Additional Budget Cuts Are Prepared

T. Eloise Foster will propose $250 million in cuts. Gov. Martin O'Malley says tough decisions have averted a worse situation.
T. Eloise Foster will propose $250 million in cuts. Gov. Martin O'Malley says tough decisions have averted a worse situation. (Maryland Department Of Budget & - Maryland Department Of Budget &)
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By John Wagner
Washington Post Staff Writer
Wednesday, September 10, 2008

Gov. Martin O'Malley's administration is preparing to announce hundreds of millions of dollars in additional cuts to transportation projects and state agencies this year to cope with a sluggish economy that continues to undercut Maryland's major sources of tax revenue.

A state panel said yesterday that it projects $432 million less revenue for this fiscal year than it did six months ago, largely because of lagging collections of state sales and income taxes -- problems hardly unique to Maryland.

Budget Secretary T. Eloise Foster said she plans to recommend at least $250 million in spending cuts next month to help close the shortfall in the state's $14.5 billion general fund. Some reserve funds would be used to bridge the gap, too, Foster said.

In addition to cuts for this fiscal year, which began in July, reductions in spending would be made for fiscal 2010, for which budget analysts now project a shortfall of about $1 billion.

"Obviously, when you're talking about cuts of this magnitude, everything has to be on the table," Foster said without elaborating on what O'Malley (D) is considering.

Maryland transportation officials plan to announce today the deferral of about $1.1 billion in transportation projections in a $10.5 billion capital plan for the next six years.

The announcement, confirmed by lawmakers and legislative aides briefed yesterday, is prompted by lagging revenues in a separate fund for transportation projects. Two of those revenue sources, the gas and titling taxes, have slowed considerably because of higher gas prices and slumping car sales.

The economy is taking a toll on government budgets throughout the region and beyond. The cutbacks in Maryland are particularly challenging, 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 fall special session called by O'Malley. The governor and lawmakers have since trimmed hundreds of millions of dollars more from the general fund and scaled back some increases to the transportation trust fund.

In a statement yesterday, O'Malley said Maryland is "ahead of the game" because of those "tough decisions" and would otherwise face a far more daunting shortfall.

O'Malley pointed to a survey last month by the Center for Budget and Policy Priorities showing that the District and at least 29 states, including Virginia, face shortfalls in their fiscal 2009 budgets.

In Maryland, the $250 million or more in spending reductions that Foster is preparing will be presented to the Board of Public Works, a three-member panel that includes O'Malley. It has the authority to cut the budget when the legislature is not in session.

House Speaker Michael E. Busch (D-Anne Arundel) said he is hopeful that the expected cuts will consist largely of "efficiencies" at state agencies but added, "It's hard to keep going back and asking them to do that."

Senate President Thomas V. Mike Miller Jr. (D-Calvert) predicted the October cuts will be less challenging than the round needed to balance the 2010 budget.

"We're not going to decimate government, but we're going to have to downsize," Miller said.

He said lawmakers will probably take another look at state aid to local governments, which accounts for about 40 percent of general fund spending. Miller also ruled out additional tax increases, which he said "simply are not going to happen."

Comptroller Peter Franchot (D), chairman of the Board of Revenue Estimates, said the "sobering" numbers released yesterday "simply confirm that the national recession has taken a painful and far-reaching toll on our state's economy and that Maryland's working families are simply being stretched to their limits, if not beyond their means."

He urged O'Malley and lawmakers "to put aside the piecemeal approach of the past and, instead, take this opportunity to conduct a comprehensive and critical examination of both state spending and state revenue."

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