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The midpoint of 2009 is fast approaching, which should be a signal for Gov. Martin O'Malley to take some distasteful but necessary steps to get a head start on reducing Maryland's mounting deficit.

Instead, the governor continues his "wait and see" approach, even though it is crystal clear to nearly everyone but his inner circle that Maryland's financial situation is deteriorating. O'Malley's procrastination will make his later decisions much more painful.

Since early April when O'Malley and state legislators passed a $32 billion budget, the state's fiscal picture has grown ominous. The Department of Legislative Services concluded in its "90 Day Report" a few weeks later that while "the budget is balanced on a cash basis, a structural imbalance of $1.7 billion exists."

DLS projected a 2.3 percent decline in general fund revenues for the current year and an additional revenue drop of 1.6 percent in the next fiscal year, which starts on Wednesday.

Those estimates proved way too optimistic. Earlier this month, Comptroller Peter Franchot reported revenue collections for the first 11 months of this fiscal year were down 4.9 percent — more than double the DLS prediction.

Personal income tax collections dropped 17 percent in April and 23 percent in May. Corporate tax receipts plunged 25 percent in April and 32 percent in May. Sales tax payments to Annapolis fell 12.6 percent in April and 11.9 percent in May.

Meanwhile, unemployment in Maryland hit a 25-year high of 7.2 percent. There were 25,000 fewer people employed in May than in April. "The job market," said economist Anirban Basu, "remains lousy."

This is going to be a very slow recovery. Yes, Maryland is in better shape than most other states but there won't be a rapid rebound that quickly refills Maryland's coffers.

By the time the governor submits his next fiscal blueprint in January, the state could be as much as $2 billion in the hole just for the budget year ending in June 2010.

And given the weakening outlook for the following fiscal year, O'Malley's Excedrin headaches will grow in intensity.

The governor has failed to grasp the depth and breadth of this recession, perhaps because the huge federal stimulus package masks the extent of Maryland's difficulties.

The state continues to spend far, far more than it collects in taxes.

DLS expects this gap, or structural imbalance, will reach $2.3 billion in the 2010-11 fiscal year. How is O'Malley going to bridge this huge chasm on top of the deficit he currently faces?

Making matter worse, the federal stimulus money runs out in October 2010. How will O'Malley compensate for the loss of billions in federal aid when Maryland's economy is still wobbly?

Tax increases are not under consideration — although they should be, along with a host of fee and toll increases. Because 2010 is an election year, neither O'Malley nor state legislators will tolerate such progressive actions. They fear voter anger.

That leaves two choices: Fiscal gimmicks to paper over the state's predicament or large-scale spending reductions.

Lt. Gov. Anthony Brown has signaled across-the-board cuts may be the answer. During a visit to Frederick in May, he said that transportation, education, public safety and health programs could be on the chopping block. "When you need to make big cuts," Brown said, "you got to look at the big buckets."

But more systemic changes may be needed. Non-essential programs may have to be sacrificed. Local aid programs that are not absolutely necessary may face substantial shrinkage.

Another partial answer could lie in the state's struggling efforts to get its slots program off the ground. If O'Malley orders his underlings to accelerate the licensing and approval process for these five gambling facilities in Worcester, Allegany, Cecil and Anne Arundel counties and Baltimore city, the slots sites might open sooner than expected, thus producing hundreds of millions of extra dollars for the state next year.

Still, O'Malley may not be able to avoid massive government downsizing in January. Since tax increases won't happen until the post-election 2011 legislative session, the governor's options for eliminating Maryland's yawning revenue-to-spending gap are few.

Things would look different had he imposed Draconian cuts this spring. Then his later choices would be much more palatable. For instance, $500 million in permanent spending cuts for the fiscal year that starts Wednesday also would have meant an additional $500 million savings off next year's budget, too – a total two-year pick-up of $1 billion.

By postponing such unpleasant moves, O'Malley isn't doing himself any favors. Every month's delay dramatically increases the magnitude of later fiscal actions. His "let's see what tomorrow brings" strategy could turn Maryland's election-year budget into a political nightmare.

Barry Rascovar is a longtime State House columnist and a communications consultant. His e-mail address is brascovar@hotmail.com.