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Gov. Martin O'Malley said Friday he plans to propose as much as $700 million in budget cuts for the fiscal year that began just 10 days ago, as income tax receipts are projected to be lower than expected.

At an appearance in Baltimore, O'Malley said his Cabinet and senior advisers have been working on a list of budget cuts that he hopes to present July 22 to the Board of Public Works for approval. His remarks about cutbacks in a $14 billion budget came after the state legislature's chief budget analyst warned of a widening shortfall.

"The continued contraction in many areas of the economy has necessitated our going back to the drawing board early in this fiscal year to cut another $700 million," O'Malley told reporters. "None of it is going to be easy."

O'Malley, a Democrat, said he would like to avoid widespread layoffs as he has done in previous rounds of budget cuts, though he acknowledged that some areas of government might be reorganized, causing some workers to be displaced. He also said the budget cuts will be made with an eye toward "protecting services for those hard hit by the economy."

Warren G. Deschenaux, the General Assembly's chief fiscal analyst, said in a letter this week to legislative leaders that funds carried over from last fiscal year that were supposed to help balance this year's budget are essentially wiped out. That, and another $400 million decline due to deteriorating tax receipts, could total about $700 million, or 5 percent of the budget.

"Addressing a shortfall of this magnitude will be a daunting task," he wrote, adding that next year's budget is projected to be more than $1 billion out of balance.

Part of the problem in keeping ahead of such declines is the fact that the legislature adjourns in early April, before the tax filing deadline, Deschenaux said. He suggested the legislative session continue until May so lawmakers can get a better fiscal picture. Such a move, however, would require a change to the state's constitution.

Both the governor and House Speaker Michael E. Busch, who appeared with him Friday, emphasized that Maryland is faring better than other states.

Busch noted that Maryland has a rainy-day fund of about $800 million that it could tap to fill budget gaps. And O'Malley pointed out that 2,500 jobs were added in Maryland in May, reversing several months of losses. The governor said the one-month gain could be a blip, but held out hope it's a sign that the end of the recession is near.

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