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Amid a recession that seems to be waning even as jobs are not returning, Maryland finds itself with a budget gap that at least one budget hawk in the legislature says will take new taxes to fill.

Gov. Martin O'Malley is expected to bring about $300 million in fiscal 2010 budget cuts to the state Board of Revenue Estimates on Wednesday.

The General Assembly will face a deficit of at least $2 billion when lawmakers return to Annapolis in January to begin work on the fiscal 2011 budget.

"I don't believe there is the appetite for the kind of cuts necessary to avoid taxes, in my opinion," said Del. Murray D. Levy, a member of the House Appropriations Committee.

If O'Malley (D) and legislative leaders planned on reining in the deficit solely by slashing spending, "I think you would've seen more cuts earlier," said Levy (D-Dist. 28) of La Plata.

But taxes won't be on the table in 2010, when the governor and the entire General Assembly face an election.

"The political calculus I think weighs a lot heavier than the financial calculus right now in an election year," Levy said.

"The following year is when, like the special session in 2007, you'll see the whole package put on the table," he said.

The House Republican Caucus was to meet this week to begin formulating a budget reduction plan, House Minority Leader Anthony J. O'Donnell said.

The evaluation will look at the budget from both a fiscal and a policy standpoint, said O'Donnell (R-Dist. 29C) of Lusby.

"[O'Malley] has to stop this charade of state employee furloughs," he said. "It does nothing in the long run to fix this problem and it causes pain for very little gain."

An earlier round of cuts ordered up to 10 furlough days for state employees and laid off 200 other state workers. O'Malley is rumored to be considering further cuts to the state work force.

Elsewhere in the budget, O'Malley should also eliminate funding for stem cell research, new voting machines and new major land acquisitions, O'Donnell said.

The caucus could also consider a resolution urging O'Malley not to accept a $126.8 million infusion of federal aid to prop up the state's struggling unemployment insurance trust fund, he said.

Senate Minority Leader Allan H. Kittleman (R-Dist. 9) of West Friendship said the state should stop using capital dollars to pay for operating expenditures and must rein in spending.

In December, the Spending Affordability Committee will make its recommendations on the size of the fiscal 2011 budget. In recent years, the panel's Republican members have unsuccessfully pushed for recommending a budget reduction.

The Board of Public Works comprises the governor, treasurer and comptroller and has the authority to slash the budget when the General Assembly is not in session. The board has cut $736 million from the fiscal 2010 budget over two rounds. When passed by the legislature in April, the original fiscal 2010 budget totaled $13.8 billion in operating funds and $30 billion total.

The latest cuts aren't likely to come from K-12 education.

O'Malley has said repeatedly that he will not cut from such a high priority for his administration and for voters. And rules attached to $720 million in federal stimulus dollars that the state accepted this year to bolster the education budget mean that Maryland cannot cut spending on schools below its fiscal 2008 level.

Those restrictions will carry over, along with the stimulus dollars, into fiscal 2011, leaving anxious lawmakers hoping for a rebound of tax revenues before the federal aid drops out in fiscal 2012, leaving the state with an even bigger hole to fill.

"We can't go below where we are now, but we don't have to keep going up" in education funding, said Sen. Richard S. Madaleno Jr. (D-Dist. 18) of Kensington.

Two factors in the funding formulas that drive mandated growth in the schools budget are on Maryland's side: The state is going through a period of no increase in school enrollment and there is no inflation.

Lawmakers are unlikely to tweak those funding formulas, something last done during the 2007 special session when the General Assembly changed the inflation index pegged to school funding in an attempt to constrain budget growth.

Tweaking the formulas worked to constrain spending, Madaleno said, but the downturn in state revenues has outpaced any savings.

"We've constrained spending by $2.3 billion, but revenues have declined by $3.2 billion," he said, citing numbers provided to lawmakers this week.

The state faces an overall budget gap of $519.5 million for fiscal 2010, including future budget deficiencies because of ongoing tax revenue shortfalls, the nonpartisan Department of Legislative Services on Tuesday told the Spending Affordability Committee.

The $300 million in cuts to be proposed next week and $95 million in corporate tax income that the state stands to gain as a result of Constellation Energy Group's recent sale of its nuclear energy assets to Electricite de France will leave the budget short $124.5 million.

Education represents about 38 percent of the general fund budget, meaning the board will be cutting deeply into other areas in order to spare schools.

No easy cuts remain, lawmakers said.

"Obviously it'll be again deep cuts to the state's health care programs and social services programs," Madaleno said.

Republicans and Democrats alike voiced opposition to cutting any more from the developmentally disabled, whose advocates have been vocal after sustaining $29 million in cuts to services earlier this year.

But that doesn't mean more cuts are out of the question.

"I'm frightened that they will go back to them," Madaleno said.

O'Malley has closely guarded any specifics about the next round of cuts, holding a series of meetings with staff and cabinet secretaries in preparation for next week's proposal.

"As we get deeper and deeper here the cuts obviously get more and more painful," said Shaun Adamec, an O'Malley spokesman. "And it gets more and more difficult not to cut the core services of our agencies."