$300 million in cuts eyed

The Baltimore Sun

A state Senate committee approved more than $300 million in preliminary reductions to Gov. Martin O'Malley's budget yesterday, and some lawmakers said the weakening economy will force the General Assembly to cut hundreds of millions more.

While legislators worried about sagging tax revenues, a plan to rescind the $200 million-a-year computer-services tax that they approved in November's special General Assembly session appeared to be gaining momentum.

The idea of replacing the levy with a temporary income tax surcharge on the wealthy is in its early stages, but Senate President Thomas V. Mike Miller, who had previously rejected overturning the computer tax, hinted that it might succeed.

"It's in play," he said.

The Senate Budget and Taxation Committee voted on spending reductions yesterday, a day after Comptroller Peter Franchot released revenue estimates predicting that the state will have $330 million less than O'Malley expected when he submitted his budget in January, news that forced deep cuts.

The panel voted to defer funding for many of the new programs legislators approved late last year, such as the Chesapeake Bay 2010 Trust Fund and medevac helicopter purchases. Health care, higher education, stem cell research, the Inter-County Connector and economic development also were cut.

Sen. Ulysses Currie, who chairs the committee, said lawmakers made the reductions "without hurting any of the [state] agencies."

Not everyone agreed.

"We are very disappointed," Kim Coble, Maryland director of the Chesapeake Bay Foundation, said of the committee's move to put off until 2011 the $50 million that is to be dedicated to restoring the bay.

"The question in front of the state of Maryland is what it's going to take to restore the bay," Coble said. She noted a number of problems, including crab and oyster populations that are at historic lows.

House budget leaders are looking at a similar figure for cuts, although some hope to hold on to more funding for stem cell research, said Del. John L. Bohanan Jr., a St. Mary's County Democrat who is a member of the House Appropriations Committee.

Republicans and some Democrats said the General Assembly should reduce spending much more to guard against further economic slowdowns.

Del. Murray D. Levy, a Charles County Democrat who is one of the House's most respected voices on budget issues, said the General Assembly should cut about $570 million from O'Malley's $15.2 billion budget to make up for the unexpected revenue declines reported in December by the Board of Revenue Estimates.

"We're on the right track, but we need to pick up the pace in my opinion," Levy said. "The recent revenue reductions are more the beginning than the end. I think the economy is in serious trouble, and our revenue estimates are going to reflect that, so the sooner we get our house in order and in preparation for this, the better off we're going to be."

The state has about $150 million in its Rainy Day Fund to cover unexpected slowdowns, but if revenues fall below expectations again, as they have in the past few months, the state could face a deficit.

That would probably force O'Malley to decide on additional cuts, which can be enacted with the consent of the Board of Public Works. Another special legislative session would be logistically difficult this year because the State House will be closed for renovations, starting next month.

Rick Abbruzzese, a spokesman for O'Malley, said the discussions on the budget are continuing.

"It's early in the process, and the governor is going to continue to work with members of the General Assembly to make the appropriate cuts in the budget," he said.

Some lawmakers are pushing for legislation that would raise income taxes for residents in the top brackets. One proposal targets those earning $500,000 or more to lessen the impact of budget cuts or to replace the revenue from the computer-services tax.

A lobbying blitz has been aimed at rolling back the computer tax that was passed during last year's special session, along with a number of other tax increases, but legislative leaders say a repeal isn't possible without an alternative revenue source.

"We can't afford to just do a repeal without any other offset because of our fiscal situation," said Sen. Rob Garagiola, a Montgomery County Democrat who is helping develop the income tax proposal. The legislature temporarily raised income taxes on high-income residents during the 1990s recession, when the state faced similar budget shortfalls, he said.

Many lawmakers from both parties say they don't want to raise taxes after the $1.3 billion in increases they approved in the November special session.

Sen. J. Lowell Stoltzfus, an Eastern Shore Republican, said during yesterday's Senate hearing that he was concerned about the state's reliance on cutting transportation or environmental projects to keep the budget balanced.

"I'm concerned about all these transfers," he said before asking Warren Descheneaux, the General Assembly's top fiscal adviser, where the state stands in eliminating the long-term gaps between spending and revenue.

"You haven't made progress, but you haven't lost ground," Descheneaux said, adding that the shortfalls in expected revenue put the state back where it started when O'Malley submitted his budget.

bradley.olson@baltsun.com

Sun reporters Laura Smitherman and Gadi Dechter contributed to this article.

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