grim assessment, contained in a letter this week to leaders of the General Assembly, blames a sluggish economy that has significantly slowed tax collections and urges "that swift action be taken to mitigate the problem."

"If the current doldrums are seen to persist through fiscal 2010, we could be looking at . . . a problem of up to $1 billion," wrote Warren Deschenaux, the legislature's chief fiscal adviser. "Although time will tell, at this point it sure looks like we are in for a bumpy ride."

The economy is taking a toll on state and local budgets throughout the region, forcing hiring freezes and service reductions, among other cutbacks. In Maryland, the prospect of additional action is particularly uninviting, given what has occurred in the past year.

To help bring the state's spending practices in line with revenue collections, lawmakers approved nearly $1.4 billion in tax increases during a special session last fall that sapped the popularity of Gov. Martin O'Malley (D). The governor and lawmakers have since trimmed hundreds of millions of dollars more from the $15 billion general fund.

"What's happened is the economy," said Del. Murray D. Levy (D-Charles), a leading voice on the House Appropriations Committee. "We were not prepared, and are not prepared, for the economy."

Deschenaux's letter comes in advance of revised revenue estimates for both the current fiscal year, which began in July, and the following year, in which he says the $1 billion cash shortfall is possible. O'Malley's office and lawmakers have been awaiting the numbers, scheduled for release early next month, to determine what steps to take before January, when the legislature reconvenes.

Deschenaux suggests that budget cuts made in coming months will also help mitigate future shortfalls. The Board of Public Works, a panel that includes O'Malley, is authorized to make reductions when the legislature is not in session.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) has said he would like to see a joint panel of legislators meet as early as next month to advise the board on additional cuts.

An aide to House Speaker Michael E. Busch (D-Anne Arundel) said he is interested in asking Appropriations Committee members this fall to revisit budget reductions that were considered but not enacted during last year's special session.

At this point, lawmakers are floating few ideas for additional cuts. There seems to be no appetite for more tax increases.

"I can't see how you would do that," said Sen. Edward J. Kasemeyer (D-Howard), vice chairman of the Senate Budget and Taxation Committee.