Economic Development

Tired of Cutting

After a tough year of spending reductions, Maryland ponders a new approach.
by | October 2007

Maryland lawmakers already know they're going to have to cope with a big deficit next year. They'll have company in that regard, with many states currently collecting less revenue than expected due to the crunch in financial markets. But what makes Maryland worth watching is its likely response to the budgetary shortfall: more spending.

Maryland faces a deficit of about $1.5 billion, or 10 percent of its general fund. Governor Martin O'Malley made spending cutbacks totaling $200 million in July but is reluctant to cut much more. He doesn't want to follow the path taken by his peers in other states in recent years of making major cuts to higher education and aid to local government.

In fact, O'Malley and other top Democratic leaders in Maryland are talking about increased spending for transportation, education and health care. "There's really not anything more that we could cut and still have a stable operation," says Sheila Hixson, who chairs the House Ways and Means Committee. "Once we act on education and health care, the deficit is a larger figure. We're looking at $2 billion."

As a result, there's speculation in Annapolis about higher personal and corporate income taxes, a 1-cent increase in the sales tax, and legislation that would legalize race track slot machines after years of debate. O'Malley also has raised the specter of a gas tax increase to pay for transportation improvements, which come out of a separate fund. "Our roads and bridges will not wait until the right political timing, the ideal gas price or the best fiscal environment," the governor told county officials.

If O'Malley gets his way, it will be the surest sign since the Minneapolis bridge collapse that states are serious about putting up money to maintain their infrastructure. In Maryland, of course, they're prepared to go even further, spending new money for a much broader assortment of purposes. Needless to say, they'll encounter plenty of resistance. "They're on a spending binge," complains Dee Hodges, of the Maryland Taxpayers Association.

In a tough fiscal environment, it's all but certain that O'Malley and his allies won't get everything they want. But they're likely to get a good share, which may serve as a signal that the era of no new taxes-- ever, for any reason--has ended in Maryland, and perhaps in other states as well.


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