The state has a general fund surplus and a rainy day fund it could tap to fill budget gaps in the short term, and the administration is counting on slots revenue to fill deficits in later years. But bigger-than-expected revenue shortfalls in the next two years could force the state to look for more spending cuts or new revenues, though lawmakers say that more tax increases are unlikely.
The state's debt limit is closely monitored by credit-rating agencies, which have assigned Maryland a top rating as a sign of confidence in the state's financial stewardship. The coveted AAA rating typically means the state can obtain lower interest rates, saving taxpayers money. State officials said they met recently with the rating agencies and concluded that analysts wouldn't object to a change.
Maryland uses two measures to set its debt limit, which is an advisory guideline not mandated by law. One measure is based on a ratio of the amount of outstanding debt to the total personal income Marylanders generate and is set at 3.2 percent; the other measure aims to keep debt service to no more than 8 percent of revenue.
The committee raised the 3.2 percent limit to 4 percent, though state officials said debt would not be increased that much because the revenue-based limit would kick in first. Earnings have waned with the faltering economy, and the state's debt is at about 3 percent of personal income.
The committee also authorized $150 million in additional borrowing for school construction, which would allow O'Malley to maintain the same level of funding as this year.
But Foster said the governor won't unveil his capital budget proposal until January and the administration would be mindful of economic conditions when setting spending plans.
Baltimore Sun reporter Gadi Dechter contributed to this article.
BUDGET HIGHLIGHTS
* State leaders voted yesterday to increase the amount the state can borrow to build schools, roads and other projects to avoid having to roll back $800 million in planned construction.
* The decision comes as revenue estimates are expected today, possibly showing a budget shortfall of more than $1 billion.
* Such a shortfall could increase scrutiny of a November referendum on the legalization of slot machines, which could bring the state hundreds of millions of dollars a year.
