Gov.-elect Martin O?Malley will have one year to fix a projected $1.2 billion budget deficit as he starts his term in January, according to estimates from the state?s nonpartisan budget analysts.
During a briefing for state lawmakers, Warren Deschenaux, the Legislature?s chief fiscal analyst, said the state has seen continued small gains in jobs and personal income, but revenues created by the real estate and construction industry have leveled off. He said state tax collections have been “weak” in the first half of the current fiscal year that began in July, and said declines in sales tax revenues turned out to be leading indicators of the 2000 recession.
“Although things have been going swimmingly, they?re just treading water right now,” Deschenaux said. “We?re expecting what we?ve seen so far to be just a blip, but that may be optimistic.”
The shortfall is similar to the one that greeted Republican Gov. Robert Ehrlich four years ago at the start of his term.
A national recession, the economic downturn caused by the terrorist attacks of Sept. 11 and the demands of landmark state education funding only compounded the budget shortfalls that faced Ehrlich in the first few years of his term.
State legislative leaders said closing the gap between the state?s revenues and expenditures remains a problem for the new governor, but they shied away from saying a tax increase or the legalization of slot machines could generate the funding needed to fill the hole.
“This will be a very challenging first year for the governor-elect,” said Senate President Mike Miller. “But Ehrlich had a challenging first year, too. It?s something that governors are elected to deal with.”
Miller said there would be budgetary “belt tightening” rather than tax increases.
Steve Kearney, a spokesman for O?Malley, said the new administration would “look at everything to close this gap.”
