- The Washington Times - Friday, May 16, 2003

ANNAPOLIS (AP) — Maryland will most likely end the fiscal year in the red for the first time in a decade, state financial analysts are warning.

The legislature’s top budget analyst said in a letter to legislative leaders that a deficit is expected if tax revenues continue to fall behind projections, wiping out the small surplus that had been expected when the budget year ends June 30.

The state could be facing a deficit of as much as $65 million when the new fiscal year begins, said Warren G. Deschenaux, director of the legislature’s Office of Policy Analysis.

Gov. Robert L. Ehrlich Jr., a Republican, plans to reduce state spending by about $450 million during the coming year to try to head off future deficits.

His Cabinet secretaries are preparing lists of potential spending cuts that could result in laying off some state employees, cuts in health care for the poor and tuition hikes at public colleges and universities.

Senate President Thomas V. Mike Miller Jr., Prince George’s County Democrat, however, called the new estimate “dire news.”

“We had a similar situation in 1992 and [Gov. William Donald] Schaefer dealt with it appropriately,” Mr. Miller said. “But now we have a Republican governor and a Democratic General Assembly, and this could get caught up in politics.”

Fiscal analysts expect state budget leaders will have to deal with a substantial gap between revenue and spending as they work on the state budget for the fiscal year that begins in July 2004.

“The most important thing it means is the economy is not turning around, and we’re still having revenue shortfalls,” said House Appropriations Committee Chairman Howard P. Rawlings, Baltimore Democrat. “We did what we could in terms of generating additional revenue. In fact, this year’s budget does have a [surplus] that will help mitigate the problem. The real trouble will be in the future.”

The state budget is balanced for the fiscal year that begins July 1, but relies on a tax package, aimed primarily at businesses, that Mr. Ehrlich has promised he will veto.

The tax bill would temporarily increase the tax rate on corporate income, tax HMO premiums like other insurance products and close loopholes allowing some companies to avoid state taxes.

Despite pressure from Democrats, the governor remains committed to vetoing the tax bill before the legal deadline May 27, spokesman Paul Schurick said.

“Despite the deepening fiscal crisis, the governor remains opposed to any increase in taxes and fees, particularly increases in health insurance premiums,” Mr. Schurick said. “This has been, and continues to be, a problem of spending. The state is spending far more money that it is collecting, and that practice will end.”

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