Lower Wages In Maryland Bad News For Budget Gap

VIA WASHINGTON POST:

Shrinking paychecks for some of Maryland’s wealthiest residents, along with new data showing wages falling across the state, will mean smaller state income-tax payments headed to Annapolis next spring and a budget problem twice the size of what officials predicted just months ago.

Maryland faces a budget hole of almost $2 billion in the fiscal year beginning next summer — a gap equal to the shocking one lawmakers contended with last year but magnified by deep cuts made to almost every state program to close that and other shortfalls since the recession began.

The gap, which is equal to 14 percent of this year’s budget, sets up an election-year budget battle sure to increase pressure on Gov. Martin O’Malley (D) to address unpopular budget solutions his administration has so far avoided, such as shifting costs of teacher pensions to local governments.

It also provides fuel to critics who say O’Malley has not gone far enough to make permanent cuts that will restrain state spending in future years. More than three-quarters of the cuts the governor proposed last month to close a widening gap in Maryland’s current budget year were one-time fixes that will not help solve next year’s problem.

The new fiscal projections were released Thursday by the state’s Board of Revenue Estimates. Hours later, Warren Deschenaux, the legislature’s chief fiscal analyst, told a panel of state lawmakers that without corrective action or a larger-than-predicted economic recovery, state spending is forecast to outpace revenue by at least $2 billion each year through 2014.

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