ANNAPOLIS – Maryland’s projected revenue stream was slashed by $432 million Tuesday, as state officials proposed more spending cuts and blamed the shortfall on the battered economy.
The Board of Revenue Estimates said the state will collect nearly $14.1 billion in its general fund next fiscal year, down from the roughly $14.5 billion predicted in March. The lion’s share of the plunge came from sliding sales and income tax receipts, but other dips are expected in everything from tobacco to motor fuel charges.
The general fund bankrolls nearly all of the state’s operating expenses, including education, health care, and salaries for state workers.
Gov. Martin O’Malley, who described the shortfall as “not unexpected,” said he will soon propose hundreds of millions of dollars in cuts. Comptroller Peter Franchot also said he wants to trim state spending.
Neither specified where the ax should fall.
“The bright fact is that we are still growing,” said state Treasurer Nancy Kopp, referring to Maryland’s projected 4 percent growth rate. “Some other states are still down year over year.”
Maryland’s fiscal woes were thrust into the spotlight last fall, when the General Assembly entered a special session, often working into early-morning hours, to plug a $1.7 billion budget gap. The lawmakers approved a series of tax hikes, including a 1-cent jump in the sales tax.
However, these and other efforts have so far fallen short. Maryland still faces a potential $1 billion deficit, and in March the Board of Revenue Estimates predicted a $333 million revenue shortfall.
The state will release updated revenue projections in December, at which point, Franchot said, the estimates may again be cut.
On Monday, Franchot proposed setting up a panel to review state spending.
That same day, Franchot voted against raising the bar on how much money Maryland can borrow for schools, road construction and other projects. That vote, by the Capital Debt Affordability Committee, passed 4-1.
Franchot, in an interview, blamed the most recent projected shortfall on the soured economy and “out-of-control” state spending.
“Those are the two culprits in this area; we’ve got to reform state spending, and we cannot tax our way out of a bad economy,” he said. “We have to, like the rest of Maryland, do some penny-pinching and kind of rein in spending.”
Still, some revenue gaps can’t be blamed on the economy or state expenditures. Estate tax revenues, for instance, are expected to fall nearly 14 percent from last fiscal year, to $210 million.
“Generally, (that figure) is almost entirely random,” said David Roose, director of the Bureau of Revenue Estimates. “It just depends on whether a handful of really wealthy people die or not.”