Analysts expect another shortfall

July 9, 2008

Budget analysts warned state lawmakers yesterday that a decline in personal income tax, sales tax and other revenue is expected to leave a $200 million shortfall from the last fiscal year and the current one. That budget shortfall comes on top of an expected $500 million gap between revenue and spending for the next fiscal year. The signs of fiscal trouble are emerging months after the General Assembly convened a special session to raise taxes by $1.3 billion and to cut spending by hundreds of millions of dollars.

"The shortfalls are coming back," Warren G. Deschenaux, the legislature's chief fiscal analyst, said in a hearing before the Senate Budget and Taxation Committee.

Gov. Martin O'Malley anticipates plugging future deficits with an estimated $600 million in revenue from slot machines, if voters approve the legalization of the gambling devices in a November referendum. The state also has a cushion in its general fund and a rainy-day fund. But if voters reject slots or if the economy continues to slide, lawmakers will be forced to act, Deschenaux said.

Laura Smitherman