Another $205 million must fall to budget blade

Friday, Oct. 2, 2009

And when O'Malley (D) drafts his 2011 budget next year, he'll have $2 billion less to work with.

David Roose, executive secretary of the Board of Revenue Estimates, said tax receipts will come in nearly $683 million less than anticipated. The current budget, which started July 1, has already been trimmed twice because of declining tax revenue from the faltering economy.

"Once again, we're going to be asked to go back to the drawing board and come up with another budget balancing plan to do that," Budget Secretary T. Eloise Foster said.

Roose told the board — Foster, Comptroller Peter V.R. Franchot (D) and Treasurer Nancy K. Kopp (D) — that individual income taxes were off projections, set in September, by $480.3 million, and corporate income taxes were down $60.4 million. Sales taxes missed projections by $81.5 million.

"It will be some time before robust economic growth returns," Roose said.

The O'Malley administration has some leeway on when it makes the cuts.

Officials could take budget reductions to the Board of Public Works at its bimonthly meetings, or it could wait until the General Assembly reconvenes in January. The lawmakers have more budget-cutting authority than the board.

Foster said she would prefer the cuts sooner rather than later.

Government data show how painful the recession is. Personal income is projected to fall 0.7 percent, the first time that statistic has declined in a long time, Warren G. Deschenaux, director of the Office of Policy Analysis and the chief budget analyst for the legislature, said at a legislative hearing.

Deschenaux said employment is falling, with jobs down by 2.7 percent in April and 1.9 percent in July, an indication that the rate of decline is slowing.

"In this environment, that's what we call progress," Deschenaux sardonically told the lawmakers.

O'Malley told reporters that even though national economists see an end to the recession, it will take longer for tax revenues to rebound.

He noted that unemployment rates in Maryland actually have gone down in two of the last four months, default notices decreased in September and home prices are starting to stabilize or increase in some areas, which could signal the beginning of a "leveling-off trend."

O'Malley would not commit to avoiding more layoffs of state workers if more cuts are needed. More than 200 state employees lost their jobs last month when the Board of Public Works approved $454 million in budget reductions.

He also couldn't guarantee how much the state will be able to dedicate to school construction next year, but said he hoped for $250 million.

"We're at a point now that we're not choosing between high priorities and low priorities," he said. "We're choosing between high priorities and higher priorities."

He said he would direct staff to identify whatever reductions are necessary and bring them to the Board of Public Works as soon as possible.

"The cuts become more and more painful each time," O'Malley said. "The limbo dance becomes harder and harder."

Del. Luiz R.S. Simmons said he will offer a potential revenue source at the next General Assembly session — moving to the state's general fund the $100 million the state expects to set aside for the horse racing industry through slots revenue.

"I find it incomprehensible that we are going to take $100 million a year from the video lottery revenue and give $100 million a year to the failing Maryland horse racing business," said Simmons (D-Montgomery).

"Groups better wake up and understand that there is nothing written in stone about that $100 million for Maryland horses," he said, calling horse racing a "moribund" industry offering "dead-end" jobs without health care benefits.

Simmons said he is not counting on O'Malley's support of the proposal.

"We're open to all ideas," O'Malley said.

Staff writer Alan Brody contributed to this report.

dtallman@gazette.net