Hundreds of millions of cuts in state spending this year will need to be made as Maryland revenues are expected to be $432 million lower than originally forecast.
“These revisions to revenue estimates are not unexpected,” said Budget Secretary Eloise Foster at Tuesday’s meeting of the board that forecasts how much money the state will have to spend. “The governor and I are already meeting with state agencies” to make further reductions, which will be proposed to the Board of Public Works.
“We’re ahead of the game because of the difficult decisions we made last year” to cut spending taxes and raise taxes, Foster said.
State Transportation Secretary John Porcari said Maryland was also likely to see reductions in revenue estimates for gasoline and titling taxes in his department’s plan being finalized this week. Vehicle miles being driven are down because of high gas prices, and fewer vehicles are being purchased, Porcari noted.
On top of that, funds in the federal Highway Trust Fund are drying up due to a battle with Congress, and funding may be delayed or reduced for Maryland projects, Porcari said. Any projects recently added to the state highway plan may need to be put off again.
David Roose, the director of revenue estimates, said, “The economy has yet to hit bottom and will not until next year.”
“Base-line growth is just about flat” in most revenues, Roose said. Not counting last year’s increase in the sales tax from 5 to 6 percent, those revenues actually have declined by 1.8 percent, its worst performance since the deep recession in 1991. There also has been a larger than expected drop in sales for cigarettes, after the legislature doubled the tax to $2 a pack.
Panels of experts in banking, real estate, utilities and real estate gave varying estimates about when the economy would turn around, with some predicting early next year and others saying business activity would not increase until 2010.
“Stop thinking this is a short-term problem” in residential real estate, said Jane Fairweather, a Montgomery County Realtor who said housing cycles tend to last 10 years.
Lou Baker, president of the Maryland division of Pulte Homes, said that slumps in new home-building tend to last 43 months, which would mean that industry would be “hitting bottom” in the first half of 2009.
