- The Washington Times - Thursday, January 17, 2008

ANNAPOLIS — Gov. Martin O'Malley yesterday introduced his $31.5 billion budget for Maryland in fiscal 2009, which includes increased spending on the environment, community colleges and public safety.

The budget — the second in Mr. O'Malley’s four-year term — has 5.7 percent more in state spending than his first budget. And it uses much of the revenue from the new taxes approved during the recent special General Assembly session to cover the increases.

Mr. O'Malley, a Democrat, delivered his budget in the face of concerns from state lawmakers that the stagnant economy will drive down revenues and undo efforts made during the special session to close a more than $1.5 billion shortfall.

“It has put a lot of work in jeopardy,” said Senate Finance Chairman Thomas M. Middleton, Southern Maryland Democrat. “It’s a scary thing with the way the economy is going. If we have a budget write-down come March, we’ve got some very serious decisions to make.”

Maryland’s budget leaders said the major factors are a downturn in local housing sales and the likely credit crunch that would follow, which would slow the money flow into state coffers and likely cause a new budget shortfall.

In addition, consumer confidence across the country has dropped, as Maryland lawmakers look to the newly increased state sales tax for a greater source of income.

“It’s a very scary time,” Mr. O'Malley said. “It’s a time when a lot of Marylanders are hurting, having a very difficult time paying the bills.”

The governor called lawmakers back to Annapolis in November for the special session to cut the billion-dollar shortfall.

The Democrat-controlled Assembly passed $1.4 billion in taxes and$550 millionin budget cuts in a grueling three-week session.

Republican leaders, who opposed the session to the point they filed a lawsuit to overturn its results, said the time to fix the budget was during Mr. O'Malley’s first session in Annapolis.

“They based all their numbers on the most optimistic of assumptions,” said Senate Minority Leader David R. Brinkley, Frederick Republican. “In time, it will prove a big mistake.”

Comptroller Peter Franchot, the state’s chief tax collector and fiscal watchdog, cautioned lawmakers last month about the potential for less revenue because of declining home sales and the resulting credit troubles.

But Mr. Franchot, who staunchly opposed the special session, said yesterday he feels no vindication.

“They passed the biggest tax increase in Maryland history right as we were going into a recession,” he said. “That just adds to the unpredictability of the revenues.”

Economists say the soft economy could result in lawmakers having to find $100 million to $200 million more in cuts or taxes — roughly the same amount they approved in the special session through the increased sales taxes and expanding taxes to computer services.

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