ANNAPOLIS – The state will face a $388 million budget shortfall in the upcoming fiscal year, policy analysts predicted Tuesday at a joint House and Senate budget briefing.
But that figure is well down from predictions of a $1 billion deficit, and the improvement was attributed to higher-than-anticipated tax revenues and reductions in state spending.
Still, Marylanders will likely see a decline in basic services or tax increases to close the budget gap, budget experts said.
“Choices are pretty clear; it’s raising revenue or cutting services,” said Steve Hill, director of the Maryland Budget and Tax Policy Institute.
But with Gov. Robert Ehrlich dead set against raising personal taxes, said Greg Massoni, the governor’s press secretary, now is a good time for the Legislature to reconsider slots as a practical revenue source.
The House of Delegates blocked Gov. Robert Ehrlich’s attempts to win approval for slot machines at race tracks for two years. Slots proponents, including Senate President Thomas V. Mike Miller Jr. of Calvert County, have said the revenue from the machines is the best way to fund a comprehensive school reform plan and mitigate the budget woes.
The budget forecasts came in a briefing by the state’s Department of Legislative Services to the Senate Budget and Taxation, House Appropriations and House Ways and Means committees, as well as the state’s Spending Affordability Committee.
Sen. Nathaniel McFadden, D-Baltimore, said he opposes raising taxes but worries how the state will fully fund the school reform program known as Thornton, which is a significant unfunded mandate the state must support.
State spending is expected to increase about $800 million next fiscal year, with two areas composing the bulk of the increase: more than $400 million in educational aid and more than $150 million in Medicaid. Educational aid expenses alone outweigh total projected revenue for the cycle, the analysts said.
However, the analysts pointed to optimistic economic news.
Payroll employment is up 2.3 percent, and the analysts said the current fiscal year’s budget is forecast to generate a surplus of $481 million. The unanticipated savings will help mitigate the shortages for the next fiscal year, Hill said.
The General Assembly and the governor will have to make some tough judgments on the state’s priorities when the legislature convenes in January, said Warren Deschenaux, a principal financial analyst who discussed the budget at the briefing.