ANNAPOLIS (AP) — Maryland will get as much as $333 million in unexpected federal aid as a result of the $330 billion tax-reduction package approved last week by Congress.
Local governments will get part of the money — maybe as much as $72 million — with the rest available to help state officials cope with Maryland’s worst fiscal crisis in at least a decade.
“It’s just one-time money. It’s not going to solve our problems long-term,” Warren Deschenaux, the legislature’s chief fiscal adviser, said yesterday. “But it’s helpful. No doubt about it.”
Maryland has a budget that is balanced on paper for fiscal 2004, which begins July 1, but a deficit is expected.
James “Chip” DiPaula Jr., Gov. Robert L. Ehrlich Jr.’s budget secretary, said the bill passed by Congress “is a welcome temporary relief package.”
But, he said, the state still faces a structural deficit — the difference between anticipated revenues and the growth in spending — of $1 billion in fiscal 2005.
A $20 billion increase in aid to the 50 states was added to President Bush’s tax-cut bill as part of negotiations to get the votes of Senate moderates required for its passage. Vice President Dick Cheney cast the deciding vote for the bill, breaking a 50-50 tie vote in the Senate.
Mr. Deschenaux said the new federal aid will make up for the $135 million the state will lose as a result of Mr. Ehrlich’s veto of a bill passed by the legislature that would increase some business taxes. It also will help cover the gap if state revenues continue to lag behind estimates, he said.
Mr. DiPaula said revenues have been declining recently. “We hope that turns around some time soon,” he said.
If the economy does not improve, the potential for bigger deficits will increase, Mr. DiPaula said.
Mr. Ehrlich has announced plans to cut spending by about $500 million during fiscal 2004 to get a head start on coping with the anticipated deficit for the following year.
Paul Schurick, the governor’s spokesman, said the federal aid will “hopefully soften the blow.”
“This new federal money … may forestall or even avoid the necessity of some cuts,” Mr. Schurick said.
But, he said, there still will be “very difficult and painful cuts” in spending before the budget is brought into balance.
Please read our comment policy before commenting.