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"I think we have some evidence that the economy has slowed down and is continuing to slow down," Warren E. Deschenaux said. "I'm not sure we've hit bottom yet."
The state will need to tap its reserve funds to help balance the fiscal 2009 budget, unless Gov. Martin O'Malley proposes significant cuts through the Board of Public Works, Deschenaux said. But the real challenge is balancing the fiscal 2010 budget at a time of declining revenues and increased spending initiatives.
Final figures for fiscal 2008, which ended June 30, showed that state revenues were $73 million less than anticipated, reinforcing the dreary outlook regardless of the outcome of the November slots referendum. Income, sales and tobacco tax collections fell a combined $140 million short of revenue projections.
Gambling supporters are using the sluggish economy as an argument to legalize slots, while opponents argue that it will increase crime, poverty and addiction without solving the state's fiscal woes.
"With the books now officially closed, it is clear that whatever happens in November, we will still have a significant budgetary shortfall," said Comptroller Peter V.R. Franchot (D) in a statement. "My office is currently hard at work preparing next year's revenue estimates, but it is safe to say that in the current economic climate, we're in for more bad news."
That comes at an inopportune time for Maryland lawmakers, who last year passed $1.3 billion in tax increases as part of an effort to bring the state's spending in line with revenues. But it came at a price, as O'Malley (D) saw his approval rating plummet below 40 percent.
Updated revenue estimates for the current fiscal year and the next are expected to be released soon, and the news is expected to be grim. Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach wants lawmakers to begin talking about possible budget solutions well before the legislature reconvenes in January. Meanwhile, Deschenaux said the three-member Board of Public Works, which O'Malley chairs, could authorize reductions to help cushion the fiscal blow.
"We're looking at some large numbers and they'll be very challenging to deal with," he said.
More tax increases are unlikely and the kind of drastic cuts necessary to make up the shortfall will almost certainly run into opposition in Annapolis.
Franchot, who opposes slots, has called on the state to form a commission to evaluate state spending patterns rather than expanding gambling.
"Slots won't solve our fiscal problems; in fact, they will only make them worse," he said in the statement. "We need to get serious about the financial mess we find ourselves in. Like hardworking families all across Maryland, we need to tighten our belt and take a comprehensive look at state spending."