ANNAPOLIS (Sept. 10, 2008)—Maryland's projected revenue stream was slashed by $432 million Tuesday, as state officials proposed more spending cuts and blamed the shortfall on the battered economy.
The Board of Revenue Estimates said the state will collect nearly $14.1 billion in its general fund next fiscal year, down from the roughly $14.5 billion predicted in March. The lion's share of the plunge came from sliding sales and income tax receipts, but other dips are expected in everything from tobacco to motor fuel charges.
The general fund bankrolls nearly all of the state's operating expenses, including education, health care, and salaries for state workers.
Gov. Martin O'Malley, who described the shortfall as "not unexpected," said he will soon propose hundreds of millions of dollars in cuts. Comptroller Peter Franchot also said he wants to trim state spending.
Neither specified where the ax should fall.
"The bright fact is that we are still growing," said state Treasurer Nancy Kopp, referring to Maryland's projected 4 percent growth rate. "Some other states are still down year over year."
Maryland's fiscal woes were thrust into the spotlight last fall, when the General Assembly entered a special session, often working into early-morning hours, to plug a $1.7 billion budget gap. The lawmakers approved a series of tax hikes, including a 1-cent jump in the sales tax.
However, these and other efforts have so far fallen short. Maryland still faces a potential $1 billion deficit, and in March the Board of Revenue Estimates predicted a $333 million revenue shortfall.
The state will release updated revenue projections in December, at which point, Franchot said, the estimates may again be cut.
On Monday, Franchot proposed setting up a panel to review state spending.
That same day, Franchot voted against raising the bar on how much money Maryland can borrow for schools, road construction and other projects. That vote, by the Capital Debt Affordability Committee, passed 4-1.
Franchot, in an interview, blamed the most recent projected shortfall on the soured economy and "out-of-control" state spending.
"Those are the two culprits in this area; we've got to reform state spending, and we cannot tax our way out of a bad economy," he said. "We have to, like the rest of Maryland, do some penny-pinching and kind of rein in spending."
Still, some revenue gaps can't be blamed on the economy or state expenditures. Estate tax revenues, for instance, are expected to fall nearly 14 percent from last fiscal year, to $210 million.
"Generally, (that figure) is almost entirely random," said David Roose, director of the Bureau of Revenue Estimates. "It just depends on whether a handful of really wealthy people die or not."
Statement from Gov. O'Malley on the Budget Shortfall (Sept. 9, 2008)
“Today, the Board of Revenue Estimates announced a budget shortfall for the current fiscal year and 2010. Given the national economic downturn, national foreclosure crisis, and the increased price of energy, gasoline and food, these revenue estimates are not unexpected; and we are preparing to bring hundreds of millions in cuts before the Board of Public Works in the coming weeks to address this challenge.
“Given the national economy, other states are facing the same or significantly worse budget pictures. In fact, the Center for Budget and Policy Priorities estimates that at least 29 states are facing a total budget shortfall of $48 billion in FY 2009.
“In Maryland, because of the tough decisions we made to protect public education, public heath and public safety, and expand opportunity for our middle class families, we are ahead of the game. Working with the General Assembly, we have already reduced spending by $1.8 billion and taken actions to address the structural deficit that we inherited.
“Without these actions and tough decisions, our State would be facing an estimated $2.5 billion shortfall in FY 2010. Instead, Maryland is a facing a shortfall that is significantly less that is the result of a downturn in the national economy, not structural in nature.
“We have worked hard to restore fiscal responsibility and accountability in Maryland over these last two years.
“In 2008 and 2009, our state budget grew by less than 4 percent annually – less than the Spending Affordability Guidelines set by the General Assembly – compared to 22 percent in the last two years of our Republican predecessors.
“We have already cut $1.8 billion from state spending, eliminated over 700 state positions, and yes, we have asked the people of Maryland to play a role in this solution by increasing the sales tax by a penny and enacting a more progressive income tax structure. The people of Maryland will also have an opportunity to vote on a slots referendum in November that is expected to provide an additional $650 million for public education in our State.
“As we have worked together to address the structural deficit that we inherited, we will come together in the weeks ahead to address this latest budget challenge presented to us by our national economy; and we will do so in a way that recognizes the burden and challenges faced by our middle-class families as the cost of everything continues to rise even as wages remain stagnant.
“The investments we have fought so hard to preserve in public education, public safety, and public health are intended for one purpose only – to strengthen and grow our middle class over the long-term and create a more sustainable future for our children.
“This has been our goal from the beginning, and it will continue to guide the actions of this Administration as we work to address this latest challenge.”
“Today, the Board of Revenue Estimates announced a budget shortfall for the current fiscal year and 2010. Given the national economic downturn, national foreclosure crisis, and the increased price of energy, gasoline and food, these revenue estimates are not unexpected; and we are preparing to bring hundreds of millions in cuts before the Board of Public Works in the coming weeks to address this challenge.
“Given the national economy, other states are facing the same or significantly worse budget pictures. In fact, the Center for Budget and Policy Priorities estimates that at least 29 states are facing a total budget shortfall of $48 billion in FY 2009.
“In Maryland, because of the tough decisions we made to protect public education, public heath and public safety, and expand opportunity for our middle class families, we are ahead of the game. Working with the General Assembly, we have already reduced spending by $1.8 billion and taken actions to address the structural deficit that we inherited.
“Without these actions and tough decisions, our State would be facing an estimated $2.5 billion shortfall in FY 2010. Instead, Maryland is a facing a shortfall that is significantly less that is the result of a downturn in the national economy, not structural in nature.
“We have worked hard to restore fiscal responsibility and accountability in Maryland over these last two years.
“In 2008 and 2009, our state budget grew by less than 4 percent annually – less than the Spending Affordability Guidelines set by the General Assembly – compared to 22 percent in the last two years of our Republican predecessors.
“We have already cut $1.8 billion from state spending, eliminated over 700 state positions, and yes, we have asked the people of Maryland to play a role in this solution by increasing the sales tax by a penny and enacting a more progressive income tax structure. The people of Maryland will also have an opportunity to vote on a slots referendum in November that is expected to provide an additional $650 million for public education in our State.
“As we have worked together to address the structural deficit that we inherited, we will come together in the weeks ahead to address this latest budget challenge presented to us by our national economy; and we will do so in a way that recognizes the burden and challenges faced by our middle-class families as the cost of everything continues to rise even as wages remain stagnant.
“The investments we have fought so hard to preserve in public education, public safety, and public health are intended for one purpose only – to strengthen and grow our middle class over the long-term and create a more sustainable future for our children.
“This has been our goal from the beginning, and it will continue to guide the actions of this Administration as we work to address this latest challenge.”
Capital News Service contributed to this report.