Maryland faces $430 million shortfall

Cuts to state, local governments likely in January session

By Tom LoBianco (Contact) | Wednesday, September 10, 2008

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ANNAPOLIS | Maryland budget officials said Tuesday that the state has fallen behind roughly $430 million in expected revenue this year, which will likely result in deep cuts to transportation projects and local governments when lawmakers return in January.

"This is like a bucket of cold water," said Delegate Steven R. Schuh, Anne Arundel Republican. "The first place the governor is going to have to go is the transportation budget. The increase in the transportation budget were just enormous, well over $1 billion in increases. ... Those increases are, at this point, unsustainable."

Mr. Schuh said Gov. Martin O'Malley, Democrat, failed to make enough cuts to that state government in his first two years of office, including the special session of the General Assembly last year in which he increased taxes and proposed revenue from slot machines as a solution.

Comptroller Peter Franchot, Democrat, called the session "hurried" and said lawmakers "didn't even look at our spending practices," despite the growth of state government.

"These sobering numbers 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 said Tuesday.

Virginia lawmakers heard similar news Tuesday from state fiscal leaders who predicted revenue losses of $1 billion.

Gov. Tim Kaine, Democrat, requested state agencies put together a plan to cut 15 percent from their budgets.

Mr. O'Malley has yet to issue a broad edict like Mr. Kaine's. But he is expected to address the problem at a Board of Public Works meeting Wednesday.

County and local government leaders in Maryland have largely remained unscathed throughout the state's ongoing budget battle but could face serious cuts in education aid.

Mr. Franchot this week proposed creating a commission of financial experts to review state spending. Mr. O'Malley said he would be open to the idea.

Mr. O'Malley called lawmakers back to Annapolis last year for a long, politically trying special session that resulted $1.4 billion in new taxes, about $300 million in budget cuts and an undetermined amount of new spending on health care, education and the environment. Lawmakers also passed the governor's proposal to legalize slot machines as a revenue source. Voters will decide the issue in November.

Mr. Franchot, Republican leaders and other critics said the governor should wait to see how the national economy fared before raising taxes and cautioned that tax increases would be a bad move during an economic downturn.

Expected revenue from the state sales tax, which was raised by a penny on the dollar during the special session, fell $265 million short of expectations.

Revenue from the cigarette tax, which was raised by $1 a pack during the special session, fell $18 million short of expectations, or close to 20 percent less than what lawmakers wanted.

The Senate Budget and Taxation Committee plans to meet Monday to hear about the state's budget woes. Sen. Ulysses S. Currie, a Prince George's Democrat who has been the subject of an ongoing federal investigation, is expected to chair the meeting despite calls from state Republicans for him to step down.

Transportation Secretary John D. Porcari is expected to brief reporters Wednesday about revenue downturns. He said Tuesday that revenue from the state gas tax and vehicle-titling tax, which fund the state's transportation program, also have taken a hit, but he did not release specific details.

Budget leaders have said no single fix will be used to heal the state's budget problems but tax increases are off the table.

State Treasurer Nancy K. Kopp, who sits on the state Board of Revenue Estimates with Mr. Franchot and Budget Secretary T. Eloise Foster, suggested the state may have to dip into it's savings account.

Mrs. Foster said the governor plans to cut $250 million to $300 million before lawmakers return.

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