As sales tax and income tax revenues flatten, Maryland legislators need to get ready for another round of budget cuts in the fiscal year that just started, the General Assembly?s top budget analysts told the Senate Budget committee Tuesday.
“The sales tax had a very bad month in June,” and that was after the May federal tax rebates had started to come in, said Warren Deschenaux, the legislature?s director of policy analysis. “You probably need to start thinking about what?s you?re going to do,” he told the senators.
The bad news was not unexpected. It came just two weeks after the Board of Public Works, chaired by Gov. Martin O?Malley, approved $50 million in reductions to this year?s spending that he recommended. But almost half those cuts were one-time actions that will not trim the budget in future years, budget analyst David Juppe told the committee.
O?Malley Budget Secretary Eloise Foster at the board meeting had warned, “Depending on the Maryland economy, we?re going to have to assess [the situation] on a month-to-month basis. We may have to come back to the board for additional reductions.”
The board may cut the budget when the legislature is not in session. At the moment, the personal income tax in Maryland is still up about 4.6 percent this calendar year, but that is still $46 million less than what was estimated in formulating the budget.
Not counting the penny increase in the sales tax in January, sales taxes collected are actually down 1.1 percent from the prior year, $25 million below estimates. This is due to an 8 percent decline in vehicle sales and a 35 percent falloff in sales of existing homes, which has affected the construction sector, a major driver of sales tax receipts, analyst Theresa Tuszynski said.
Deschenaux said at the moment he?s expecting that revenues will come in $50 million to $100 million below estimates, but that is cushioned by a planned $237 million surplus (or fund balance) at the end of fiscal 2009.
If things get worse than that, “we?ll be in a near-calamitous situation,” Deschenaux said.
