A sluggish economy and housing market continued to undercut nearly every source of tax revenue for the state over the past year, with collections falling $73.5 million short of expectations, setting the stage for tighter budgets in the coming years.
The declines demonstrate how inextricably tied state government is to the overall economy. A dent in consumer spending, weakened by the economic malaise and household budgets strapped by higher gas and food prices, led to a sales-tax shortfall. A sinking stock market cut into individual income tax payments. And fewer home sales meant courts collected fewer fees for recording deeds.
"That's painful," said state Sen. David R. Brinkley, the Republican leader and a member of the budget committee. "But when Maryland's families are feeling the pinch, no one should be surprised that the government's revenues are going to fall short."
The latest budget news came out of the comptroller's office, which yesterday released a report on the final accounting for fiscal 2008, which ended June 30.
The governor and General Assembly are required to enact a balanced budget every year based on revenue projections, so last year's shortfall will come out of the current general fund surplus and will affect next year's spending plans.
Gov. Martin O'Malley, a Democrat, has been wrestling with budgetary problems since he came into office last year.
The governor convened a special legislative session last fall during which the General Assembly raised taxes by $1.3 billion and reduced spending by hundreds of millions of dollars. Other cuts since he took office have brought the total to almost $2 billion, according to the administration. The legislature also forwarded a plan for legalizing slot machines, which goes before voters for approval in November, to help balance the budget in the future.
But as the state was implementing the budget-balancing package, the economy was stung by the subprime mortgage debacle and credit meltdown. The resulting lag in state revenue now means tax and fee collections for the current fiscal year and fiscal 2010 could be $1 billion less than expected, according to the nonpartisan Department of Legislative Services.
That leaves O'Malley with a more difficult task when he begins this fall to craft a budget for fiscal 2010. He is required to present that plan to the General Assembly when it convenes in January. More definitive revenue forecasts for the current and next fiscal years are expected in September and will be updated again in December.
