Legislators on the budget committees were told Monday that Gov. Martin O?Malley?s budget slows down state spending less than it appears.
But the state also faces an unexpected slowing in sales tax collections because of a falloff in housing sales.
This year?s small budget growth was funded largely with one-time solutions, budget analysts told the lawmakers, and the situation in future years looks even bleaker.
Warren Deschenaux, the chief budget analyst, said the situation was like standing in a field with a hole on one side, a pile of dirt on the other, and a shovel in your hand.
“You can keep digging or start filling in the hole,” Deschenaux said. But there is no question that “revenues are on a rather austere path” and “the hole will get deeper.”
“The overall economy has slowed,” said fiscal analyst Theresa Tuszynski. But “the housing market is in the midst of a very serious contraction.” That has a major impact on sales tax revenues because of taxes on large appliances, furniture and other items bought for a new house, in addition to the construction materials.
“I feel we?re in for a potentially tough time,” said Sen. Ulysses Currie, D-Prince George?s, chairman of the Budget Taxation Committee. The slowdown in housing sales “has hit us hard.”
In addition, the state lottery is “definitely struggling,” to meet its goals because the lack of a big MegaMillions jackpot has hurt sales, Tuszynski said.
Budget analyst David Romans said that one-time items in this budget, such as an unexpected surplus in the health insurance account, are “really masking the new growth” in the O?Malley spending plan. While the budget seems to show a $720 million increase ? 2.5 percent ? the actual “underlying budget growth,” Romans said, is really closer to $1.6 billion, a 5.7 percent increase.
The budget also takes almost $1 billion from the rainy-day fund, and “when it?s gone, it?s gone,” Deschenaux said. “We are in essence driving the car right up to the cliff.”
Another budget item is a deferral of a $53 million payment for rights of way for the Intercounty Connector, the Montgomery County toll road. This is essentially a cash-flow item and will not slow down progress on the road, O?Malley and his officials have said, but the money must be paid in the next budget.
