WASHINGTON – Maryland, like many other states, is struggling to balance its budget, but the economy has begun to recover and states should see improvements soon, according to a national survey released Thursday.
Officials with the National Governor’s Association and the National Association of State Budget Officers, who released the report, said that some states have seen small improvements in revenue already and they expect more will see revenue growth in about six months.
While the recovery will be uneven among states, Maryland’s high-tech industry gives it a “pretty resilient economy” that should put it in a better position than some others, said Raymond Scheppach, executive director of the National Governors Association.
“I do believe states have in fact bottomed out and the crisis has eased somewhat,” Scheppach said.
Recovery will “depend a lot on the underlying economy,” he said. He still anticipates long-term structural problems in state budgets as costs for some services, like healthcare, will continue to rise without a simultaneous increase in revenue.
Maryland, which is facing a budget shortfall of about $800 million in the next fiscal year, will close that gap in part with cuts “in all program areas with the exception of health and K-12 education,” said Neil Bergsman, executive director of the Maryland Department of Budget and Management.
Bergsman said Thursday the state has “significant challenges for the upcoming budget and future.”
States have slashed budgets and tapped rainy-day funds and other one-time sources of income as they grappled with the deficits of recent years. Very few raised taxes, and revenue collections remained “stagnant” at the beginning of fiscal 2004, the report said.
Maryland is a “microcosm” for the national budget picture, said Scott Pattison, executive director of the National Association of State Budget Officers. He said Maryland has not been hit as severely by the economic crisis as some other states, but it hasn’t weathered it the best either.
The report — officially called the Fiscal Survey of States — predicted that Maryland would end fiscal 2004 next summer with a $447 million budget balance, a projection that one legislative budget analyst called a little high.
Warren Deschenaux, director of the Office of Policy Analysis for the Department of Legislative Services, said the state will more likely have a fiscal 2004 balance of about $300 million, in addition to a rainy-day fund of about $500 million. But Deschenaux said the bottom-line does not reflect the struggle state officials will go through to get there.
“You would think that we were doing very well,” because of the high balances cited in the report, Deschenaux said. “The way we’ve gotten there hasn’t exactly been a case of textbook prudence.
“We haven’t been able to pay for our expenses out of our normal tax revenues,” he said.
He noted that the state has drastically cut funding to higher education, frozen salaries and hiring, and borrowed money from the transportation trust fund to balance its budget. Unlike many other states, however, Maryland has avoided dipping into its rainy-day fund.
“We’ve been using every other pot of money we can find instead of going there,” Deschenaux said.