Md. urges more U.S. aid

Revenue projections falling more slowly as economy turns

further cuts unneeded

December 17, 2009|By Laura Smitherman | laura.smitherman@baltsun.com

Even as the fiscal picture in Maryland brightens, Gov. Martin O'Malley called on the federal government Wednesday to provide more help to states that are laboring to keep their budgets balanced.

The governor's plea came as state analysts announced that Maryland's revenue projections have fallen $77 million more for the current fiscal year and the next. While that means O'Malley will have less money for next year's budget, which he will present to the General Assembly in January, the decline was far less precipitous than previous Maryland revenue adjustments during the recession.

State officials said the projections from the Board of Revenue Estimates indicate that an economic turnaround is under way.

"Maryland's revenues appear to be stable, and it looks as if we are at least beginning down the road to recovery," said state Budget Secretary T. Eloise Foster.

Nonetheless, O'Malley warned that as the state confronts a projected $2 billion budget shortfall next year, it could "add to the unemployment woes" if the federal government does not provide more stimulus money. His remarks come as Congress debates measures that would extend Medicaid funds to states straining under the rising cost of the health care program for the poor.

"We really need additional help from Washington," O'Malley, a Democrat, told reporters in Annapolis.

Previous drops in revenue projections have triggered immediate budget cuts. In September, the board reported that state revenues were hundreds of millions of dollars less than expected for this fiscal year, which began in July. Falling revenue collections prompted O'Malley to push through more than $1 billion in midyear budget cuts.

This time, reserve funds are expected to cover the $15 million writedown, so budget cuts will not be needed. Projected revenues from taxes and other collections were revised downward by $62 million for next year, a relatively modest amount compared with the state's operating budget of about $13 billion.

But state officials cautioned that even though Maryland revenue forecasts appear to jibe with the improving economic outlook, some negative economic indicators persist. Unemployment and home foreclosures continue. And personal income is expected to post its second-worst drop on record, slowing recovery in an economy that largely depends on consumer spending.

"My first reaction to this report is one of relief," Comptroller Peter Franchot said, referring to the revenue estimates. "My second reaction, however, is one of unbridled caution. I see red lights blinking."

O'Malley and lawmakers say many options are on the table next year, when a further $2 billion budget shortfall looms. They are expected to consider aid cuts to local governments as well as layoffs and furloughs of state employees. They also are expected to debate tuition increases at public universities.

"We're cautiously optimistic that revenues are starting to meet expectations," said House Speaker Michael E. Busch. "If we can just keep our services and people in place, that's the ultimate goal."

Busch said an extension of federal assistance for Medicaid programs is needed, noting that the current stimulus funding will run out in December 2010, halfway through the next fiscal year.

Some economists have warned that states would have to implement deep budget cuts and tax increases next year to balance their budgets, weakening a fragile economic rebound. According to the Washington-based Center for Budget and Policy Priorities, state actions to eliminate deficits could cost the U.S. economy 900,000 jobs.

But Republicans say the federal stimulus money has fueled government spending when the focus should have been on restraining expenses. Lawrence J. Hogan Jr., who is weighing a challenge to O'Malley as a GOP candidate in next year's election, criticized the governor's request for "another federal bailout."

O'Malley says he has rolled back spending to levels not seen in three years. He will hear from a bipartisan group of lawmakers today who will recommend a level of spending for the next fiscal year, and some lawmakers said they might suggest that there be no increase in the state's operating budget.

The recommendation of the Spending Affordability Committee is not binding, but operating budgets have largely tracked its suggestions. Foster said the O'Malley administration intends to follow the panel's guidance.

Baltimore Sun reporter Julie Bykowicz contributed to this article.

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