Maryland continues to collect less sales and income tax revenues than expected, raising the possibility that the state will end the budget year with a deficit for the first time since 1992.
The dour revenue outlook likely will mean that Gov. Robert L. Ehrlich Jr. will cut even deeper into the coming fiscal year's budget, which takes effect on July 1.
The administration is already preparing for up to $500 million in reductions to be made in the next several weeks, the first phase in closing a projected $1 billion gap between receipts and expenses.
"We're definitely concerned," said Budget Secretary James C. "Chip" DiPaula Jr. "It adds to the urgency to try to fix this problem much sooner rather than later."
Legislative leaders were warned of slumping tax collections in a letter this week from Warren G. Deschenaux, the General Assembly's top budget analyst.
The comptroller's office is reporting that general fund collections are 2 percent below the pace of a year ago, and are falling behind the last official estimate made in March, the letter said.
The March projection was revised downward by $218 million.
Maryland's budget is $22.4 billion.
"It is reasonable to expect that general fund revenues for the full fiscal year will close from $50 to $100 million below the estimate used to balance the fiscal 2003 budget," Deschenaux said in the letter.
"A revenue shortfall of this magnitude makes it likely, but not certain, that fiscal 2003 will close with a deficit."
State law requires that the governor must propose and the General Assembly adopt a budget believed to be balanced.
Projected deficits are usually made up through spending cuts; the state could also tap its $490 million "rainy day" fund, but such a move would require the legislature to reconvene.
House Speaker Michael E. Busch said he sees a turnaround ahead, and that the latest projections aren't cause for alarm.
"We're hopeful that there will certainly be some leveling off in the economy," he said. "The stock market is coming back. It's hopeful that retail sales will be up in the summer. This is the residual of the tough winter."
But Senate President Thomas V. Mike Miller was more pessimistic: "Tough times are going to continue to be in place in Maryland for a long time," he said.
Deschenaux said Ehrlich could reduce the potential for a deficit by curtailing spending in the current year's budget - which ends in six weeks.
DiPaula said the administration is doing that, but is more focused on looking ahead.
"It's a very small part of the situation," he said, referring to the latest projections. "We're focused on solving the billion-dollar deficit."
Ehrlich has pledged to balance his next budget without tax increases, meaning a total of $1 billion in cuts is needed.
Making good on his promise, the governor is expected next week to veto a $135 million corporate tax bill approved by the General Assembly.
