Even as they grapple with the budget, lawmakers are also expected to contend with a raft of policy issues of interest to voters. Chief among them is whether to re-regulate energy, an idea that O'Malley pushed last year but might back away from this session.
Topping the public safety agenda are tweaks to the new death-penalty regulations and changes to sex-offender and gang laws. And lawmakers may revamp the unemployment-insurance program and the way teachers are evaluated and compensated.
All 188 lawmakers and the Democratic governor are up for re-election in November. A primary challenger and Republican challenger, both relatively unknown, have said they will square off against O'Malley, but he is preparing for the possibility that former Gov. Robert L. Ehrlich Jr., who lost to O'Malley in 2006, will get into the race.
The election means that the governor and lawmakers will likely plug a $2 billion budget hole without rankling voters by raising taxes or slashing major programs.
Yet in the second year of significant budget woes, leading lawmakers say there's no way to avoid pain. State workers can expect another round of unpaid leave and salary freezes. Most local governments will see another year of drastically reduced transportation money.
"The cuts that have been made previously are going to have to be continued," said Senate President Thomas V. Mike Miller, a Democrat representing Calvert and Prince George's counties. "But they're going to be greater."
Republican lawmakers - who see this fall's election as a chance to pick up seats in Annapolis - argue that more sweeping structural changes must be made.
"We should have been more cognizant of the problems that were facing us," Sen. Allan H. Kittleman, the Senate minority leader and a Howard and Carroll Republican, told a group of lawmakers and local government officials at a Maryland Association of Counties conference last week in Cambridge. "The only reason that we can continue to survive is because we live off the federal government. If we didn't have the federal government, we would be in real, real trouble."
O'Malley is scheduled to unveil his budget next week, which he has said will keep intact all the cuts made during last year's legislative session and afterward by the state's spending panel. The governor also must find about $1 billion in new reductions.
Lawmakers can cut but not add to the budget, and Miller said lawmakers will likely turn their scalpel to some areas of spending that O'Malley, a former Baltimore mayor, has tried to shield, including stem cell research, historic preservation and aid to local governments.
"The governor has been very protective of the counties - I mean extremely protective, to the detriment of the state," Miller said in an interview last week. "But that gallantry cannot continue."
About 40 percent of the state's roughly $12 billion operating budget goes to the 23 counties and Baltimore. All but a small fraction of it is tied up in mandatory education funding.
At the Cambridge conference, local officials said they were bracing themselves. Sen. Ulysses Currie, chairman of the Budget and Taxation Committee and a Prince George's County Democrat, said local governments had not endured any "significant cuts" so far, a comment that drew grumbles in the audience of mostly county administrators.
"There's very little left for us to squeeze," Howard County Executive Ken Ulman, a Democrat, said afterward. "I cut every single area of our budget, except I gave an increase to schools. We need some flexibility."
A task force of lawmakers, including Miller and Michael E. Busch, the Democratic speaker of the House, studied education spending last year and is preparing to introduce legislation that could help counties waive some of the state's mandatory annual primary education spending increases, called "maintenance of effort."
The state school board has been loath to allow maintenance-of-effort waivers, but Busch, who represents Anne Arundel County, told local officials Friday in Cambridge that proposed legislation this year could force it to grant more.
Apart from the budget tasks ahead, several major policy issues have emerged.
Energy re-regulation, an O'Malley-backed bill that passed the Senate last year but was batted down in the House, will be introduced anew by both Republican and Democratic senators, Miller said.
But O'Malley might not fight for re-regulation - a departure from the last time he faced voters, when fighting utilities and lowering electricity bills were a central theme of his campaign. He also personally pushed for re-regulation just last year.
The governor's chief legislative officer, Joseph C. Bryce, said it is too soon to say whether the governor will back another bill.
"There's been major activity since the legislature last adjourned," Bryce said. He cited the conclusion of the Public Service Commission's inquiry into the merger between Constellation Energy Group and Electricite de France, a deal completed in November, and the new company's agreement to credit ratepayers and pay more than $100 million in additional income tax to the state.
