Md. Governor says difficult decisions ahead as revenue forecasts pressure spending

DATELINE: ANNAPOLIS Md.

With lawmakers foraging for budget cuts to prepare for unfavorable revenue estimates, Gov. Martin O'Malley said Wednesday there were difficult decisions ahead.

While it's unclear what the new March forecast will be, the new Board of Revenue Estimates projections come after a dismal showing in January sales tax revenue, which was down 5.5 percent the fifth-largest decline since fiscal year 1982.

"We have our work cut out for us," O'Malley told reporters.

O'Malley, who believes the projections could require up to $300 million in budget reductions, said the fiscal pressures are creating "all sorts of proposals with regard to anything in the budget that is on sort of a discretionary side."

"Anything about which there's some discretion, there will be a lot of pressure to cut, to scale back, to implement more slowly whatever words you want to use," O'Malley told reporters. "But it's all a part of the pressure to come up with $300 million for the revenue writedowns."

The Board of Revenue Estimates, which is comprised of Comptroller Peter Franchot, Treasurer Nancy Kopp and Maryland Secretary of Budget and Management T. Eloise Foster, will revise the official revenue forecast for March of fiscal year 2008 on Thursday. The estimates will be presented by David Roose, the executive secretary of the board. Roose also will give an analysis of the figures in the context of state and national economic trends.

O'Malley pointed to a Senate panel's vote last week to cut funding for stem-cell research by $18 million as an example of what will have to be done.

"These are all the things that we're going to have to wrestle with in addition to virtually every other piece of the budget that's discretionary," O'Malley told reporters.

The governor attributed the budget woes to a downturn in the national economy, creating new problems after a difficult special session in November that included $1.4 billion in new taxes and $500 million in budget cuts to battle a structural deficit that had existed for years.

"We're all anxious, and we're all worried about the economy and we're all feeling the pressures of the national downturn and that's the reality of these times," O'Malley said.

Among other cuts, the Senate panel also approved $6.8 million in budget reductions for the University System of Maryland, creating a challenge to preserve a freeze on tuition O'Malley wants.

The Senate Budget and Taxation Committee on Tuesday decided to move forward with the idea of modifying the financing plan for the Intercounty Connector, an 18-mile highway through Maryland's Washington suburbs. The decision would save $32 million in the state's $15.2 billion General Fund to help counter the drop in revenues.

Lawmakers also are eyeing $50 million they put in a fund last year to help clean up the Chesapeake Bay.

O'Malley, speaking after an environmental rally, said there will be pressure on the bay fund not to implement the full amount. "We're working hard to protect it," the governor said.

There's also talk of putting off the full implementation of the small employers health insurance initiative, which was approved in the special session.