While Maryland’s structural deficit is nearly eradicated and Congress has taken a step back from the fiscal cliff, state lawmakers still are expected to take a cautious approach to this year’s budget process when the General Assembly reconvenes Wednesday.
“It looks like the budget’s going to be in relatively decent shape this year,” said House Majority Leader Kumar P. Barve (D-Dist. 17) of Gaithersburg. “[But] we’re still in a fiscally conservative mode.”
Maryland’s structural deficit has been cut from about $2 billion to about $500 million over the past three years, and a panel of lawmakers recommended in December that it be reduced to about $183 million in the coming fiscal year.
While not completely eliminated, it no longer would be a major worry, according to state analysts.
The joint Spending Affordability Committee also recommended that the state leave a general fund balance of at least $200 million for fiscal 2014, which would put state reserves at nearly $1 billion.
December projections from the state Board of Revenue Estimates showed fiscal 2013 revenues up by $127 million over previous estimates and fiscal 2014 revenues up $33 million.
Congress’ last-minute deal to avoid the fiscal cliff last week delayed the implementation of major federal spending limitations, known as sequestration, for two months, meaning they could resurface in the midst of budget discussions in Annapolis.
“It doesn’t remove the specter of cuts that could possibly come down the road,” said House Speaker Michael E. Busch (D-Dist. 30) of Annapolis.
Between that possibility and the still-delicate economic recovery, expensive new initiatives aren’t on the agenda, lawmakers say.
“I don’t think were in a position to be spending money,” Barve said.
While the New Year’s Day agreement eliminated the worst of the threat from the fiscal cliff, Maryland still stands to lose federal money either from sequestration or whatever action Congress takes to avoid sequestration, said Neil L. Bergsman, director of the nonprofit Maryland Budget & Tax Policy Institute.
“I think we’re going to lose some federal funding, but it will probably be manageable,” he said.
Wiping out the remaining structural deficit and increasing transportation funding were the two major remaining challenges before the legislature, and lawmakers need to fix those issues without taking money from priorities, Bergsman said.
Still, 2013 could prove to be a relatively “boring” budget year, he said.
“The arithmetic to balance the budget is easier than it’s been in any year since 2006,” Bergsman said.
But the lingering sequestration threat complicates how lawmakers will approach the state’s urgent needs such as transportation funding, said Sen. Roger Manno (D-Dist. 19) of Silver Spring, who sits on the chamber’s Budget & Taxation Committee.
“We need some sort of politically palatable, smart transportation solution,” Manno said.
Recent proposals have included taxes on gasoline sales and establishing regional transportation authorities, but plans that involve new tax revenue aren’t likely to get support until there’s more certainty about the national economy, he said.
“I think we’re doing about as good as we thought we’d do in the state,” Manno said. “But we’re still in a holding pattern.”
A state Blue Ribbon Commission recommended in late 2011 that Maryland raise an additional $870 million annually to put toward transportation projects. Increasing transportation funding is a legislative priority of both the Maryland Municipal League and the Maryland Association of Counties.
Gov. Martin O’Malley (D) has not yet unveiled his legislative agenda, but has said proposals to raise transportation revenue via a 6 percent sales tax on gasoline or a one-cent increase in the overall sales tax could resurface.
While the sequestration threat may loom, the federal agreement on tax rates — which will remain at Bush-era levels for families making less than $450,000 per year — was a source of optimism for some.
“It makes everything a little more settled going into the session so we know what we’re dealing with,” said Del. Jolene Ivey (D-Dist. 47) of Cheverly, who chairs the Prince George’s County House delegation.
One of the county’s top priorities will be securing the state’s share toward a proposed $600 million regional medical center, Ivey said. A location has not yet been chosen for the new hospital, but it will be located somewhere in the county. The state is expected to cover one-third of the new facility’s cost.