O'Malley appears to have refocused his approach on energy policy from re-regulation to urging the commission to exercise its authority to regulate new power generation.
Public safety, another core of O'Malley's 2006 gubernatorial campaign, is likely to return this session. In a speech Thursday night in Cambridge, O'Malley said lawmakers must "take stock of the foundation of public safety."
Miller and Busch have both said they'd like to review the way major sex offenders from other states who move to Maryland are classified on the state sex offender registry - an issue highlighted by the December abduction and killing of an 11-year-old Salisbury girl. The suspect in her abduction is listed as a "high-risk" offender in Delaware and "compliant" child sex offender in Maryland.
O'Malley is expected to be "heavily involved" in sex-offender bills this session, Bryce said, though the governor doesn't have details of a plan yet.
Busch also has made gang legislation a critical issue this year, prompted in part by the gang-related killing in May of 14-year-old Christopher Jones, a Crofton resident.
"Obviously there's a communications gap between boards of education and law enforcement agencies, and there's no consistent policies across the state," he said in a recent interview. "I want to establish that."
Also on the public safety front, Miller said he will put forward a bill that would expand the list of evidence that can be used in death penalty cases. Senators last year side-stepped a full repeal of capital punishment, proposed by O'Malley, by instead requiring that prosecutors have either DNA evidence, a videotaped confession of the killer or a video recording of the crime.
Miller said the new capital punishment statute is too narrow. He said the list of acceptable evidence should have included fingerprints and still-photographic evidence.
"We made a mistake that needs to be corrected," he said.
Several legislative initiatives will reflect an effort to tap more federal money.
Busch said lawmakers hope to be briefed immediately on what legislative changes state schools Superintendent Nancy S. Grasmick believes are necessary to make the state competitive for about $150 million in federal Race to the Top funds.
Grasmick has said the state must increase the number of years it takes for teachers to achieve tenure and begin requiring unions to bargain over alternative pay, such as giving teachers extra pay to teach subjects in which there is a shortage of instructors.
The governor "believes the state is already in a position to be very competitive" for the federal money," said Rick Abbruzzese, an O'Malley spokesman, but he "has been involved in conversations with stakeholders, advocates and teachers unions on what reforms would increase the state's chances."
The governor also will try to revamp the state's unemployment insurance program to access about $127 million in federal money, most of which would be used to replenish the nearly depleted fund. The state is only eligible for the money if it requires employers to expand the period that they examine when determining whether someone is eligible for unemployment benefits.
Business leaders say that although employers would see short-term benefits from the federal money, the long-term costs associated with using the "alternative base period" are unacceptable.
O'Malley has recently begun using the phrase "job, jobs, jobs" in nearly every speech. He said he will push tax breaks for businesses that hire unemployed Marylanders and try to stimulate small-business lending.
To Republicans, the governor's "jobs" mantra rings hollow. They point to increases in the millionaires' tax, corporate tax, sales tax and personal income tax as having created a terrible environment for employers.
"We've been piling onto businesses like there's no tomorrow," Kittleman said. "The governor says 'jobs,' but I think the only one he's worried about is his own."
Major legislative initiatives on tap Energy re-regulation: Repeal the state's 1999 decision to get out of the business of regulating energy.
Education: Increase the number of years it takes for teachers to achieve tenure and require unions to bargain over alternative pay.
Unemployment insurance: Require employers to use "alternative base period" in determining eligibility for unemployment insurance.
Death penalty: Add fingerprints and still photographs to the list of evidence acceptable in capital cases.
Gangs: Standardize reporting requirements between schools and law enforcement about gang activity.
Sex-offender registry: Review how major sex offenders from other states who move to Maryland are classified on the state sex offender registry.
Jobs: Give $3,000 tax credit to businesses for every unemployed Marylander they hire and put $10 million toward state guarantees of bank loans made to small businesses.