Gov. Robert L. Ehrlich Jr.'s spending proposal is so large that it will turn the state's surpluses into deficits within the next two years, budget analysts told the General Assembly yesterday.
Improving revenues and belt-tightening produced surpluses in fiscal years 2005 and 2006. But under the plan Ehrlich submitted last week for fiscal 2007, the state would again spend more than it takes in, said Warren Deschenaux, the General Assembly's chief fiscal analyst.
He said the current projections show the state using all its surplus cash and more in fiscal 2008 and facing a funding shortfall of nearly $1 billion in 2009.
"Assuming the revenues go as expected, and that's always a big if, we're living off the cash until that runs out, and then we have a problem," Deschenaux said. "We're spending more than we're taking in."
Ehrlich, who campaigned on a promise to restore fiscal order to Annapolis and who faced a $1.3 billion deficit in his first year in office, said when he unveiled his proposal last week that it was fiscally responsible.
Spending on state programs would grow by 11.4 percent under his proposal, the fastest rate of growth in at least two decades. But the governor also would dedicate $644 million to the state's rainy day account and would set aside $670 million to help pay for fiscal 2008 expenses.
Deschenaux estimated that the $670 million would still leave the state more than $120 million short in fiscal 2008.
Legislative analysts are known for their conservative revenue estimates and for years have projected a dire fiscal future.
Much of the projected increase in spending can be attributed to the requirements of a landmark education funding formula the General Assembly passed before Ehrlich took office and to increases in Medicaid costs, Deschenaux said. More than half of the budget is nondiscretionary, he said.
Budget and Management Secretary Cecilia Januszkiewicz said the administration agrees with Deschenaux's assessment that deficits could return soon. She said the governor is working to mitigate the problem by tempering state spending increases and setting aside money now.
He has also proposed a new revenue source to alleviate the problem, she said - slot machines. Ehrlich has seen his proposals for legalizing slots fail in the legislature for three years in a row, and slots opponents in the legislature have said they see little chance for a bill to succeed in an election year. Still, Ehrlich introduced another slots bill last week.
"That would help address some of these issues," Januszkiewicz said.
Ehrlich's budget exceeds a spending limit recommended by the General Assembly by more than $200 million, according to the Department of Legislative Services analysis. The recommendation, made annually by the Spending Affordability Committee, is designed to establish how much the state can spend without causing the budget to grow faster than Maryland's economy.
Legislators have said they will try to cut spending to bring it in line with the recommendation. But they have also said they may reconvene the committee and raise their spending target.
andy.green@baltsun.com
