Maryland Governor Says State Budget Needs Further Cuts of $516 Million Because of Falling Tax Revenue Collections

By John Wagner
Washington Post Staff Writer
Wednesday, March 11, 2009

Gov. Martin O'Malley said yesterday that Maryland will need to make an additional $516 million in budget cuts, possibly revisiting the idea of laying off state workers, in response to a continuing erosion in tax collections that a state panel will announce today.

"We'll have to look at everything," O'Malley (D) said last night. "We will come up with a plan."

O'Malley pledged that he would seek to protect education spending in the state's $14 billion general fund, and said he is hopeful that layoffs can be avoided.

But O'Malley said that he and lawmakers will have to take another look at several other priorities that appeared safe just three weeks ago, after it became clear that the state would get an influx of money from the federal stimulus plan.

That level of spending is being threatened by an announcement expected today that tax revenue will fall an additional $1.1 billion short of projections over two years. The federal stimulus money will help Maryland absorb that loss in the current fiscal year that ends in June, but more cuts will be required to balance next year's budget, O'Malley said.

Lawmakers are expected to wrap up work on next year's budget before adjourning their 90-day session next month. The proposal O'Malley submitted in January already included $2 billion in spending cuts and other reductions.

House Speaker Michael E. Busch (D-Anne Arundel) said today's announcements will make lawmakers' work all the more challenging in the remaining weeks of the session.

"Obviously the write-down puts more tough decisions on the table for the governor and the General Assembly," he said.

Planned spending on community colleges and higher education are among the areas likely to be scrutinized in coming weeks, lawmakers said.

O'Malley is seeking to increase community college budgets by 5.5 percent next year. He has also proposed freezing public university tuition for a fourth year in a row. The governor said he will fight to maintain that proposal, but acknowledged that some lawmakers think a three-year freeze was sufficient.

In addition to possible layoffs, lawmakers are also expected to consider pay cuts for state workers in the coming budget.

Like other states, Maryland has seen a significant erosion of income taxes, sales tax and other major sources of revenue amid the economic downturn. The Board of Revenue Estimates is scheduled to release its latest projections this afternoon.

Staff writer Rosalind S. Helderman contributed to this report.

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