Maryland is expected to confront a structural deficit of more than $630 million in fiscal year 2014 and will have a projected budget shortfall of $247 million, when lawmakers craft a spending plan for the coming year, state officials said Wednesday.
Budget analysts from the Department of Legislative Services briefed lawmakers from the Joint Spending Affordability Committee, as well as the House and Senate committees that oversee the budget, on the state’s overall fiscal situation.
Revenues are expected to increase, but “it appears we’re losing a little ground in our effort to resolve our structural deficit,” said Warren G. Deschenaux, director of policy analysts for DLS.
Overall, the state’s budget is expected to grow about 4 percent during fiscal year 2013, with total expenditures topping out at $37.1 billion, according to DLS.
The $638 million structural deficit was more than analysts had been expecting, Deschenaux said. Eliminating that deficit in fiscal 2014 would require limiting the increase in general fund growth to 1.3 percent, he said.
Sen. Edward J. Kasemeyer (D-Dist. 12) of Columbia, who chairs the Budget & Taxation Committee, told reporters after the briefing that a substantial portion of the structural deficit was related to paying the state’s bond obligations, raising the difficult question of whether the state’s property tax needed to be increased.
Kasemeyer said he did not anticipate lawmakers would increase taxes in the coming year.
State general fund revenues for fiscal 2012 came in $229.5 million higher than anticipated, and fiscal 2013 revenues were projected to increase by another $180.6 million, according to DLS. Fiscal 2014 revenues were estimated to increase 2.7 percent over fiscal 2013, according to the department.
But the looming federal “fiscal cliff,” major spending cuts that could be triggered by the federal Budget Control Act at the end of 2012 if Congress does not act, could drastically change Maryland’s fiscal 2014 projections, Deschenaux said.
Federal aid to the state could decrease by about $117.6 million for fiscal 2013, and state income and sales tax revenues could drop by as much as $635 million in fiscal 2014 if all federal cuts go into effect, according to DLS.
“This level of fiscal contraction is sufficient to push the U.S. economy back into a recession,” Theresa Tuszynski, a policy analyst for the legislative services department, told lawmakers at the briefing.