- The Washington Times - Monday, January 12, 2009

ANNAPOLIS — Facing a $1.9 billion budget deficit, the Maryland General Assembly session that begins Wednesday inevitably will be dominated by decisions on how to balance the state’s books.

While the budget has always been a major focus of the 90-day session, Maryland’s finances this year have elevated its importance, especially when serious cuts are expected to have a major impact on residents.

“Budget, budget, more budget,” said Sen. Thomas Middleton, Charles Democrat and chairman of the Senate Finance Committee.

Veteran lawmakers are saying the budget crisis is at least as bad as the recession Maryland weathered in the early 1990s, when lawmakers were able to raise revenues to address the problem. However, this time there’s no stomach for tax increases, after a $1.4 billion tax increase just a little more than a year ago.

“It’ll be a combination of, hopefully, some reimbursement from the federal government, cuts in state government, a different revenue sharing with the counties and possible use of the rainy-day funds,” said House Speaker Michael E. Busch, Anne Arundel Democrat.

In a rare move, lawmakers are even talking about using a little-known reserve account containing $366 million in the comptroller’s office. The Local Income Tax Reserve Account was created decades ago to ensure money would be available for tax refunds, but it hasn’t been needed. About $80 million was taken out of the account in 1991, during another budget crisis.

Gov. Martin O’Malley, a Democrat, has already said everybody will feel the cuts and that expensive proposals will be shelved. It’s going to be tough enough just to pay for important priority items in health, education and public safety.

“The best that we’ll be able to do is level-fund them, but there are going to be lots of cuts all around,” Mr. O’Malley recently told the Maryland Association of Counties.

The state also needs to find an additional $415 million to cover declines in revenue in the fiscal year that began July 1. A furlough plan for state employees is already in effect to save an estimated $34 million, and Mr. O’Malley and the other members of the state Board of Public Works are expected to make more cuts later this month.

The nearly $2 billion deficit will have to be addressed in the fiscal 2010 budget, which is the one Mr. O’Malley will submit later this month for the legislature’s review. The Assembly is required by law to approve a balanced budget every year.

Delegate Norman H. Conway, chairman of the House Appropriations Committee, said lawmakers need to explore ways to reduce the amount of mandated spending.

“We have 67 percent of our budget that’s mandated,” said Mr. Conway, Wicomico Democrat. “I think we’ve got to bring that percentage down so that the governor and the legislature can have some flexibility to work within the budget.”

Republicans say past spending is part of the problem.

Delegate Anthony J. O’Donnell, Southern Maryland Republican, said the state should not give up on costly items such as a fund to clean up the Chesapeake Bay and an expansion of health care coverage to the uninsured. The plans were approved in the 2007 special session along with tax increases to reduce a structural deficit. Mr. O’Donnell also said the state should shift problems to local governments.

“I think it will force local governments to raise taxes,” he said.

Delegate Murray D. Levy, Charles Democrat and Appropriations Committee member, said the budget woes are as bad as those in the last recession and likely to get worse, when the state receives updated revenue numbers in March.

He said tapping the state’s $700 million Revenue Stabilization Account, and spreading it out over two years should be part of the strategy. “It’s raining,” he said.

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