MD Expects Shortfalls in Tax Revenue; Asks Departments to Plan for Reductions

Last week Someone Noticed listened to two of Elkton’s political leaders, Commissioners Givens and Storke,  wonder about the financial burden several major projects might create for town taxpayers.  Since then we’ve listened to news about what’s happening to state budgets, as shortfalls are larger than expected and departments are asked to plan for additional cuts.  

This Associated Press piece, which was published in the Daily News (Salisbury), summarizes the situation.  Since its pertinent for local planners and those observing government, we clipped part of it here.  Click on the link to go to the full story.

——– Association Press, Published in Daily Times

ANNAPOLIS – The next round of state budget cuts will likely be more apparent to Maryland residents, prompting Gov. Martin O’Malley to refer to an upcoming spending board meeting as a “Parade of Horrible.” The O’Malley administration estimates $1.8 billion in budget reductions have been made since the Democratic governor took office in January 2007, although Republican critics dispute that figure. But as the financial crisis continues to grip the nation, creative budget-balancing has become harder and state finances are hitting the wall of continuing economic downturn.O’Malley has asked state agencies to look at hundreds of millions of dollars in budget cuts to balance state books, as major areas of state revenue such as sales and income taxes drop. Revenue estimates updated last month showed Maryland would collect $432 million less during the current fiscal year than previously estimated.

“There’s no way that we can do $400 (million) without touching a lot of the things that we were able to spare through the special session and the other things,” O’Malley pointed out last week during a meeting with State Treasurer Nancy Kopp. O’Malley said the challenge is one of searching for ways to harm people the least. “But everybody is going to be hurt, and nobody is going to be happy,” O’Malley said.

Critics argue past cuts either didn’t go deep enough, or were one-time reductions or spending transfers that shifted money around and largely avoided painful and noticeable hits to state government. Sen. Allan Kittleman, R-Howard, described the previous cuts as “not reductions of any substance,” and he criticized the administration for returning to “a tax-and-spend philosophy of government.”

Kittleman, the Senate minority leader, pointed to a $25 million fund for Chesapeake Bay cleanup as an example of a worthy but unaffordable expense during tough times. “Unfortunately, the current administration has decided that we can do everything, and we are going to spend and spend and spend until they face the crisis that they face right now,” Kittleman said.

More keenly felt cuts also will be needed because the fiscal 2010 budget is facing a potential $1 billion shortfall, observers say. “I think everybody agrees: the iceberg is in sight,” said Delegate Murray Levy, D-Charles, who is a member of the House Appropriations Committee. The state Board of Public Works, consisting of O’Malley, Kopp and State Comptroller Peter Franchot, is scheduled to take up the cuts Oct. 15. “The 15th is our meeting to do the ‘Parade of Horrible,'” O’Malley said.

It won’t be the first time the board has faced hard choices, but the decisions get increasingly difficult as the economy continues to falter.The governor’s popularity plummeted after raising taxes by $1.4 billion in last year’s special legislative session, which resulted in about $550 million in budget cuts.

Still, O’Malley said tough calls made over the last year put the state on better financial footing. Otherwise, O’Malley said Maryland would be facing “a $2.3 billion hole instead of a $400 million hole.” Kopp agreed, saying some states sought to borrow money to operate over a relatively short period, hoping to replace the funds when tax revenue comes in. But borrowing has become harder amid the nation’s financial crisis.

“First of all, they can’t get the money, because it’s all tightened up. And secondly, the taxes aren’t going to come in,” Kopp said. “At least we’re in better shape than that.”
But, O’Malley added, “It still doesn’t make it any easier.”

Levy applauded the governor’s decision to ask state agencies last month to submit 5 percent budget reductions in preparation for the cuts. Although it’s unlikely 5 percent of the agencies’ budgets will be trimmed, Levy said it’s important to start with a wide area of options, and the sooner significant budget cuts are made, the better. “Everything is on the table right now,” Levy said.   [Click here for full story}

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